Washington State and Seattle set the nation’s highest minimum wage

Since 1998, Washington State has led the nation in both local and statewide minimum wage levels, which attracted the attention of Labor Secretary Tom Perez who praised the state for having “the highest minimum wage in the country for the last 15 years.” But the full picture is much less rosy than Secretary Perez would have us believe.

In an article on Forbes.com the Freedom Foundation’s Maxfeld Nelson put things in perspective. “Although the state’s overall job growth has remained strong since adoption of the high minimum wage, growth in industries with a prevalence of low-wage workers has slowed,” he reports. Citing Bureau of Labor Statistics and Census Bureau data he writes that while Washington State’s share of the nation’s population increased by 5.7 percent from 1998 to 2014, and its share of total U.S. jobs increased by 6.3 percent, the state’s share of U.S. hotel and restaurant jobs, which could have been expected to rise commensurately, fell by 5.7 percent. Those industries are where thousands of people the higher minimum wage was supposed to help were once employed.

In fact, while Washington’s teen unemployment rate had roughly paralleled national trends prior to the 1998 minimum wage hike, every year since then it has been substantially higher, and at one point reached 34 percent above the national rate.

Not content with the state’s $9.47 minimum wage, SeaTac, a small city that depends heavily on businesses benefitting from its airport, decided to raise its minimum to $15 an hour in a close vote in a 2013 election. “Although the narrow drafting of the ordinance and ongoing litigation have limited the law’s scope to a mere handful of businesses and employees,” Mr. Nelson writes, “it is still having consequences. A parking company has added a ‘living-wage surcharge’ to its rates. One hotel closed its restaurant and laid off 17 employees. Employees at another hotel reported losing an array of benefits, with one stating that the $15 minimum wage ‘sounds good, but it’s not good.’”

And now Seattle has hopped on board that bandwagon with a phased-in minimum wage, raising the minimum to $11 an hour April 1, and the rate hike will be fully implemented by 2025. Some businesses, however, are on a sped-up schedule, like Ritu Shah Burnham’s Z Pizza restaurant.

Even though she has only 12 employees, her business is classified as part of a “large business franchise,” putting her on the fast track to raising the minimum. “I’ve let one person go since April 1, I’ve cut hours since April 1. I’ve taken them myself because I don’t pay myself,” she told a local TV station. “I’ve also raised my prices a little bit; there’s no other way to do it.”

One of her employees was initially excited at the advertised benefits of getting a raise and having a better life. “If that’s the truth,” he told the TV outlet, “I don’t think that’s very apparent. People like me are finding themselves in a tougher situation than ever.” He will only get to enjoy the higher pay until August, when Ms. Burnham has determined she must close her business. “I have no idea where they’re going to find jobs, because if I’m cutting hours, I imagine everyone is across the board,” she said.

Jake Spear, the director of 15 Now Seattle, a wage hike advocate group, was unmoved at the plight of these 12 employees. It’s just one restaurant, after all. “Restaurants open and close all the time, for various reasons,” he said.

Back during the flower child era of the 1960s and 70s, the operative slogan was, “If it feels good, do it!” That slogan has more recently been co-opted by pandering politicians, labor union leaders, and others more interested in the immediate rewards of increased numbers of fawning, adoring voters and thankful union members than with the reality of lost jobs, higher consumer prices, and struggling businesses. They have another favorite slogan, as well: “Damn the torpedoes! Full speed ahead!”

The fallacy in the minimum wage debate is that so many people – liberal feel-gooders, people new to the workforce, people in the most basic jobs and/or with the lowest skill levels, along with pandering politicians and union bosses – don’t understand the significance of varying wage levels. It eludes them that wages must be earned, not merely given like a gift, and that higher wages require more training, knowledge, skill and experience from workers than lower wages do. There is more involved in earning a high wage than just getting hired and showing up for work. You have to contribute something positive to the business you are fortunate enough to work for, and the greater your contribution, the more you are able to earn.

A mandated high minimum wage contributes to the entitlement mentality, where people expect to exist without having to contribute very much to their own well-being. This is not a positive development for a society that was built by generations of Americans who were hard working and self-reliant.

Detroit and Baltimore are graphic examples of the failure of liberal policies, and now we see Washington State and Seattle heading down that same path.

Slices of life in America, 2015: The Good; The Bad, and The Ugly

The Good: Jordan Speith, 21 year-old Masters golf tournament champion - In this day of giant egos among athletes, entertainers and politicians, we hardly ever expect to see someone behave with dignity and humility when they have a big success.

But following his magnificent win at the Masters on April 12, where he shot a 2-under-par 70 in the final round to finish with an 18-under 270, four shots ahead of three-time Masters champion Phil Mickelson and 2013 U.S. Open champion Justin Rose.

This was his fourth win worldwide in four months, placing him No. 2 in the world. But no self-congratulatory, boastful behavior comes from this young man. “It's the most incredible week of my life," he said. "This is as great as it gets in our sport. … This isn't an honor that's carried lightly.”

He is as even when things don’t go so well. A bad tee shot on the 16^th hole in Sunday’s final round elicited a disgusted "dang it!"

"He's just a classy guy," Phil Mickelson said of him on Saturday. "He just represents the game very well and at a very young age, and he's just got a lot of game. So if he were to come out on top, it would be wonderful for the tournament, wonderful for the game."

The Bad: Silly enforcement of a San Antonio ordinance - It’s another case of government run amok, sometimes seeing the good things people do as bad, and following sometimes-silly rules that interfere with religious freedom and the good works people do.

San Antonio lawyer and author Joan Cheever owns The Chow Train, a licensed non-profit food truck that she uses to provide hot, healthy meals to the homeless each week. She has been doing this since 2005, feeding between 25 and 75 homeless people each time. But four of San Antonio’s Finest took exception to this voluntary effort to help those less fortunate, and issued Ms. Cheever a $2,000 ticket.

When she told one of the officers she was merely following the tenets of her religion, he responded, “Ma’am, if you want to pray, go to church.” The officer apparently is not familiar with the First Amendment of the U.S. Constitution, which clearly allows one to freely practice their religion whether in church or not, something that is of a higher authority than city ordinances.

Charitable works have been under attack for decades by a growing attitude among big government advocates that holds, despite dramatic evidence to the contrary, that government can do it better. And now in San Antonio government directly halts a private sector effort to help people in need, people that the city government is not feeding once a week, as does Ms. Cheever.

She will appear in court on June 23 to defend herself, and plans to argue that this expression of her religious convictions is protected under the Religious Freedom Restoration Act. Let us hope the court will see the value of her works, and allow her to follow her charitable impulses to help the less fortunate unimpeded.

The Ugly: Two examples - “Ugly” is a term with a variety of meanings, and applications: very unattractive, disagreeable, unpleasant, objectionable, morally revolting, threatening or dangerous, mean, and is applied to things that are really dumb and defy common sense.

With that in mind, two ugly items:

* A New York Police Department officer who drove his replica of the General Lee car from “The Dukes of Hazard” TV show to work has been told by his superiors not to drive it to work anymore. Why? Because the General Lee has a Confederate flag painted on its top, and some might consider that offensive. According to a local TV news report, a police spokesman said, “due to the fact that its presence at the NYPD facility may be considered offensive and/or inappropriate, the registered owner is being instructed that the car should not be parked on NYPD property.” Maybe the officer should be forced to sell the car as a provision of continued employment, so he can’t offend anyone, even when he’s off duty. No one must be offended. Ever.

* A Virginia college girl and two friends were set upon in her car in a store parking lot after making a purchase by seven plainclothes officers of the state Alcoholic Beverage Control agency. The girls did not realize the un-uniformed people were law enforcement agents, and got scared when the agents aggressively approached their car. They tried to escape, prompting one officer to pull a gun and another to try to break out a window with a flashlight. In the effort to escape, the driver brushed two of the officers. She was later charged with three felonies and spent the night in jail. What had these girls done? The officers “thought” they “might” have bought beer and “might” have been under age. They had bought bottled water, not beer. Eventually, the charges against the girl were dropped. Who thinks hiding in store parking lots waiting to catch under-age customers buying beer is efficient use of ABC resources and taxpayer money?

Minimum wage hike: Another bad Obama idea

Another of President Barack Obama's bad ideas is to force employers to pay higher wages to the lowest skilled and/or least experienced workers on the premise that by raising the take-home pay of these people, the world will be better.

Unfortunately, lots of people agree with him, including some who are usually far more sensible. They think that raising the minimum wage would put more money into the economy, and that can't be a bad thing, can it? First of all, it doesn't put money into the economy; it merely moves it around unnaturally. And, as usual, there are other repercussions that haven't been considered.

Since the number of people that earn the minimum wage is relatively small, any direct help is minimal. In January the U.S. Labor Force was 155.6 million, with about 102 million working full-time. Only 1.5 million earn the minimum wage, about nine-tenths percent. It is most often a starting wage level for teenagers with few or no skills and/or experience. And while the president didn't mention this, just because someone starts at the minimum, that doesn't mean they earn at that level for long. Research shows that nearly two-thirds of those earners get a raise from one month to a year after they begin work.

U.S. Census data shows that only 15 percent of minimum wage earners are single parents, and all are eligible for the Earned Income Tax Credit. The remaining 85 percent are teens living with their working parents or other working relatives, adults living alone, or married adults living with a working spouse. The average family wage of a minimum wage earner is more than $43,000 a year.

So, the problem the president believes he will solve by increasing the minimum wage is so small as to be no real problem at all, and there is evidence that far more harm than good will result.

Mr. Obama proposes to raise the rate from $7.25 to $9.00 an hour over two years. Something he never talks about – and may neither think about nor care about – is the question of where this money for higher wages will come from. Somehow, employers will have to find a way to pay every minimum wage worker 24 percent more over a two-year period, which works out to $3,600 in annual wage increases per worker over that time frame.

Will they reduce the number of minimum wage workers? The increase in pay for every four workers is nearly equal to the pay of one worker under the existing minimum wage. If you are a minimum wage earner, you might ask yourself: would you rather earn $7.25 an hour for 40 hours a week, or $9.00 an hour for zero hours a week?

Will they raise their prices by 24 percent, making their products more expensive for everyone, including those who earn the new minimum wage?

What about people who earn a bit more than the current minimum, but less than nine bucks? They will have to be increased to $9 per hour, which makes them minimum wage earners again after having been at a rate higher than the minimum, perhaps after having worked their way up from that level. What will employers do? Will they increase those hourly wages by $1.75 an hour to keep them where they were relative to the minimum wage; will they give them a smaller raise; or will they just pay them $9?

And what about those who earned more than $9 an hour, and are now $1.75 an hour closer to the minimum? How will they react? Shouldn't everyone get a raise; wouldn't that be the "fair" thing to do? How much additional costs to employers will this cause?

"The effects of the minimum wage are declines in employment for the very least skilled workers," according to David Neumark, a University of California, Irvine, professor who has studied the issue. He says the benefits of higher minimum wages sometimes go to teens in higher-income families taking part-time jobs. "A lot of the benefits of minimum wages leak out to families way above the poverty line," he said.

So, the minimum wage hike really helps only a relative few, sometimes helps those that don't need it, reduces hiring of minimum wage workers, and makes running businesses more expensive for employers, who would have to find a way to pay for increased wages for many more workers than just those earning the minimum.  They might have to defer expanding their business or purchasing new equipment. Or, they might have to increase the prices for their products and services. Or they might have to do some of all of those things.

All jobs and workers have economic value based upon the importance of their work to the business of which they are a component that is not related to the desires of politicians to endear themselves to a segment of the populous.

Politicians cannot change economic reality, but they do not let that stop them from trying, and we can see all around us in the current economic malaise what happens when they try to manipulate the economic environment.

Congress’ solution to the financial crisis: Fire, aim, ready!

Following the financial crisis of 2008, the U.S. Congress rushed in on its white horse to save the day. Its solution: a huge bill designed to reign in those naughty big banks and Wall Street firms whose greedy executives created this crisis.

Never mind that Congress tried to fix problems a few times before, and in doing so contributed substantially to this crisis, and that many of its current members supported those efforts. Undaunted by previous failures, Congress yet again created a solution that would prevent this from happening again: the Wall Street Reform and Consumer Protection Act of 2010, better known as Dodd-Frank, after co-authors Sen. Chris Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.), and the new law has made things so much better, right?

“It's in the aggregate, in weighing benefits against costs and in pondering the unintended consequences, that Dodd-Frank starts to look like a threat to our financial system.” So wrote Neil Weinberg in American Banker a year ago. “At 2,319 pages, including 250 amendments, and with vastly more rulemaking to come, Dodd-Frank's costs are only now starting to mount,” he said.

“Whether all this will make our financial system safer is an open question. Even Barney Frank would likely concede that the hugely expensive Sarbanes-Oxley Act of 2002, of which he is a fan, has not had the intended effect of wiping out corporate wrongdoing. What's not in dispute is that Dodd-Frank will impose a major drag on the business of commercial banking and have numerous knock-off effects that were neither intended nor necessarily desirable.”

Among those possible unintended consequences: Fewer and bigger banks, as the cost of compliance forces banks to merge; higher consumer costs, as banks must pass on their higher regulatory costs to their customers; and fewer mortgages, as banks flee the mortgage business in reaction to onerous elements of the law.

A month later co-author Sen. Chris Dodd, who retired after the law passed the Congress, wrote an op-ed in The Washington Post titled “Five myths about Dodd-Frank,” in which he defends the law against criticisms, although different criticisms from those Neil Weinberg discussed. “After a worldwide financial meltdown — and a $700 billion taxpayer-funded bailout — the need for common-sense financial reforms was clear. But now, even though the Wall Street Reform and Consumer Protection Act of 2010 … is only beginning to take effect, critics are launching false attacks against the law in an effort to undermine it. Whether they are intentionally misleading or just misguided, they are wrong about the law’s purpose and impact.”

Sen. Dodd may not view his work as harmful from his disconnected and distant perspective, but the people who are directly affected by it do.

American Bankers Association President Frank Keating, had this to say about the effects of the law in a letter to Treasury Secretary Timothy Geithner in June of last year: “While I appreciate that you share our desire that the law not operate to the harm of community banks, I must report and emphasize that in actual practice the Dodd-Frank Act is already operating to the detriment of community banks and promises community banks further harm. … I have spent the past six months meeting leaders of thousands of these small banks across the country. There is uniform concern, anxiety, frustration and anger among these community leaders, who feel betrayed by Washington,” the letter said.

“Though Congress and administration officials have attempted to reassure these bankers that Dodd-Frank is not about them – that they are held harmless by the law – the reality is quite different,” he continued. “True, the law on paper distinguishes between banks by size. But its $10 billion threshold – used to “exempt” smaller institutions from provisions in the Consumer Financial Protection Bureau and the Durbin debit-interchange amendment – is arbitrary and artificial and is not working.”

A truly dire warning about Dodd-Frank’s likely effects comes from former Chairman of the Federal Deposit Insurance Commission (FDIC), Bill Isaac, who told Larry Kudlow on CNBC’s “The Kudlow Report” in March of this year that community banks have a lot to fear from the law’s financial reforms. “The bigger banks can absorb it, the smaller banks can’t,” he said. “I would not be surprised to see half of the community banks in this country go out of business if we don’t give some relief from Dodd-Frank for them.”

Community banks are owned and operated by people in their community, and still possess that local focus and personal touch that larger institutions usually do not have. They tend to focus on the needs of the communities where the bank has branches and offices. The people who make lending decisions understand local needs and are themselves members of the community.

Community banks did not create the problem, but as Bill Isaac, Neil Weinberg and Frank Keating demonstrate, they are suffering under the regulations that were supposed to target those who did.

If things at your community bank change for the worse, be sure to blame the U.S. Congress instead of the bank. Better yet, why not pressure members of Congress to takes steps to save those valuable local businesses before it’s too late.

Exactly what does being “better off than four years ago” look like?

The DC newspaper The Hill has a new poll that found 52 percent of likely voters believe the country is now in "worse condition" than four years ago, while just 31 percent believe it's in "better condition."

It is pretty clear that people believe they are not better off today than four years ago, but what would things look like if we were better off today?

Well, for example, if your home was worth $80,000 in September of 2008 it should not be worth less today and perhaps should have gained a little value. Or, if you were out of work then, you should have a job today, and if you had a job then, you should perhaps be making a little more today. It should not cost you much more to fill your car with gas, and trips to the grocery store should cost about the same today as then.

However, most Americans cannot make such claims today. Most homeowners have lost value in their homes; more than 34 million of us are unemployed, underemployed, or have exhausted unemployment insurance and become so discouraged that we have given up looking for work; gasoline prices have doubled, food and health care prices have increased; and relatively few have seen their wages increase.

The jobs numbers released last Friday reflect feeble job creation in August. Just to stay even with the new people entering the job market each month the economy must create 125,000 jobs, and to make progress in replacing those jobs lost during the recession we need lots more new jobs than that. The 96,000 new jobs created in August falls 29,000 jobs short of what’s needed just to stay even.

The U-3 unemployment rate fell from 8.3 to 8.1 percent. It most often is a good sign when the U-3 rate falls, but the fact that for every job created four people gave up looking for work and dropped out of the active work force means no good news there.

Economist James Fitzgibbon of the Highlander Group said that "If we impute the data samplings of non-working citizens at the labor force rate of January 2009 we would have a Household U-3 Unemployment rate currently of 11.4%." That isn’t better than four years ago, either.
     
Mr. Fitzgibbon then addresses the effect on the Labor Force Participation rate of the 368,000 people who dropped out of the labor force last month, which "has fallen sharply to 63.5 percent, a new 31-year low reading."  

Add to that the fact that from June 2009 to June 2012, inflation-adjusted median household income fell 4.8 percent, to $50,964, according to a report by Sentier Research. The report notes that incomes have dropped more since the beginning of the recovery than they did during the recession itself, when they declined 2.6 percent.  That certainly does not indicate we are better off than four years ago.

Yet, Vice President Joe Biden said last week at a campaign appearance at an AFL-CIO event just before the beginning of the Democrat National Convention that his answer to the question “Are you better off than four years ago,” is “yes, we are.”

"You want to know whether we're better off? I've got a little bumper sticker for you: Osama bin Laden is dead and General Motors is alive," Mr. Biden proclaimed.

After 43 months in office, the vice president cites only two things to support the idea that we are better off than four years ago, both weak. As good as it is that bin Laden has been dispatched to his just reward, whether he is alive or dead is totally irrelevant as a measure of whether Americans are better off today than four years ago.   The other one, General Motors, is not looking quite as bright and shiny as the vice president seems to think it is.

The company is losing market share; its products are not competitive in the American market.  The federal government owns 500,000,000 shares of GM, or about 26 percent of the company, which earned it the nickname “Government Motors.” The government not only cheated GM bondholders out of their investment when it acquired the stock, but would need to get about $53.00 a share to break even on the “investment,” but the stock currently sells for about $20.21 a share.  The government has $10.1 billion worth of stock, and sits on an unrealized loss of $16.4 billion.

President Barack Obama showed what he thinks is important when he put his ideology ahead of what Mr. Biden termed his “profound concern for the average American.” His first priorities were taking over the healthcare system and force-feeding green energy to the American people. That put energy industry workers out of work, cost Americans millions in higher prices, and lost a pile of taxpayer money. But like the man said, “You don’t ever want a good crisis to go to waste.”

The President’s foolish, ham-handed decision to focus on health care and green energy have damaged, not improved, the economy, and as Clint Eastwood so perceptively noted in Tampa, “When somebody doesn’t do the job, we gotta let ‘em go.”

Will a unionized hospital provide better care for local patients?

A recent news article focused on a possible labor union drive at Bluefield Regional Medical Center, but furnished few details. That’s because neither the hospital nor the union(s) were talking. 

It is difficult to imagine that unionizing any of BRMC’s departments will help its patients, and there is evidence that unionized hospitals not infrequently have serious problems. This cloak of secrecy does nothing to answer the public’s questions about what is going on.

Labor unions are not inherently bad. They were once the major factor in balancing the employee/employer relationship at a time when workers were often treated badly. However, since government stepped in and enacted laws regulating the workplace, there isn’t much for unions to do along those lines. Instead, they now negotiate benefits for workers, like higher wages, shorter hours, and worker-friendly work rules.  

Union members know how to do their jobs, but the unions to which they belong know very little about running the businesses in which they organize workers, or just aren’t concerned about it. They could be valuable partners in those businesses, contributing to the success of the organization so that everyone benefits, but they seldom are. Most often they are adversaries of management, instead. Thus when unions negotiate perks for their members, businesses must make changes to accommodate these perks that inevitably increase the company’s costs and modes of operation, making the business less efficient and less competitive against non-unionized companies.

Some of the most damaging aspects of a union workforce are the work rules unions insist on, many of which defy common sense and good management practices. Some examples:

1) A repair crew that consisted of an electrician, a plumber/pipefitter, a carpenter and a crew leader were controlled by a work rule dictating that if the crew was sent on a job that had an electrical problem, for example, only the electrician could work on it. If he needed help, for even the most basic forms of assistance not requiring specialized knowledge or training, a second repair crew had to be called in, meaning that eight people were on a job that required only one electrician and someone to assist, and perhaps a crew leader.

2) A common problem is that when layoffs become necessary work rules that determine who gets laid off and who doesn’t favor seniority. It’s not about who does the best work, but who’s had the job the longest.

3) One work rule required all members of an 18-person crew to be present before the crew could work. If one person called in sick the crew couldn’t work, but still got paid. This rule allowed – even encouraged – abuse, and crew members set up a revolving schedule to call in sick.

Private sector union membership has fallen dramatically, from 24 percent in 1973 to less than 7 percent in 2011. However, union membership in hospitals has increased by nearly one-third in the last decade. Along with the increased membership is a huge increase in hospital strikes. The Federal Mediation and Conciliation Service reports that from 2009 to 2010 hospital strikes increased by 70 percent and from 2010 to 2011 that number rose by an additional 73 percent, producing an increase in the number of strike days from less than 800 days in 2009 to more than 1,000 days last year.

What does a hospital do when caregivers walk out? It hires temporary caregivers, and these people are unfamiliar not only with current patients, some of whom are critically ill, but also hospital procedures. In the case of a California strike 23,000 hospital workers walked out. Is it possible to hire 23,000 replacement workers on short notice without at the very least a high potential for mistakes? Did all of those replacements have the same or higher skill level as the strikers?

An article by Capital Research Center’s Matthew Vadum reports: “A major 30-year study found that strikes are, in fact, deadly. Jonathan Gruber of MIT and Samuel Kleiner of Carnegie Mellon University studied strikes by New York State nurses between 1984 and 2004. After controlling for factors like patient demographics and disease severity, they found that ‘nurse’s strikes increase in-hospital mortality by 19.4 percent and 30-day readmission by 6.5 percent for patients admitted during a strike.’”

 “Strikes are extremely costly,” he went on to say. “Hospitals must pay replacement nurses and additional security, while losing business, as patients opt for other hospitals. Last year’s strike by 600 D.C. nurses, for example, cost the hospital $6 million.” Commenting on a strike by 12,000 Minnesota nurses, he said it cost “about $46 million for substitute nurses,” almost half of which was for a day of mandatory orientation.

Once ensconced, unions pursue their own narrow goals, while employers are often held hostage to demands that are one-sided and often excessive. In the case of a hospital, this scenario has little potential for a positive result.

At the very least we can expect a successful union drive at BRMC to increase costs, and therefore requests for rate increases.

And if the union drive is successful at BRMC, it is likely that unions will attempt to organize other regional facilities.