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Does a Minimum Wage Reduce Poverty?

January 5, 2014 in Economics

By Per Bylund

In a long and seemingly technical blog post on the Washington Post “wonkblog,” Roosevelt Institute fellow Mike Konczal suggests that raising the minimum wage will reduce poverty. He primarily relies on one meta study (Dube 2013, unpublished) to show that economists “do agree” “that raising the minimum wage would reduce poverty.”

Quickly reading through the article, it is obvious that this is the kind of perception Konczal wants the reader to get. Well, not so fast. The blog post exclusively refers to aggregates of different kinds, which obscures the analysis. And, if one reads more closely, Konczal includes several limitations and constraints to his thesis, and in fact agrees with the age-old truth that raising the minimum wage would kill off jobs. Minimum wage mandates above the present market wage of course has only one direct effect: jobs below that level are outlawed. Hence, any person on the job market with a productivity level (whatever the reason) below the minimum wage mandate will not be able to find a job.

Konczal’s text is a balancing act relying on arbitrary limits and vague language. For example, he relies on extrapolating on the elasticity of minimum wage found in several studies to be around -0.24 (which means, statistically, that raising the minimum wage by 1 % would reduce the number of poor people by 0.24 %), but says that one “shouldn’t take the effects of small changes to see what would happen if we, say, increased the minimum wage 500 percent, or to levels that don’t actually exist right now.” Right. This is true, but not because the elasticity of minimum wage at the level studied “is” -0.24, but because it was – using the specific data and methods in the particular study.

There are no constant relationships in the social world, which is the reason Konczal shows reluctance to extrapolate too far from the mean; but the same fact should also make him weary to assume the found elasticity is applicable on different time periods. (But the latter obviously doesn’t bother him.)

Throughout, Konczal uses the term “poverty.” But poverty statistics take into account only income, not what tasks are carried out within employment. If raising the minimum wage prohibits certain jobs (on which Konczal agrees), is it then not likely that the remaining jobs will change? Some of the tasks carried out by low-productivity labor cannot profitably be carried out by employees with higher wages, which means – to the extent they must be carried …read more


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It’s Time to Shut Down the Transportation Safety Administration

January 5, 2014 in Economics

By Doug Bandow

Doug Bandow

Any American who travels must deal with the Transportation Safety Administration. The Bush administration made many mistakes in dealing with the attacks of Sept. 11, 2001. Creating a government monopoly to handle transportation safety was one of the worst.

Government’s most important duty is protecting its citizens. Still, the state need not hold a monopoly. There are police, but the Second Amendment also ensures that Americans can protect themselves.

Obviously, Uncle Sam has an interest in transportation safety. No airport or airline wants a plane hijacking. No airline (or railroad) passenger wants to die in a terrorist incident.

The TSA is a costly behemoth better at bureaucracy than safety.”

Unfortunately, TSA is a costly behemoth better at bureaucracy than safety. In the aftermath of the Sept. 11 killings, the Bush administration and Congress felt they had to do something, so in 2001 they created the TSA.

The following year, the agency was transferred, along with pieces of 21 other agencies, to the new Department of Homeland Security. In 2013, the TSA spent $7.9 billion and had 62,000 employees.

TSA’s main job is to protect the more than 450 commercial airports, though railways, transit systems, highways and even pipelines also are on its list. Two-thirds of the agency’s budget goes for airport screenings.

As my Cato Institute colleague Chris Edwards has documented in a new study on the agency, TSA has lived down to expectations. Noted Mr. Edwards: “TSA has often made the news for its poor performance and for abusing the civil liberties of airline passengers. It has had a troubled workforce and has made numerous dubious investments.” For all the agency’s spending and effort, “TSA’s screening performance has been no better, and possibly worse, than the performance of the remaining private screeners at U.S. airports.”

TSA has had an abundance of problems. Wasteful spending of all sorts. “Unethical and possibly illegal activities,” according to the agency inspector general. “Costly, counter-intuitive and poorly executed” operations, according to a House oversight committee. Employee misconduct. Ranking 232 out of 240 federal agencies in job satisfaction.

Worst, though, is TSA’s failure to do the job for which it was created: securing America’s airports and other transportation hubs. Reported Mr. Edwards: “There were 25,000 security breaches at U.S. airports during TSA’s first decade, despite the agency’s huge spending and all the inconveniences imposed on passengers.” In tests, the agency failed to catch as much as three-quarters of fake explosives. Expensive, high-tech machines were purchased and then abandoned.

The problem is not just operational inefficiency. The TSA doesn’t think strategically, or at least, do so effectively. Critiques …read more

Source: OP-EDS

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Governor Andrew Cuomo to Establish Medical Marijuana Program in New York Through Executive Action

January 5, 2014 in PERSONAL LIBERTY

By drosenfeld

DPA Statement: Bold Step to Help Some Patients Builds Momentum for Needed Comprehensive Legislation

January 4, 2014

Drug Policy Alliance

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