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Tag : economics

the truth in business

By The Leasing Group

Truth about the Minimum Wage

Ask about anyone to weigh in on an increase in the minimum wage and you’re bound to get an emotional response.  As with abortion, gun control, and taxes, there’s very little middle ground on this issue.  The minimum wage is very polarizing topic.  Forget about changing minds.

 

For dissenters, the logic goes something like this…a free market system allocates resources, including labor, more efficiently than any other system.  Government interference only serves to disrupt this efficiency resulting in slower economic growth, higher labor costs and lower employment, all bad for businesses and for their workers.  Worse yet, the minimum wage is inflationary, and we all know what that means.  End of story.

 

I’m sure the intellectual thinkers of the day came to this conclusion honestly and without prejudice.  However, in its seventy-five year history, the minimum wage has not been the culprit feared by economic experts.

 

First, there is no evidence linking the minimum wage to a softening economy.  Second, with few exceptions, businesses don’t typically lay off workers just because of hourly wage increases.  Even when they do, unemployment does not necessarily rise.  Third, in a labor driven market, workers typically make more than the minimum anyway.  An increase rarely has the predicted impact.

 

For supporters, the arguments are more tangible.  With so many workers teetering at the poverty level, we’re all better off when workers and their families don’t require the public safety net.  And, since the cost of welfare in all its forms far exceeds the inflationary cost of wage increases, doesn’t a rising tide lift all boats?   Additionally, working families contribute to the tax base.

 

On balance, a modest increase in the minimum wage actually does more good than bad.  I think its time for conservatives (me included) to get out of the way.

 

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Popping the Student Loan Bubble

I usually cringe when I read about Elizabeth Warren advising the Secretary of the Treasury, chairing a Presidential oversight committee or crafting legislation in the Senate.  As chief architect of the Consumer Financial Protection Board and its founding leader, she and the CFPB have harmed community banks, created mountains of bureaucratic red tape, hurt borrowers and done virtually nothing to protect consumers.

 

Now Warren is weighing in on the student loan problem.  On the surface, lowering interest rates and capping monthly payments sounds great.  No one, including me, wants graduates to be saddled with so much debt that they can’t start families, buy homes or create businesses.  But Warren’s proposals don’t address the root causes of this $1.2 trillion crisis.

 

The issue is directly linked to two very bad policies:

 

  1. Easy student access to credit without spending controls.  In other words, students are permitted to borrow for purposes beyond tuition, room and board.  Without controls, loans pay for night lives, smart phones, cars, sporting events and all sorts of non-educational endeavors.
  2. Little oversight of or limits to education cost increases.  Generally, public and private institutions alike do a poor job of controlling their costs.  They don’t have to as long as the government loan program will pay.  Additionally, “for-profits” schools routinely enrich themselves at student and tax payer expense receiving a disproportionately high number of loans coupled with high loan defaults.

 

Warren’s proposed solutions create more problems than they solve because they don’t address the real issues.  If we’re going to deal with our student debt problem, we must address the reasons for the problem, not simply lower payments on loans way too high in the first place.

 

 

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Thoughts on Full Employment

I will admit it.  Surfing the C-Span channels for economic debates on policy affecting employment is not everyone’s definition of fun.  Professor X wants more stimulus while director Y rails over failed stimulus of the past.  Senator Z argues in favor of fiscal constraint and a balanced budget while a panel of congressmen and women question the wisdom of lower spending during an anemic recovery.  Before long my head is exploding with conflicting arguments. 

 

What are we to believe amidst so much chatter, where every point of view has its supporters and detractors?  Is it possible to determine truth from fiction, given the arguments and information at our disposal?  After sorting through the pros and cons, I’ve assembled a list of recommendations.  While far from perfect, they seem worth considering.      

 

1.  Achieve energy independence.  Isn’t it time to put thousands to work by easing regulation on energy exploration, production and transportation, if we can do this safely?  The benefits….new jobs, 100% energy independence, millions of dollars pumped into our economy, and freedom from Middle East terrorist influenced oil.

 

2.  Train for tomorrow’s jobs.  How about creating a new class of interest-free student loans available to fund training for the high tech jobs of tomorrow, the jobs crying for talent?  A four year college degree is not for everyone.  Educating the lawyers, doctors, engineers, artists and psychologists is fine, but we must also train computerized machine tool technicians and digital press operators.

 

3.  Tax policy to reward “Made in USA” employment.  Bring the overseas manufacturing jobs back home and give them to anyone who wants to work.  With focused favorable tax incentives directed to the right companies, we can do this and employ Americans in the process.  What’s standing in the way? 

 

Is full employment possible?  Is a living wage possible?  Is a revitalized middle class possible?  I think so.  It’s simply a matter of agreeing on a job creation policy and implementing it.  No excuses acceptable.

 

the truth in business
Truth about the Minimum Wage
buisness advice
Popping the Student Loan Bubble