I can't stand minimum wage laws. They're terrible policy. Anyone with even a basic level of understanding of economics knows and can explain why. Since I don't have one :), I had to read Stossel's. One of the most obvious reasons minimum wage laws are bad policy is that the cut the bottom rungs off the wage ladder. As Stossel explains:
"The law of supply and demand, which operates whether we like it or not, says that when the price of something goes up, people buy less of it. That's why environmentalists like higher gasoline taxes, and anti-smoking activists back higher cigarette taxes."
Given that explanation, when the cost of labor goes up then people (employers) buy less of it. In other words, they don't employee as many people.
As much as I like Stossel (and anyone that's read Stupid in America can attest that I do) even he misses one important point here. I believe that increasing the minimum wage will only increase the number of illegal immigrants that are hired. I know this isn't terribly intuitive so let me try to explain it with an analogy that most people are more familiar with.
Years ago the NBA considered raising the height of the basket. The thought was that there were so many really tall people playing that the 10' height had become outdated. People who were 7'+ tall had an unfair advantage over 6' people because they were so close to the 10' basket height. They did some test to see how effective raising the height of the basket would be in leveling the playing field between people that were 6' and 7' tall. In tests that were done (can anyone find one of those old tests for me to link to?) raising the height of the basket didn't level the playing field as they hoped it would. Instead, it further exaggerated the disparity. It put the 10' goal even further away from the 6' tall person and increased the advantage that the 7' person had.
So how does this basketball analogy have to do with minimum wage laws? Right now mimimum wage is $5.15. That's our 10' basketball goal. The 6' tall people are American citizens that are currently being employeed at minimum wage. The 7' tall people are illegal immigrants. Their advantage is that they can work for a cheaper rate. Surely most companies are law abiding in their hiring policies but some try to break the law and get an advantage by hiring some 7' tall people on their team. They're cheaper to employ. When the height of the basket is raised (when minimum wage is increased) then the 7' tall people (illegal immigrants) have even more of an advantage. They have more of an advantage because whereas currently it costs $5.15 to employ a US citizen versus potentially $4 for an illegal immigrant raising the minimum wage to $7.25, as the house as just voted to do, pushes that disparity from $1.15 to $3.25.
I'm not condoning companies for hiring illegal aliens. Certainly regardless of the money that can be saved it's not a justification for breaking the law. It will encourage a lot of unscrupulous companies to do just that, though. It increases their incentive the break the law. It may not be worth them risking the fines and bad publicity and everything else that goes with getting caught to save $1.15 but it's going to become worth it to more companies for $3.25. The easier it is for illegal immigrants to get a job the more that are going to be streaming across our border. That's the real low point of increasing the minimum wage.
Showing posts with label John Stossel. Show all posts
Showing posts with label John Stossel. Show all posts
Wednesday, January 10, 2007
Friday, January 13, 2006
Stupid in America
Tonight I saw one of the best documentaries that I've ever seen. ABC's 20/20 with John Stossel ran a documentary about American public education entitled "Stupid in America." I'm a big fan of John Stossel.
If you're not familiar with Stossel, you should check out Give Me a Break. He walks you through how he started out in the 1980s as a consumer advocate reporting on scams. One of the stories I remember most was a piece he ran about abortion clinics. Apparently it was becoming a relatively wide spread problem that these clinics would report that women were pregnant and needed to come in for an abortion when they were really not pregnant at all. Stossel reported on the problem from the consumer's point of view. These women were being cheated, paying for a service that they never received. Stossel hired women to go into abortion clinics and when supplying a urine specimens to the clinic actually supplied the clinic with a sample of Stossel's urine that they were carrying. Something like 6 out of 10 clinics reported, based on a sampling of Stossel's urine, that the woman was pregnant. After finding out about different scams and how businesses were cheating consumers he advocated increased government oversight. He wanted more regulation to solve society's problems. Over time, Stossel decided to revisit scams he had previously busted. He learned that even after the light he had shed on the problems that the situation had not grown much better. He slowly began to learn first hand that increased government regulation was not the answer to everything. He became far more libertarian in his beliefs and became a firm believer that government has a role but it's not to increase regulation to solve any and all of society's ills.
Now that you know who he is, back to Stossel's current story. Stossel once again lays out a very compelling case. In this instance, how forcing children to go to a single school without having a choice is a government monopoly. He compares it to AT&T back in the 1980. He argues that consumers (in this case the children being sent to often failing government schools) would be far better off given choices in the education market just as they're better off given a choice of Verizon, Cingular, Sprint, T-Mobile, and so many other mobile phone carriers these days as opposed to being stuck with a single provider no matter how poor they may be.
I hope people don't get me wrong. I don't hate public schools. My mom was a public school teacher for 30 some odd years. Both of her parents were public school teachers. I have numerous aunts and uncles that were teachers, a sister-in-law that was a teacher, and lots of friends. I'm a product of a public school. 1st through 12th grade I attended public school in what most people would say is one of the worst possible places for it - south Mississippi. But my experience wasn't a horror story. By and large I had teachers that cared and other students around me that challenged me.
Stossel went to one of the top public schools in New Jersey, supposedly the state with the highest rated public schools in the nation. Stossel asked what about the purpose of the Bill of Rights and one of the causes of the Civil War. No one was able to answer. He went to South Carolina which has one of the lowest rated public schools in the nation. He interviewed the state Secretary of Education about the problems. She continually said that the schools there are dramatically improving and have great things in store over the next few years. No acknowledgement of the fact that less than 50% of students entering high school graduate after 4 years there.
He contrasted her attitude with that of a newly elected governor in the state. The governor moved to South Carolina after being elected and upon moving learned that his family was in an underperforming school district. He was then told that whereas everyone else has to send their children to the school in the district where they live, the governor is exempt from that law. Why is what seems to be good enough for everyone else, going to the school in the district in which you live, not good enough for the governor?
I'm not going to take any more time than I already have to recap Stossel's arguments. Read his article. The whole point of this was to say that education in America is a major problem and something needs to be done to address the problem. This would be one of my other first initiatives as governor. People seem to agree that the governor's children deserve better that our current system; they deserve a choice. Like the South Carolina governor, I just happen to agree that your children deserve a choice as well.
If you're not familiar with Stossel, you should check out Give Me a Break. He walks you through how he started out in the 1980s as a consumer advocate reporting on scams. One of the stories I remember most was a piece he ran about abortion clinics. Apparently it was becoming a relatively wide spread problem that these clinics would report that women were pregnant and needed to come in for an abortion when they were really not pregnant at all. Stossel reported on the problem from the consumer's point of view. These women were being cheated, paying for a service that they never received. Stossel hired women to go into abortion clinics and when supplying a urine specimens to the clinic actually supplied the clinic with a sample of Stossel's urine that they were carrying. Something like 6 out of 10 clinics reported, based on a sampling of Stossel's urine, that the woman was pregnant. After finding out about different scams and how businesses were cheating consumers he advocated increased government oversight. He wanted more regulation to solve society's problems. Over time, Stossel decided to revisit scams he had previously busted. He learned that even after the light he had shed on the problems that the situation had not grown much better. He slowly began to learn first hand that increased government regulation was not the answer to everything. He became far more libertarian in his beliefs and became a firm believer that government has a role but it's not to increase regulation to solve any and all of society's ills.
Now that you know who he is, back to Stossel's current story. Stossel once again lays out a very compelling case. In this instance, how forcing children to go to a single school without having a choice is a government monopoly. He compares it to AT&T back in the 1980. He argues that consumers (in this case the children being sent to often failing government schools) would be far better off given choices in the education market just as they're better off given a choice of Verizon, Cingular, Sprint, T-Mobile, and so many other mobile phone carriers these days as opposed to being stuck with a single provider no matter how poor they may be.
I hope people don't get me wrong. I don't hate public schools. My mom was a public school teacher for 30 some odd years. Both of her parents were public school teachers. I have numerous aunts and uncles that were teachers, a sister-in-law that was a teacher, and lots of friends. I'm a product of a public school. 1st through 12th grade I attended public school in what most people would say is one of the worst possible places for it - south Mississippi. But my experience wasn't a horror story. By and large I had teachers that cared and other students around me that challenged me.
Stossel went to one of the top public schools in New Jersey, supposedly the state with the highest rated public schools in the nation. Stossel asked what about the purpose of the Bill of Rights and one of the causes of the Civil War. No one was able to answer. He went to South Carolina which has one of the lowest rated public schools in the nation. He interviewed the state Secretary of Education about the problems. She continually said that the schools there are dramatically improving and have great things in store over the next few years. No acknowledgement of the fact that less than 50% of students entering high school graduate after 4 years there.
He contrasted her attitude with that of a newly elected governor in the state. The governor moved to South Carolina after being elected and upon moving learned that his family was in an underperforming school district. He was then told that whereas everyone else has to send their children to the school in the district where they live, the governor is exempt from that law. Why is what seems to be good enough for everyone else, going to the school in the district in which you live, not good enough for the governor?
I'm not going to take any more time than I already have to recap Stossel's arguments. Read his article. The whole point of this was to say that education in America is a major problem and something needs to be done to address the problem. This would be one of my other first initiatives as governor. People seem to agree that the governor's children deserve better that our current system; they deserve a choice. Like the South Carolina governor, I just happen to agree that your children deserve a choice as well.
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