Feeds:
Posts
Comments

Archive for the ‘Jobs’ Category

A few days ago, we used supply-and-demand curves to illustrate how taxes reduce economic output.

Supply-and-demand curves also can be used to examine the impact of minimum wage laws on the labor market.

Workers understandably will be willing to supply more labor at higher wages.

Employers are just the opposite. They demand more labor when wages are low.

In an unfettered market, the interplay of supply and demand will result in an “equilibrium wage.”

But as you can see from the chart, if politicians impose a minimum-wage mandate above the equilibrium level, there will be unemployment.

Some folks, though, may not be overly impressed by theory. So how about empirical research.

Other folks, though, may prefer real-world examples rather than academic studies.

We’ve already looked at the bad results when the minimum wage was increased in Michigan.

Now we have some more unfortunate evidence from the state of Washington. Seattle Magazine has a story about a bunch of restaurants closing because of an increase in the minimum wage.

The article starts by noting a bunch of eateries are being shut down.

Last month—and particularly last week— Seattle foodies were downcast as the blows kept coming: Queen Anne’s Grub closed February 15. Pioneer Square’s Little Uncle shut down February 25. Shanik’s Meeru Dhalwala announced that it will close March 21. Renée Erickson’s Boat Street Café will shutter May 30… What the #*%&$* is going on?

Hmmm…so what’s changed. It’s not higher food prices. It’s not a change in dining preferences of consumers.

Instead, government intervention is having a predictable effect.

…for Seattle restaurateurs recently, …the impending minimum wage hike to $15 per hour. Starting April 1, all businesses must begin to phase in the wage increase: Small employers have seven years to pay all employees at least $15 hourly; large employers (with 500 or more employees) have three. Since the legislation was announced last summer, The Seattle Times and Eater have reported extensively on restaurant owners’ many concerns about how to compensate for the extra funds that will now be required for labor: They may need to raise menu prices, source poorer ingredients, reduce operating hours, reduce their labor and/or more.

An industry expert tries to explain the new reality of coping with higher costs.

Washington Restaurant Association’s Anton puts it this way: “It’s not a political problem; it’s a math problem.” …he says that if restaurant owners made no changes, the labor cost in quick service restaurants would rise to 42 percent and in full service restaurants to 47 percent. “Everyone is looking at the model right now, asking how do we do math?” he says. “Every operator I’m talking to is in panic mode, trying to figure out what the new world will look like.”

Well, we know what “the new world will look like” for many workers. They’ll be unemployed.

So you can understand why this issue is so frustrating. Politicians posture about helping workers, but they wind up displaying their economic ignorance and real-world innumeracy.

And innocent people pay the price, as shown in the Branco cartoon.

P.S. Walter Williams explains the racist impact of minimum-wage laws.

P.P.S. On a lighter note, here are a couple of additional clever cartoons illustrating the negative impact of minimum-wage mandates.

P.P.P.S. And this video is a must-watch on the issue.

P.P.P.P.S. Shifting to a different topic, I’m not quite sure this guy deserves to be in the Moocher Hall of Fame, but I’m glad he’s going to jail.

Champion golfer Alan Bannister, who played off a handicap of seven, was convicted of benefits fraud after being caught on camera walking around the course on his daily game. He even had a taxpayer-funded mobility car by claiming he was in too much pain to walk. …Inspectors discovered he used his mobility car – intended for people “virtually unable to walk” – to drive to the golf club to play with the “Sunday Swingers” and “The Crazy Gang” players, despite claiming he could barely walk 50 metres at a time. …The court was told Bannister dishonestly claimed £26,090.55 from 2007 until 2012 in Disability Living Allowance.

And while he’s only a borderline case for the Moocher Hall of Fame, he’s a perfect example of eroding social capital.

He’s a dirtbag who decided that it is perfectly okay to scam off taxpayers. When enough of his fellow citizens make the same choice, a society is in deep trouble.

Read Full Post »

It’s very frustrating to write about the minimum wage. How often can you make the elementary observation, after all, that you’ll get more unemployment if you try to make businesses pay some workers more than they’re worth?

But it’s my mission to promote economic liberty, so I’ve written on why government-mandated wages can create unemployment by making it unprofitable to hire people with low work skills and/or poor work histories. And I’ve attacked Republicans for going along with these job-killing policies, and also pointed out the racist impact of such intervention.

Heck, just about everything sensible that needs to be said about the topic is contained in this short video narrated by Orphe Divougny

But I guess I’m the Sisyphus of the free-market movement because once again I’m going to try to talk some sense into those who think emotion can trump real-world economics.

Let’s start by citing some new reasearch.

States are allowed to increase minimum wages above the federal level. This creates interesting opportunities to measure what happens to employment when the national minimum wage is increased, since the change presumably doesn’t impact states that already are at or above that level.

Two economists from the University of California at San Diego took advantage of this natural experiment and examined employment changes in states that were “bound” and “unbound” by the law.

…we find that minimum wage increases significantly reduced the employment of low-skilled workers.  By the second year following the $7.25 minimum’s implementation, we estimate that targeted workers’ employment rates had fallen by 6 percentage points (8%) more in ‘bound’ states than in ‘unbound’ states.  …Over the late 2000s the average effective minimum wage rate rose by nearly 30% across the United States.  Our best estimate is that these minimum wage increases reduced the employment of working-age adults by 0.7 percentage points.  This accounts for 14% of the employment rate’s total decline over this time period and amounts to 1.4 million workers.  A disproportionate 45% of the affected workers were young adults (aged 15 to 24).

Gee, what a surprise. Fewer jobs.

But the mandated hike in wages didn’t just reduce employment.

There were also negative effects on income.

We find that binding minimum wage increases reduced low-skilled individuals’ average monthly incomes.  Targeted workers’ average incomes fell by an average of $100 over the first year and by an additional $50 over the following two years. …We provide direct evidence that such losses translate into meaningful reductions in upward economic mobility.  Two years following the minimum wage increases we study, low-skilled workers had become significantly less likely to transition into higher-wage employment in bound states than in unbound states. 

This evidence on income is particularly important because some statists make a rather utilitarian argument that it’s okay for some people to lose jobs because others will benefit.

Jared Bernstein is Exhibit A, as you can see in this debate we had for CNBC.

But let’s not just focus on numbers. There are painful human costs when low-skilled workers are priced out of the labor market.

Here are some excerpts from a column in the Wall Street Journal about a real-world example of people losing their jobs.

It’s well-established in the economic literature, if not in the minds of proponents of these laws, that the result will be job losses. Yet this empirical reality fails to capture the emotional reality of the employees who are let go, or of the business owners who had no choice but to let them go. …Michigan’s minimum wage rose in September to $8.15 an hour from $7.40 (the minimum wage for tipped employees rose 17%, to $3.10 an hour). The wage will rise to $9.25 by January 2018.

Now let’s look at the impact on a non-profit restaurant that helped disadvantaged people.

The staff at Tastes of Life was made up of recovering addicts, recently incarcerated individuals and others who would have a hard time landing a job elsewhere. Mr. Mosley explained that on-the-job offenses for which an employee would have been “gone that day” in a traditional work setting were instead used as training opportunities at Tastes of Life. …Mr. Mosley’s financial goal was to break even and use any excess funds to subsidize Life Challenge participants. After more than two years of operation on Beck Road, 2½ miles from the center of town, Tastes of Life had a steady flow of loyal customers, but rising food costs presented a challenge.Mr. Mosley and Ms. Tucker had planned to print new menus with higher prices to cover the food costs, but the September wage hike complicated those plans, in particular because the increase covered both tipped and non-tipped employees. …“If we had a $10 menu item, it would have to be $14,” Mr. Mosley said. The restaurant’s customer base of seniors on a fixed income and Hillsdale locals made this option a nonstarter. The restaurant also had to find roughly 250 new customers a month, unrealistic in a small town of about 8,300.

So the inevitable happened.

The increased minimum wage, he told me, was “the straw that broke that camel’s back,” forcing him to close his doors and lay off his 12-person staff. …with the higher wage costs, the arrangement was no longer feasible, and Tastes of Life closed on Sept. 28. …Four former employees have been able to leverage their restaurant experience to find new employment, but Mr. Mosley told me that eight are still out of work. …the loss of Tastes of Life cuts deep, because the benefit for Life Challenge participants was both valuable and is not easily attained elsewhere. These unintended consequences of a minimum wage hike aren’t unique to small towns in south-central Michigan. Tragically, they repeat themselves in locales small and large each time legislators heed the populist call to “raise the wage.”

Understanding “unintended consequences” is a key characteristic of a good economist.

Indeed, Bastiat’s wise words about the “seen” and “unseen” help to explain why Krugman makes so many mistakes.

But that’s a topic for another column (actually, a whole series of columns).

Today, the goal is simply to understand that it is pointlessly destructive to make low-skilled labor less affordable.

P.S. Given all the evidence that minimum-wage laws destroy jobs, why do some people persist in supporting such a destructive policy? In this post, I provide six possible reasons.

P.P.S. No wonder I get so frustrated on this topic.

P.P.P.S On the lighter side, here are some good cartoon on the minimum wage from Steve Breen, Lisa Benson and Henry Payne.

Read Full Post »

For the past several years, on the issue of jobs, I’ve focused more on the employment-population ratio rather than the official unemployment rate.

Both figures are important, of course, but I think the employment-population ratio has more economic meaning since our prosperity ultimately is based on how many people are productively employed.

To put this in wonkish terms, our national economic output is a function of the efficient allocation of labor and capital.

The reason I bring this up is that many people think the job market is now in great shape because the unemployment rate has dropped to 5.6 percent.

To be sure, that’s good news when compared to the much higher rates of joblessness that plagued the nation a few years ago. But one of the reasons the unemployment rate has dropped is that many people have left the labor force.

Here’s a chart based on data from the Bureau of Labor Statistics showing how many people have jobs compared to the working-age population. As you can see, there’s been scant improvement in this important indicator.

The problem isn’t that the ratio plummeted during the downturn. That always happens.

What’s worrisome is the fact that there wasn’t a bounce back in the right direction after the economy started to improve.

Indeed, it’s become such a problem that the establishment media has started to notice.

Here’s some of what Reuters reported on Fridays good news/bad news jobs report.

…wages posted their biggest decline in at least eight years in a sign the tightening labor market has yet to give much of a boost to workers. …The jobless rate fell 0.2 percentage point to a 6-1/2-year low of 5.6 percent, but that was mainly because people left the labor force. The drop in labor participation and a surprise five-cent, or 0.2 percent, decrease in average hourly earnings…the labor force participation rate, the percentage of the working age population who either have a job or are looking for one, dropped back to the 36-year low of 62.7 percent reached in September.

The labor force participation rate, which is mentioned in the Reuters article, is another set of data that is rather similar to the employment-population rate.

Here’s a chart that’s been circulating on Twitter, based on data from the St. Louis Federal Reserve. You can see that the labor force participation rate jumped significantly between 1970 and 1990, in large part because more women were entering the job market. But in recent years, the trend has been in the wrong direction.

And if you parse the data, you can see that the big problem is among those without a college degree.

Now that we’ve cited lots of data, let’s speculate on why we have fewer and fewer people productively employed.

There are several possible answers, including the big increase in people scamming the disability system.

There’s also the jump in tax and regulatory burdens, though that presumably impacts all economic statistics.

Obamacare deserves its own special mention since it imposes a significant penalty on work.

And, until recently, the government had a policy of endless unemployment benefits that made work relatively less attractive.

So the bottom line, as you might expect, is that the problem is too much intervention and bloated government. Which means the answer is free markets and less government.

P.S. Some readers will have noticed that this piece cites both the employment-population ratio and the labor force participation rate. These two data series are sometimes used interchangeably, though I prefer the former for reasons explained in this article for the BLS’s Monthly Labor Review.

P.P.S. If you want a humorous take on labor economics, I recommend this Wizard-of-Id parody, as well as this Chuck Asay cartoon and this Robert Gorrell cartoon.

P.P.P.S. To end on a glum note, Obama wants to increase the minimum wage. You don’t need to be a rocket scientist to know whether that’s going to help or hurt the job market.

Read Full Post »

Exactly one year ago, we looked at the best and worst policy developments of 2013.

Now it’s time for a look back at 2014 to see what’s worth celebrating and what are reasons for despair.

Here’s the good news for 2014.

1. Gridlock – I’ve been arguing for nearly three years that divided government is producing better economic performance. To be sure, it would have been difficult for the economy to move in the wrong direction after the stagnation of Obama’s first two years, but heading in the wrong direction at a slower pace is better than speeding toward European-style statism.

Indeed, the fact that policy stopped getting worse even boosted America’s relative competitiveness, so there’s a lot to be thankful for when politicians disagree with each other and can’t enact new laws.

David Harsanyi explains the glory of gridlock for The Federalist.

Gross domestic product grew by a healthy 5 percent in the third quarter, the strongest growth we’ve seen since 2003. Consumer spending looks like it’s going to be strong in 2015, unemployment numbers have looked good, buying power is up and the stock market closed at 18,000 for the first time ever. All good things. So what happened? …the predominant agenda of Washington was doing nothing. It was only when the tinkering and superfluous stimulus spending wound down that fortunes began to turn around. …spending as a percent of GDP has gone down. In 2009, 125 bills were enacted into law. In 2010, 258. After that, Congress, year by year, became one of the least productive in history. And the more unproductive Washington became, the more the economy began to improve. …Gridlock has caused an odd, but pervasive, stability in Washington. Spending has been static. No jarring reforms have passed — no cap-and-trade, which would have artificially spiked energy prices and undercut the growth we’re now experiencing. The inadvertent, but reigning, policy over the past four years has been, do no harm.

Amen. Though I should hasten to add that while gridlock has been helpful in the short run (stopping Obama from achieving his dream of becoming a second FDR), at some point we will need unified government in order to adopt much-needed tax reform and entitlement reform.

The key question is whether we will ever get good politicians controlling both ends of Pennsylvania Avenue.

2. Restrained Spending – This is the most under-reported and under-celebrated news of the past few years, not just 2014.

Allow me to cite one of my favorite people.

In fiscal year 2009, the federal government spent about $3.52 trillion. In fiscal year 2014 (which ended on September 30), the federal government spent about $3.50 trillion. In other words, there’s been no growth in nominal government spending over the past five years. It hasn’t received nearly as much attention as it deserves, but there’s been a spending freeze in Washington. …the fiscal restraint over the past five years has resulted in a bigger drop in the relative size of government in America than what Switzerland achieved over the past ten years thanks to the “debt brake.” …The bottom line is that the past five years have been a victory for advocates of limited government.

And this spending restraint is producing economic dividends, though Paul Krugman somehow wants people to believe that Keynesian economics deserves the credit.

3. Limits on Unemployment Benefits – Although the labor force participation rate is still disturbingly low, the unemployment rate has declined and job creation numbers have improved.

The aforementioned policies surely deserve some of the credit, but it’s also worth noting that Congress wisely put a stop to the initiative-sapping policy of endlessly extending unemployment benefits. Such policies sound compassionate, but they basically pay people not to work and cause more joblessness.

Phil Kerpen of American Commitment elaborates, citing recent research from the New York Fed.

According to empirical research by the Federal Reserve Bank of New York: “most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility.” Those benefits finally ended at the end of 2013, triggering a sharp rise in hiring… Specifically, they found that the average extended unemployment benefits duration of 82.5 weeks for four years had the impact of raising the unemployment rate from 5 percent to 8.6 percent. …Good intentions are not enough in public policy.  It might seem kind and compassionate to spend billions of taxpayer dollars on “emergency” unemployment benefits forever, but the effect is to keep millions of people unemployed.  Results matter.

Phil’s right. If you pay people not to work, you’re going to get foolish results.

But the three above stories are not the only rays of sunshine in 2014. Honorable mention goes to North Carolina and Kansas for implementing pro-growth tax reforms.

I’m also pleased that GOPers passed the first half of my test and told the Democrat appointee at the Congressional Budget Office that he would be replaced. Now the question is whether they appoint someone who will make the long-overdue changes that are needed to get better and more accurate assessments of fiscal policy. That didn’t happen when the GOP had control between 1995 and 2007, so victory is far from assured.

And another honorable mention is that Congress has not expanded the IMF’s bailout authority.

Now let’s look at the three worst policy developments of 2014.

1. Obamacare Subsidies – Yes, Obamacare has been a giant albatross for the President and his party. Yes, the law has helped more and more people realize that big government isn’t a good idea. Those are positive developments.

Nonetheless, 2014 was the year when the subsidies began to flow. And once handouts begin, politicians get very squeamish about taking them away.

This is why I wrote back in 2012 that Obamacare may have been a victory (in the long run) for the left, even though it caused dozens of Democrats to lose their seats in the House and Senate.

I think the left made a clever calculation that losses in the last cycle would be an acceptable price to get more people dependent on the federal government. And once people have to rely on government for something like healthcare, they are more likely to vote for the party that promises to make government bigger. …This is why Obamacare – and the rest of the entitlement state – is so worrisome. If more and more Americans decide to ride in the wagon of government dependency, it will be less and less likely that those people will vote for candidates who want to restrain government.

Simply stated, when more and more people get hooked on the heroin of government dependency, I fear you get the result portrayed in this set of cartoons.

2. Continuing Erosion of Tax Competition – Regular readers know that I view jurisdictional competition as a very valuable constraint on the greed of the political class.

Simply stated, politicians will be less likely to impose punitive tax policies if the geese with the golden eggs can fly away. That’s why I cheer when taxpayers escape high-tax jurisdictions, whether we’re looking at New Jersey and California, or France and the United States.

But this also helps to explain why governments, either unilaterally or multilaterally, are trying to prevent taxpayers from shifting economic activity to low-tax jurisdictions.

And 2014 was not a good year for taxpayers. We saw further implementation of FATCA, ongoing efforts by the OECD to raise the tax burden on the business community, and even efforts by the United Nations to further erode tax competition.

Here’s an example, from the Wall Street Journal, of politicians treating taxpayers like captive serfs.

Japan could become the latest country to consider taxing wealthy individuals who move abroad to take advantage of lower rates. The government and ruling party lawmakers are considering an “exit tax”… Such a rule would prevent wealthy individuals moving to a location where taxes are low–such as Singapore or Hong Kong… some expats in Tokyo are concerned the rule could make companies think twice about sending senior professionals to Japan or make Japanese entrepreneurs more reluctant to go abroad.

My reaction, for what it’s worth, is that Japan should reduce tax rates if it wants to keep people (and their money) from emigrating.

3. Repeating the Mistakes that Caused the Housing Crisis – A corrupt system of subsidies for Fannie Mae and Freddie Mac, combined with other misguided policies from Washington, backfired with a housing bubble and financial crisis in 2008.

Inexplicably, the crowd in Washington has learned nothing from that disaster. New regulations are being proposed to once again provide big subsidies that will destabilize the housing market.

Peter Wallison of the American Enterprise Institute warns that politicians are planting the seeds for another mess.

New standards were supposed to raise the quality of the “prime” mortgages that get packaged and sold to investors; instead, they will have the opposite effect. …the standards have been watered down. …The regulators believe that lower underwriting standards promote homeownership and make mortgages and homes more affordable. The facts, however, show that the opposite is true. …low underwriting standards — especially low down payments — drive housing prices up, making them less affordable for low- and moderate-income buyers, while also inducing would-be homeowners to take more risk. That’s why homes were more affordable before the 1990s than they are today. … The losers, as we saw in the financial crisis, are borrowers of modest means who are lured into financing arrangements they can’t afford. When the result is foreclosure and eviction, one of the central goals of homeownership — building equity — is undone.

Gee, it’s almost as if Chuck Asay had perfect foresight when drawing this cartoon.

Let’s end today’s post with a few dishonorable mentions.

In addition to the three developments we just discussed, I’m also very worried about the ever-growing red tape burden. This is a hidden tax that undermines economic efficiency and enables cronyism.

I continue to be irked that my tax dollars are being used to subsidize a very left-wing international bureaucracy in Paris.

And it’s very sad that one of the big success stories of economic liberalization is now being undermined.

P.S. This is the feel-good story of the year.

Read Full Post »

Much of my writing is focused on the real-world impact of government policy, and this is why I repeatedly look at the relative economic performance of big government jurisdictions and small government jurisdictions.

But I don’t just highlight differences between nations. Yes, it’s educational to look at North Korea vs. South Korea or Chile vs. Venezuela vs. Argentina, but I also think you can learn a lot by looking at what’s happening with different states in America.

So we’ve looked at high-tax states that are languishing, such as California and Illinois, and compared them to zero-income-tax states such as Texas.

With this in mind, you can understand that I was intrigued to see that even the establishment media is noticing that Texas is out-pacing the rest of the nation.

Here are some excerpts from a report by CNN Money on rapid population growth in Texas.

More Americans moved to Texas in recent years than any other state: A net gain of more than 387,000 in the latest Census for 2013. …Five Texas cities — Austin, Houston, San Antonio, Dallas and Fort Worth — were among the top 20 fastest growing large metro areas. Some smaller Texas metro areas grew even faster. In oil-rich Odessa, the population grew 3.3% and nearby Midland recorded a 3% gain.

But why is the population growing?

Well, CNN Money points out that low housing prices and jobs are big reasons.

And on the issue of housing, the article does acknowledge the role of “easy regulations” that enable new home construction.

But on the topic of jobs, the piece contains some good data on employment growth, but no mention of policy.

Jobs is the No. 1 reason for population moves, with affordable housing a close second. …Jobs are plentiful in Austin, where the unemployment rate is just 4.6%. Moody’s Analytics projects job growth to average 4% a year through 2015. Just as important, many jobs there are well paid: The median income of more than $75,000 is nearly 20% higher than the national median.

That’s it. Read the entire article if you don’t believe me, but the reporter was able to write a complete article about the booming economy in Texas without mentioning – not even once – that there’s no state income tax.

But that wasn’t the only omission.

The article doesn’t mention that Texas is the 4th-best state in the Tax Foundation’s ranking of state and local tax burdens.

The article doesn’t mention that Texas was the least oppressive state in the Texas Public Policy Foundation’s Soft Tyranny Index.

The article doesn’t mention that Texas was ranked #20 in a study of the overall fiscal condition of the 50 states.

The article doesn’t mention that Texas is in 4th place in a combined ranking of economic freedom in U.S. state and Canadian provinces.

The article doesn’t mention that Texas was ranked #11 in the Tax Foundation’s State Business Tax Climate Index.

The article doesn’t mention that Texas is in 14th place in the Mercatus ranking of overall freedom for the 50 states (and in 10th place for fiscal freedom).

By the way, I’m not trying to argue that Texas is the best state.

Indeed, it only got the top ranking in one of the measures cited above.

My point, instead, is simply to note that it takes willful blindness to write about the strong population growth and job performance of Texas without making at least a passing reference to the fact that it is a low-tax, pro-market state.

At least compared to other states. And especially compared to the high-tax states that are stagnating.

Such as California, as illustrated by this data and this data, as well as this Lisa Benson cartoon.

Such as Illinois, as illustrated by this data and this Eric Allie cartoon.

And I can’t resist adding this Steve Breen cartoon, if for no other reason that it reminds me of another one of his cartoons that I shared last year.

Speaking of humor, this Chuck Asay cartoon speculates on how future archaeologists will view California. And this joke about Texas, California, and a coyote is among my most-viewed blog posts.

All jokes aside, I want to reiterate what I wrote above. Texas is far from perfect. There’s too much government in the Lone Star state. It’s only a success story when compared to California.

P.S. Paul Krugman has tried to defend California, which has made him an easy target. I debunked him earlier this year, and I also linked to a superb Kevin Williamson takedown of Krugman at the bottom of this post.

P.P.S. Once again, I repeat the two-part challenge I’ve issued to the left. I’ll be happy if any statists can successfully respond to just one of the two questions I posed.

Read Full Post »

I’ve written many times about America’s looming fiscal collapse, and I’ve also pontificated about America’s costly and failed welfare state.

I even have speculated about when America reaches a tipping point, with too many people riding in the wagon of government dependency (as illustrated by these famous cartoons, which even have a Danish equivalent).

If you read all my posts on these issues, I like to think you’d be very well informed on these topics. But if you want to save time, my colleague Tom Palmer put all these issues together in a recent speech in Australia.

Best of all, he includes lots of great material on the moral and historical aspects of this discussion.

The good news is that there are signs of progress, at least outside the United States. Denmark, for instance, has cut back on its welfare state.

And now, even the United Kingdom has engaged in some serious welfare reform.

Here are some excerpts from a column in the UK-based Telegraph.

 Why should there have been this improvement in the labour market? …The most convincing explanation is surely the Government’s welfare reforms. They have made it more difficult and less attractive to live off benefits, thereby increasing the supply of workers. In economists’ jargon, the natural rate of unemployment has fallen.

Another Telegraph column digs into the details.

…more jobs are being created in Britain than in the rest of Europe put together. …There has clearly been a game-changer… What confounded the eggheads was that the number of workers is growing four times faster than the number of working-age people: in other words, Britons have become far more likely than pretty much anyone else to look for –and find – work. Why?

The answer is simple economics and incentives.

Fewer people now claim the three main out-of-work benefits than at any time during the Labour years. This, of course, is perfectly explained by IDS’s reforms, which make it a lot harder to live on welfare. Those who have been on incapacity benefit for years have been summoned to assessment centres to see what work they’re fit to do. Far more of the unemployed are being penalised for missing job interviews. A benefits cap has been imposed; housing benefit is being reformed; and the so-called “spare room subsidy” has been abolished, making life more expensive for those on benefits with unused rooms. …this is not about punishing “shirkers”, but helping good people trapped in a bad system. Fixing that system means making life harder for people who have it pretty tough already, at least for a short while. But under the Labour regime, such people were being led down the path to dependency and poverty. A new road had to be built, leading to work. And only now is it becoming clear quite how many people are taking it.

Here’s a chart showing how actual job creation is beating the forecasts.

These are remarkable numbers, particularly when you compare them to the job forecast put forth by the Obama White House, which grossly over-stated the number of jobs that would exist under the so-called stimulus.

The key takeaway is that incentives matter. When you give people unemployment insurance, you reduce incentives to find work. When you give people Obamacare, you reduce incentives to earn income. When you give people welfare and food stamps, you reduce incentives for self-reliance.

And when you add together the panoply of redistribution programs operated by government, it’s easy to see why far too many people are being trapped in government dependency.

If you like charts, here’s a very sobering image of how the welfare state destroys incentives for upward mobility. And if you like anecdotes, here’s a dismal story about government making leisure more attractive than productivity.

P.S. At least one honest leftist acknowledges that there’s a problem.

P.P.S. On a lighter note, here’s a satirical Declaration of Dependency from the left.

Read Full Post »

In some sense, there’s nothing remotely funny about the IRS’s targeting of Tea Party organizations.

It is disgusting that a powerful arm of the government became a corrupt vehicle for illegal partisan politics.

But it’s better to laugh rather than cry, so let’s enjoy this new video from Remy at Reason TV.

And let’s not forget that the IRS rewarded itself with big bonuses after the scandal!

President Obama infamously claimed there wasn’t a “smidgen” of corruption at the IRS. This Glenn Foden cartoon is the only appropriate response.

P.S. Switching to another topic, I explained recently that the left was wrong about unemployment insurance. The statists told us that paying people to be unemployed wouldn’t increase joblessness, but virtually all the evidence is on the other side.

Now we have even more research emphasizing that point. Here’s a blurb from some new research published by the St. Louis Federal Reserve.

…we find that the extension of unemployment benefits affected the labor market status of long-term unemployed workers in late 2013. Without extended UI benefits, these unemployed workers would have been more likely to be employed, more likely to exit the labor force, and on average 1.9 percent less likely to remain unemployed in the following period. In short, our simulated early termination of the EUC program lowered the unemployment rate by 3 to 5 basis points, suggesting that the December 2013 expiration of the EUC program might have slightly lowered the unemployment rate in early 2014.

However, since most leftists are not very literate about economics, let’s simplify the issue. Maybe they can understand some cartoons. Here are some options from Michael Ramirez, Robert Gorrell, and Chuck Asay, as well as a great Wizard-of-Id parody.

Read Full Post »

Older Posts »

Follow

Get every new post delivered to your Inbox.

Join 2,837 other followers

%d bloggers like this: