Tags: Minimum Wage

Chinese-Made Bicycles and the Wisconsin Governor’s Race


From the Tuesday Morning Jolt:

Could Chinese-Made Bicycles Be a Factor in Wisconsin’s Gubernatorial Race?

In Wisconsin, the governor’s race featuring Republican incumbent Scott Walker – perhaps a potential presidential candidate – and Democrat Mary Burke remains pretty close. The Walker campaign thinks they’ve got an opportunity to damage Burke by pointing out how her family’s business shipped jobs to China:

The dispute over Trek Bicycle Corp. flared up last week. The Walker campaign began airing an ad criticizing Trek, the Burke family business, for outsourcing jobs to low-wage China. Trek has not disclosed how much its contract workers there are paid per hour.

If they’re not disclosing it, we can surmise it’s not much.

For what it’s worth, Trek president John Burke – the brother of the candidate – said, “Mary had nothing to do with sourcing decisions at Trek. Those decisions were made by my father and myself.” Burke is no longer on the board of the company, but owns stock.

So she’s not a direct out-sourcer herself; she just profits from the outsourcing decisions of others. Much better!

And back in 2004 – when she was with the company – the U.S. Department of Labor investigated whether employees at Trek qualified for the “Trade Adjustment Assistance Program,” a federal entitlement program that assists U.S. workers who have lost or may lose their jobs as a result of foreign trade.

The Department of Labor concluded,  “The investigation revealed that production and employment at the subject firm declined from 2002 to 2003. The investigation further revealed an increase in company imports of bicycles during the relevant period.” But the Department of Labor concluded the workers did not qualify for one of the forms of assistance because “workers in the workers’ firm do possess easily transferable skills.”

Burke was at “Netroots Nation,” the big progressive blogger conference this weekend. She’s asked about “rumors in the media about you and Chinese employees and the minimum wage – is there any truth to that, or any story behind that?”

Burke’s answer, in its entirety: “I’d be happy to address that. Trek is the largest manufacturer of bicycles in the United States. Trek employs early 1,000 people in Wisconsin. In addition to $50 million in payroll in Wisconsin, by supporting millions of dollars in goods and services from all other Wisconsin businesses, small businesses across the state, its impact on the Wisconsin economy is incredible. so  Trek is very proud to be a great Wisconsin employer, a great contributor to Wisconsin, it was founded nearly 40 years ago right there in Wisconsin, and it has grown to be a global company with its headquarters in Wisconsin.”

That is a nice little series of statements and platitudes that doesn’t reassure anyone in its lack of specifics. Such as – does the company get parts, supplies or other materials from China that it could get in the United States? If so, how many? And if so, how much are the workers who produce those parts, supplies and other materials paid? When did the company start getting these supplies from China and were they available from U.S. suppliers, and at what price?

Also note that when Burke brags that the company is “the largest manufacturer of bicycles in the United States,” the company wins that distinction by making 10,000 bicycles per year in the U.S…. out of 1.5 million total. So this company makes a LOT of bikes in Germany and China.

Wisconsin liberals have accused her and her family from prospering from outsourcing:

She also claims in the interview that she never made decisions to ship jobs overseas and that she is opposed to unfair trade deals, both claims which aren’t truthful. Burke was a key family member in a family business. In his book, her brother calls her the “brains of the family.” Burke can’t on the one hand take credit for much of Trek’s business success, but then somehow sell the notion that there was a firewall between her and Trek outsourcing thousands of American bike manufacturing jobs.  

Plus, Burke is one of Trek’s private owners and currently sits on their board.  This is a real-time issue.   Did she object or do anything to stop Trek for sending jobs to China?  Is she doing anything right now to bring back the Trek jobs back? 

During her time at Trek, Burke served as a board member on the Bicycle Parts Suppliers Association (BPSA), a powerful trade association that, among other things, has lobbied for weakening tariffs and free trade.  In addition, they’ve defended Chinese manufacturing and fought regulations during the recent Chinese manufacturing lead paint scare.

So, while it is nice to hear Mary Burke bemoan unfair trade deals, the reality is that she in past has fought for them and personally profited from them. 

Keep in mind, Mary Burke is running on… raising the minimum wage, and also said the minimum wage hike “wouldn’t affect” her family’s business.

Well, we know it wouldn’t affect those Chinese workers.

Of course, we know how this all ends. Every Madison progressive, every union member, every liberal beating the drum for protecting American jobs who sneered about Mitt Romney’s greed will shrug their shoulders and vote for her… just because she’s the Democrat. 

Tags: Mary Burke , Scott Walker , Minimum Wage , Outsourcing , Wisconsin

Why Americans Want Politicans to Push Around Their Employers


There’s a thread that ties the Democrats’ arguments on the employer-covered contraceptive coverage mandate and their push to raise the minimum wage to $10.10 per hour: We’re going to make your employer give you something you want.

People rarely turn down things that they’re offered for free.

Before those of us on the Right commence fuming about “makers” and “takers,” we probably ought to think about why swaths of the electorate are so receptive to this message, and so eagerly buy into a narrative where they are the victims of their miserly bosses, and the heroic white knight of Democrat-run big government must come in and give them what they deserve.

Throughout the past three decades, without any real national debate or referendum, American workers found themselves in an era of fierce foreign competition. Goods are easily imported, and services increasingly can be handed elsewhere as well. First your telemarketer or help line was serviced from Bangalore, then it became an electronic voice menu. (“I’m sorry. I did not understand your answer. Please try again.”) Companies periodically embraced “outsourcing” and “offshoring,” utilizing cheaper labor in other countries. Mass illegal immigration increased the supply of labor, particularly manual labor.

“Chainsaw Al” Dunlap, a corporate executive who built a notorious reputation for mass layoffs at Scott Paper and then Sunbeam, helped create the modern iconic villain of a corporate executive willing to throw away his own workers in pursuit of a higher stock share price. The perception of callous and greedy corporate executives long outlasted Dunlap, who was tossed out at Sunbeam in 1998. American workers feel that their employers aren’t loyal to them, so they feel no need to reciprocate that loyalty.

Wage growth is “down from the end of 2008, broadly flat over the past decade, and on an inflation-adjusted basis, wages peaked in 1973, fully 40 years ago. Apart from brief lapses, like in the late 1990s, wages have been falling for a generation.”

There are times when those thriving the most will observe the difficult time that those once considered “middle class” are having, and rather openly say that they don’t care or that it reflects some meritocratic punishment for Americans who have grown too entitled:

The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.

I heard a similar sentiment from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”

Easy for him to say!

Note that a striking percentage of Americans don’t like their jobs: “Approximately 70 million Americans either hated their jobs or were simply ‘checked out,’ according to a recent Gallup survey of America’s workforce.”

That Gallup survey found that one of the biggest factors in an employee’s engagement is the opinion of the boss – more consequential than pay level, hours, benefits, and workload. “Managers from hell are creating active disengagement costing the United States an estimated $450 billion to $550 billion annually,” wrote Jim Clifton, the C.E.O. and chairman of Gallup.

Obviously, these things are subjective, but maybe Americans really have worse bosses than a generation ago. Mocking the boss has always been a comedy staple — Office Space, Dilbert, Horrible Bosses — but maybe people laugh because they relate all too well. They feel like their hopes, dreams, and life’s path are blocked, indefinitely, by the pointy-haired micro-manager. No wonder they cheer a Democratic officeholder who pledges to make the boss give you more stuff.

Mitt Romney and other Republicans spent a good portion of 2012 singing the praises of “entrepreneurs,” and perhaps many Americans heard that as singing the praises of their bosses — or more likely, the founder of the company that hired them, whom in most cases they’ve never even met.

Of course, you won’t get very far in life if you see your boss as your enemy. Ideally, it’s a partnership. But that requires a positive, flexible, mature attitude on the part of the employee — and the boss as well.

Companies will argue that no one sets out to hire a bad manager — true enough — and that they’re giving their workers the best deal that they can, setting their wages at the market rate. Still, some of America’s businesses are sitting on piles of cash — $1.64 trillion among U.S. non-financial companies at the end of 2013. If America’s businessmen are worried about the growing atmosphere of resentment, populist anger, demonization of the wealthy, then throwing that money around — whether it’s on higher wages, new hires, new product research and development, or plant expansion — might persuade frustrated, increasingly cynical Americans that the companies that employ them aren’t such bad guys.

Is this the face of America’s employers?

Tags: Economy , Business , Office Space , Barack Obama , Hobby Lobby , Minimum Wage

Obama: Vote Out Minimum Wage Hike Opponents! Let’s Start With Three . . .


President Obama, yesterday:

If your member of Congress doesn’t support raising the minimum wage, you’ve got to let them know they’re out of step, and that if they keep putting politics ahead of working Americans, you’ll put them out of office.

Does that apply to the three House Democrats who voted against it who are up for reelection this year? John Barrow of Georgia, Colin Peterson of Minnesota, and Kurt Schrader of Oregon all voted “no” last month, and the DCCC is pulling out all the stops to ensure Barrow, Peterson, and Schrader are reelected.

Jim Matheson of Utah, Mike McIntyre of North Carolina, and Bill Owens of New York also voted against the minimum-wage hike, but they will not be seeking another term.

Tags: Barack Obama , Minimum Wage , John Barrow , Colin Peterson , Kurt Schrader

Why Unions Hunger for a Job-Killing Minimum Wage Hike


From the midweek edition of the Morning Jolt:

CBO: Obama’s Primary Economic Proposal Would Eliminate 500,000 Jobs

This is pretty consequential, no?

Once fully implemented in the second half of 2016, the $10.10 option [for the minimum wage] would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects (see the table below). As with any such estimates, however, the actual losses could be smaller or larger; in CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1.0 million workers.

So, best guess is a half-million jobs eliminated, maybe as many as a million jobs?

Richard Berman:

The Center for Union Facts analyzed collective-bargaining agreements obtained from the Department of Labor’s Office of Labor-Management Standards. The data indicate that a number of unions in the service, retail and hospitality industries peg their base-line wages to the minimum wage. . . . The two most popular formulas were setting baseline union wages as a percentage above the state or federal minimum wage or mandating a flat wage premium above the minimum wage.

And now you see why raising the minimum wage is such an intense priority for Democrats. A higher minimum wage means higher wages for union workers, which means higher union dues, which gives unions more money to spend during campaign season.

Time to use one of my favorite illustrations of union . . . er . . . hunger for political victory:

This Wisconsin AFL-CIO photo shows AFL-CIO president Richard Trumka, left; a Green Bay Packers mascot; and, on the right, Wisconsin AFL-CIO president Phil Neuenfeldt, who made $108,526 in 2010, according to the union’s 990 form.

Tags: Minimum Wage , Unions

What’s Really Driving the Push to Hike the Minimum Wage: Union Dues


This morning, President Obama is announcing that by executive order, he’s raising the minimum wage to $10.10 for those working on new federal contracts.

The two-page “fact sheet” for the move fails to mention how many workers would be getting better wages. Note that the executive order only sets the minimum wage level for new contracts, as the White House cannot change the terms of existing contracts.

Representatives Keith Ellison (D., Minn.) and Raul Grijalva (D., Ariz.), co-chairmen of the Congressional Progressive Caucus, pushed for the change, and contended the raise would affect 2 million workers, which seems astonishingly high, considering that the high estimates of number of federal contractors is about 4.4 million.

These comments from the Government Executive site indicate a federal contractor making minimum wage is rarer than hen’s teeth:

Can only speak from experience of contracting out logistics functions; never seen one contract where a single employee was paid “just the minimum wage” . . . 

I am Contracting Officer and haven’t seen any contract that pays minimum wages. Most of the contractors make more than their counterparts in the private sector. Then you have administrative cost to manage the contract, so it already cost more to contract it out . . . 

If they raise the lower wage for non-skilled labor people, will that mean that OPM will have to adjust all the pay scales all the way up the line? I know that the WG [worker grade] scales are based on the local market but GS [general schedule] is only offset by local. Will4567 is right about contractors paying higher than minimum wage. Here at this location, the contractors pay on average $.50 to $1.25 higher than the local economy.

But that little talking point really hinges on how broadly you define “affect.”

Richard Berman:

The Center for Union Facts analyzed collective-bargaining agreements obtained from the Department of Labor’s Office of Labor-Management Standards. The data indicate that a number of unions in the service, retail and hospitality industries peg their base-line wages to the minimum wage. . . . The two most popular formulas were setting baseline union wages as a percentage above the state or federal minimum wage or mandating a flat wage premium above the minimum wage.

And now you see why raising the minimum wage is such an intense priority for Democrats. A higher minimum wage means higher wages for union workers, which means higher union dues, which gives unions more money to spend during campaign season.

Tags: Minimum Wage , Barack Obama

Reminder: 1.1 Percent of U.S. Workforce Makes Minimum Wage


The current U.S. population is about 317 million. The current number of employed American workers is 144 million.

According to the Bureau of Labor Statistics, among those paid by the hour, 1.6 million Americans earned the prevailing federal minimum wage of $7.25 per hour in 2012. (The data for 2013 hasn’t been released yet.) Of these, 484,000 are aged 16 to 19.

So . . . the Democrats’ big idea on income inequality is one that will increase wages for . . . 1.1 percent of the workforce.

The federal minimum wage is $7.25 per hour, although many states and localities require a higher wage by law. SeaTac, the municipality that surrounds Seattle-Tacoma International Airport, now requires $15 per hour. Democrats want to raise the federal minimum wage to $10.10 per hour, an additional $2.85 per hour.

For a minimum-wage employee working 40 hours per week, that’s an additional $114 per week, before taxes.

For a 30-hour-per-week worker, we’re talking about an additional $85.50 per week.

With 1.6 million earning the federal minimum wage, averaging 35 hours per week, this would amount to $159.6 million in higher wages per week. That, times 52 weeks per year, amounts to about $8.2 billion. That may sound like a lot, but we have a $17 trillion economy.

In short, an America with a $10.10-per-hour minimum wage would look indistinguishable from the one we see today on the issue of income inequality, as well as the economic aspect that more conservatives focus on, opportunity for advancement. (Getting that first entry-level, minimum wage may get harder as each employee becomes more expensive to the employer.) The workers making minimum wage may very well appreciate the extra $85 to $114 per week, but it’s not going to have much of an impact on their purchasing power. Small companies on tight margins may find the $2.85-per-worker-per-hour cost more difficult to handle, or may raise prices. Of course, if prices go up . . . that will eat into the budgets of those minimum-wage workers pretty fast, won’t it?

Tags: Minimum Wage

The Triumphant Moment of Three Popular Bad Ideas


Back during the argument about Chuck Hagel’s confirmation, I wrote:

The Obama administration’s persistent desire to hold talks with Iran was mentioned, time and again, in the campaigns of 2008 and 2012. Mitt Romney pointed out the spinning of Iran’s centrifuges many times over the past four years again and often on the campaign trail. Hagel’s been so pro-Obama that he was mentioned as a possible running mate in 2008, and has been discussed for the secretary of defense job every time it opened up under Obama. The likelihood that negotiations would not advance any U.S. interest, and instead amount to a propaganda win for regimes and groups hostile to us, is pretty clear. And yet America elected and reelected the guy proposing it. And he carried the Jewish vote by a healthy majority both times.

How many times are we required to save the American people from the consequences of their actions, dragging them kicking and screaming from a bad outcome they keep trying to run toward? If only a small portion of the American Jewish community is willing to loudly oppose Hagel over his “Jewish lobby” comments, how vehemently should those of us outside that community fight a battle that we are quite likely to lose?

At this moment, on three big fronts, we on the right find ourselves in the minority, opposing popular policies that would most directly harm those who disagree with us.

The first front is raising the minimum wage. Minimum-wage hikes make hiring entry-level workers more expensive, and probably slow hiring in those entry-level jobs. (Economists argue passionately about whether hiring slows a lot or just a little bit, but no one would argue that making workers more expensive makes businesses more eager to hire.) A minimum-wage hike will also have an economic ripple effect if employers raise prices to cover the higher wage costs.

The second front is extending unemployment benefits again. There’s nothing wrong with collecting unemployment benefits when you lose a job, but you’re not supposed to be on them forever, and at some point, those benefits create an incentive to not take that not-quite-good-enough job. Usually unemployment benefits can be collected for 26 weeks (six months); Congress offered additional federal aid during the recession, so that some could collect unemployment for as long as 99 weeks in states with extremely high unemployment. (That’s nearly two years.) Congress eventually cut that back to 73 weeks in the hardest-hit states — roughly one year and four months. As USA Today reports, “Last month, however, the House and Senate left for their Christmas break without renewing the program. As of Dec. 28, about 1.3 million people were cut off.”

At what point is the government, on behalf of the taxpayer, allowed to say, “That’s enough, you have to accept and begin work at the next job that’s offered to you”? Collecting unemployment benefits is certainly easier than working in a not-so-good job, but is it better?

The third front is marijuana legalization; the editors of NR offer Colorado a bit of applause for their recent change in the law. Sure, some people can use marijuana recreationally with no ill effects. But some percentage of users do develop an unhealthy focus on using it and/or addiction, and legalization is extremely likely to lead to wider use (after all, the risk of prosecution and legal consequences dropped from small to nil). The use by teenagers is particularly problematic, knowing what we now know about brain development, and widespread availability of those over 21 will make it more accessible to teenagers. In Colorado, they’re already seeing a “dramatic surge” of children eating pot-laced baked goods — cookies, brownies, etc. Go figure, a pot-using parent isn’t the most careful or responsible.

These proposals are all extremely popular. Hart Research finds 55 percent support extending unemployment benefits. Fox News finds 66 percent support raising the minimum wage. Gallup found 58 percent think marijuana should be made legal.

The arguments in favor of these ideas are pretty simple and straightforward: Higher wages! Helping the jobless! Legal use of a recreational drug that was pretty widespread even when it was illegal!

Opposition to these ideas usually requires a bit of thinking ahead: What if we end up making it harder for entry-level or unskilled workers to find a job? What if employers reduce workers’ hours in response to the higher hourly wage? What if our effort to help the unemployed has discouraged them from getting back into the workplace, and their longer stretches of unemployment are making it harder for them to get rehired? What if the very qualities that make marijuana enjoyable make it a very bad idea to have it widespread and in the hands of those under 21?

By and large, the public doesn’t want to think about those questions. And, at least at the moment, there’s no electoral benefit to trying to make them think about those questions.

UPDATE: This is a study of children ingesting marijuana, published in July of last year, when medical marijuana was legal in Colorado:

The proportion of ingestion visits in patients younger than 12 years (age range, 8 months to 12 years)that were related to marijuana exposure increased after September 30, 2009, from 0 of 790 (0%; 95% CI, 0%-0.6%) to 14 of 588 (2.4%; 95% CI, 1.4%-4.0%) (P < .001). Nine patients had lethargy, 1 had ataxia, and 1 had respiratory insufficiency. Eight patients were admitted, 2 to the intensive care unit. Eight of the 14 cases involved medical marijuana, and 7 of these exposures were from food products.

Tags: marijuana , Minimum Wage , unemployment insurance

No, 2014 Won’t Be a Referendum on the Minimum Wage.


Democrats want to make the 2014 midterms a referendum on raising the minimum wage.

Yeah, that will surely overshadow everyone’s problems with their health insurance under Obamacare!

Remember, thousands upon thousands of Americans are going to get a rude surprise at the beginning of the year, when they visit a doctor and find they aren’t actually covered:

There’s no way to tell how many people who think they’ve signed up for health insurance through the U.S. exchange actually have, after about 1 in 4 enrollments sent to insurers from the federal website had garbled included incomplete information.

They have similar problems on the state exchanges:

California is currently buried under more than 20,000 incomplete paper applications for health insurance through the Golden State’s online marketplace, Covered California.

And in Minnesota:

“At this late date, the health plan companies do not have most of the names or information on individuals who have enrolled through MNsure,” Julie Brunner, executive director of the Minnesota Council of Health Plans wrote in a letter to MNsure Executive Director April Todd-Malmlov and Lucinda Jesson, Minnesota Commissioner of Human Services.

After December 31, some of these people will go to their doctors or specialists, or visit hospitals, only to find they are not insured and will need to pay the costs out of pocket. (Also, they may find themselves with the tax bill if they don’t sign up by March 31.)

And here’s how it’s playing in New Hampshire for those who haven’t lost insurance or had problems signing up through the exchange:

Step inside a small diner called Chez Vachon in a working-class section of Manchester, N.H.,, and you’d never guess the White House is actually regaining its footing on the health care rollout. The president is reporting promising enrollment numbers and a faster website, but John Hill couldn’t care less.

“My insurance just went up a thousand dollars,” says Hill. “We asked why the price of the insurance was so high. They said, ‘Well, the new Obamacare law. That’s the reason why.’ “

That law had some pretty severe repercussions in New Hampshire. A strong Tea Party faction in the state Legislature voted down a state health insurance exchange, so everyone in the state applying for insurance under the Affordable Care Act has to sign up on the federal government website.

But that federal exchange has drawn only one insurance provider for New Hampshire: Anthem Blue Cross and Blue Shield. And Anthem shut out 10 of the state’s 26 hospitals from its health plans on the exchange, which means traveling in a car for an hour or more for many people in northern New Hampshire who need to see a doctor.

Hill says he’s absolutely not voting for [Obamacare-backing incumbent Democrat Jeanne] Shaheen next year.
“She voted for this. She knew what she was getting into,” says Hill. “Now she realizes, ‘Oh, this is a big mistake.’”

So no, loudly proclaiming a desire to hike the minimum wage to $10.10 an hour will not cheer or placate these voters.

Tags: Minimum Wage , 2014 Midterms

Can a Minimum-Wage Hike Really Motivate Voters?


President Obama’s message for the coming year is going to be a renewed focus on “income inequality.” Or as Bloomberg News puts it:

One of the president’s agenda items on this is raising the minimum wage. President Obama backs a proposal from Democratic members of Congress to raise it to $10.10 per hour.

On that front, fast-food workers around the country are walking out on the job and holding protests today, with one Detroit fast-food employee arguing his $7.40 per hour constituted “slave wages.” Rallies and protests are scheduled in “more than 200” cities. That may sound like a lot, but there are more than 13,000 McDonald’s restaurants in the United States alone. There were no protesters at the one on Duke Street in Alexandria closest to me this morning, and chances are, there won’t be any protesters at the one nearest you, either.

Also, Walmart, another corporation the Left sees as evil for paying insufficient wages, opened its first two stores in Washington, D.C., yesterday. The D.C. council had spent much of the year debating a law that would have required Walmart to pay $12.50 an hour in wages and benefits. The law would have applied to any “big box” store, but not to smaller businesses. The D.C. council instead decided to raise the minimum wage in the city to $11.50 by 2016.

The wages did not discourage applicants, according to the company, stating they had 23,000 applications for about 800 jobs in the two stores.

Raising the minimum wage always polls well, but it’s not clear if this is an issue that really drives voters to the polls. Certainly, most shoppers tune out the complaints of low wages. The Walmart openings in D.C. were greeted with long lines of eager shoppers, and as noted, most McDonald’s patrons will never encounter protests about the restaurant’s wages.

What’s more, the patrons encounter fast-food workers every day, and perhaps they’re not that convinced that they’re overdue for a raise of another $3 per hour or so. Like this Taco Bell employee, fired after posting the below photo to Facebook:

Does he look tragically underpaid to you?

Tags: Minimum Wage , President Obama

How Can D.C. Make New Employees More Cost-Effective?


Earlier this week we discussed the ugly truth about our economic doldrums: that companies aren’t hiring because they don’t think that the additional revenue that they can generate from a new hire is enough to cover the cost of the new employee — not merely wages and benefits, but capital expenditures, training, overhead, regulatory costs, and so on.

In this light, raising the national minimum wage to $9/hour from the current $7.25 is counterproductive. If companies are reluctant to hire people at the current cost, making them $1.75/hour more expensive isn’t going to make them a more appealing option. This may not be a huge factor, but it certainly won’t help.

In the Washington Post, Robert Shapiro, undersecretary of commerce for economic affairs in the Clinton administration, correctly identifies what should be on the minds of policymakers: “The best approach would be to directly reduce the cost for business to create more jobs.”

The problem is that his solution is pretty bad: “Congress could, for example, permanently cut the payroll tax rate for employers and make up the difference for the Social Security trust fund with a modest carbon or value-added tax.”

The payroll tax is 12.4 percent, with 6.2 percent paid by the employer and 6.2 percent paid by the employee. (For 2011 and 2012, the employee paid 4.2 percent.) But it’s hard to believe that high payroll taxes are a primary factor in slow hiring since 2008–09; the rate has been at 12.4 percent since 1990 and above 10 percent since 1979.

Employers may see new hires as too expensive to be worth it, but it’s not the 6.2 percent payroll tax that’s creating that perception. Most likely it’s the much higher health-care costs and training costs. Shapiro briefly mentions the traditional answers of “electronic medical records” and “preventative care.” Except that new studies about the effect of electronic medical records find “evidence of significant savings is scant, and there is increasing concern that electronic records have actually added to costs by making it easier to bill more for some services.”

As for preventative care . . . well, all those tests to detect health problems early that come back negative cost money, too: “The evidence of hundreds of studies over the past four decades has consistently shown that most preventive interventions add more to medical spending than they save.” And this is just for health problems that can be prevented; accidents, gunshot wounds, some diseases, etc.

As for the other idea, creation of a national carbon or value-added tax would make every product instantly more expensive, with horrific results for discretionary spending, purchasing power, and so on.

Tags: Economy , Minimum Wage , Payroll Taxes

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