Tag Archives: jobs

Another Perspective on Minimum Wage

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Mark Perry has one in his Carpe Diem column for AEIdeas.

In a recent post, I posed the question: rather than calling it “an increase in the minimum wage from $7.25 to $10.10 (or $15) per hour,” if we instead called it “imposing a $2.85 (or $7.75) per hour tax on employers who employ or hire unskilled workers,” would it make any difference to those who support “an increase in the minimum wage”? Maybe not for some of the strongest advocates of a higher minimum wage, but perhaps it would make a difference for some weaker advocates who were never challenged to think of it that way?

He then calculates the associated payroll taxes (a tax on the tax, or a surtax, in his construction) based on full time work (i.e., 40-hour work weeks) and the larger minimum wage increment, but what would that surtax work out to for the typical minimum wage worker’s half-time employment?

The employer tax of $2.85 would work out to an additional tax of $2,850 per year per part-time minimum wage employee. The surtax on that under current payroll tax law would come to just under $220 per year per employee, or a total employer tax of just under $3,070 per year. Per employee.

How many small business employers (the Walmarts of the world are an aberration) can afford that additional labor cost tax? At what point does an employer, of any size, decide the work being done isn’t worth the mandated cost and either stops doing it or automates it?

More Excessive Government

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US financial regulators are focusing renewed attention on Wall Street pay and are designing rules to curb compensation packages that could encourage excessive risk taking.

Regulators are considering requiring certain employees within Wall Street firms hand back bonuses for egregious blunders or fraud as part of incentive compensation rules the 2010 Dodd-Frank law mandated be written, according to people familiar with the negotiations. Including such a “clawback” provision in the rules would go beyond what regulators first proposed in 2011 but never finalized.

Congress created a bureaucracy, and it expanded it enormously with that Dodd-Frank. Now the bureaucrats have to do something to justify their existence. Regulators gotta regulate. And so we get this.

Never mind that the free market is a fine regulator, and “certain employees” and their “Wall Street firms” employers will be severely and promptly regulated when those excessive risks fail.

Government intrusion isn’t just not needed, though, it’s counterproductive. Now businesses, on and off Wall Street, will incur additional costs as they seek compliance, additional costs as they seek work-arounds, additional costs from the expanded field for nuisance suits (and legally legitimate ones), additional costs as they’re forced to negotiate even more complex compensation packages in order to hire the best, rather than the second best.

Such regulatory nonsense also is in large part duplicative and so wasteful. For instance:

Some banks are already voluntarily recouping money from employees who engage in misconduct or excessive risk.

We already have adequate laws (not regulations) on the books to handle both criminal and civil misconduct. Additional regulation here would be useless.

Too, that some businesses think such procedures are appropriate for them does not at all justify government interfering to impose such procedures on all of business.

Update: Corrected a typo in the third paragraph: Government intrusion isn’t just not needed….  <sigh>

Return of the Excess Profits Tax

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Excess profits taxes are taxes on profits that government decides for itself is too much. They were first tried in the US by individual states during our Civil War. They went national under Progressive governments during WWI and WWII and were not repealed until after WWII. Another Democratic administration revived them for the Korean War, and that one disappeared at the end of 1953—over 60 years ago.

Now another Progressive President, Barack Obama, wants to revive it, and without even war as justification: he just wants the money because he Knows Better the use of that money than do those companies that actually earned it. Under his 2016 Budget Proposal, Obama insists that companies

would be subject to a 14% tax on up to $2 trillion of overseas earnings they have already accumulated[.]

Obama claims he wants “more revenue” from our multinationals in order to help pay for infrastructure—you remember, all those shovel ready jobs he joked about not being so shovel ready after all.

Companies accumulate profits—earnings—for a number of reasons: saving for economic disaster or industry downturn, planned very expensive capital expansion, planned very expensive R&D, planned…whatever. They also simply hold onto funds during economic or regulatory climates that make it infeasible to spend the money.

The reasons, though, are none of the government’s business. Government has no place dictating to a private company what its purpose is in accumulating and retaining earnings. This impropriety plainly includes saying to a business, “You have too much cash on hand. Give it up.”

Here’s an alternative, albeit one inconceivable to Democrats: get more revenue from our multinationals, and get more revenue from our domestic companies and from us citizens, by cutting tax rates, reducing regulation, generally getting government out of our way. The resulting growing economic activity will generate lots more total revenue for government. Especially when tax reform makes it useful for companies to bring home the trillions of dollars they’re holding overseas.

They’re still holding all those trillions, after all, because there are no viable projects there, either, on which to spend the money.

Middle Class

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While we’re on the subject of President Barack Obama’s alleged concern for the middle class of Americans (OK, only Obama makes the allegation with any seriousness, but work with me here), Investor’s Business Daily has another take on the Obama Recovery.

The graph below is a good summary of that take:ObamaEconomicChallenge

The Obama recovery is worse than four years behind Obama’s promised schedule. It hasn’t caught up. It hasn’t caught up with the Reagan Recovery, with his “failed” Reaganomics. It hasn’t even caught up with the average of the recession recoveries we’ve been through since WWII, a period of some 70 years, 3+ generations of Americans.

As IBD put it,

[T]he growth gap between Obama’s economic policies and Reagan’s is now $2.4 trillion in lost GDP and a stunning 14.4 million in lost jobs [the bracket in the lower figure of the graph is a typo].

Finally, as IBD summed up the situation (more or less)

[W]e [need] someone in the White House who understands what it takes to produce real, sustained economic growth, and not just “underlying” suggestions of it.

Here Comes the Extortion

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Nice business you got there. Be too bad if it got shut down for some reason.

The United Steelworkers union told its workers at nine US refineries and chemical plants to strike early Sunday morning….

And they’ve gone ahead and walked out, trying to shut down nine refineries from Houston to LA. For demurring on paying the union vig. USW’s threat to the viability of these refineries ultimately could affect

30,000 workers at 230 refineries, oil terminals, pipelines, and petrochemical plants[.]

USW threatening the viability of a company for not paying up is an overstatement, you think? These refineries still have to make payroll—even of those union workers who no longer are working and earning their paychecks—they still have supplier bills to pay, they still have maintenance bills to pay, they still need to run their R&D programs, they still…. They can’t, though, if they can’t refine petroleum and have a product to sell to earn the revenue needed to pay those bills.

The USW knows that. It’s why they’ve chosen to strike—to attack the viability of their target companies and so to force their surrender.

In the final days of negotiations, the union rejected multiple offers from Shell, which led negotiations on behalf of US refinery operators.

Notwithstanding that, USW International President Leo Gerard claimed in wide-eyed innocence,

Shell refused to provide us with a counteroffer and left the bargaining table. We had no choice but to give notice of a work stoppage.

It’s time unions lost their exemption under the Clayton Antitrust Act, the successor law to the Sherman Antitrust Act which bars companies—and the USW is a company—from abusing their monopoly power. A monopoly power the USW clearly has with its near total control over the labor force of these refineries, and a monopoly power the USW clearly is abusing with its naked threat to the viability of those companies through its refusal to work—its refusal to let those companies earn the revenue they need to pay their bills.