James Landrith is...Taking The Gloves Off: syndicated

left-libertarian blogger, publisher, USMC veteran and civil liberties activist

 

CON: UM Economist Cites the ‘Folly of a Living Wage’ 
June 14, 2009
William F. Shughart II

Before he retires at the end of June, Jackson City Council President Leslie Burl McLemore plans to make one last-ditch effort to push through an ordinance requiring city contractors to pay their employees a “living wage.”

Dr. McLemore’s heart may be in the right place, but his head is not.

The idea of a living wage is that even if workers are paid the federal minimum, which rises from $6.55 to $7.25 per hour in July, they still may not be able to afford all of the “necessities” of daily life, such as food, clothing, housing and healthcare. A consultant to the city council estimates that an hourly wage of $10.56 is required to furnish people working (and presumably living in Jackson) with an adequate standard of living if their employer pays for healthcare benefits and $12.70 if not.

I accept those figures as reasonably accurate, although I doubt that an extra $2.14 per hour (or $342.40 per month for full-time employees) before taxes would allow workers on city contracts to buy individual health insurance coverage, which is considerably more expensive than group coverage.

Be that as it may, Dr. McLemore’s proposal is an invitation for city contractors to drop some or all of the fringe benefits they now provide to their employees. A worker’s worth to his or her employer cannot magically be raised at the stroke of a city government pen.

Suppose that someone employed by a city contractor now is being paid $8 per hour plus $2.56 per hour in benefits in the form of health insurance, education and training, help in purchasing uniforms or tools required on the job, paid vacations, or “comp time.”

The worker’s total compensation is $10.56 per hour—equal to what his or her skills command in the marketplace. If the city council enacts a living wage of $10.56 per hour, the worker’s hourly wage will increase, but the employer no longer will be willing to pay for fringes.

Although the hypothetical employee’s paycheck is fatter, he or she arguably is made worse off since employers generally can supply fringe benefits more cheaply than workers can purchase them on their own.

Economists who have studied the effects of raising the federal minimum wage find that employers respond to higher labor costs by cutting employees’ hours, by requiring them to work harder at their jobs, and by limiting overtime.

And it is the people who are employed in low-skilled, entry-level jobs that bear the brunt of such predictable policy changes. The bottom line is that government cannot give anyone a raise not justified by increases in productivity or in the market value of what they help produce.

It is also true, as foreseen by Ward 1 Councilman Jeff Weill, that contractors will factor higher labor costs into their bids on contracts. Although the contractors who will be required to pay living wages have not yet been identified, it should be obvious that increases in the cost doing business with the city will be passed on to Jackson’s taxpayers.

And if private employers are forced to pay workers more to attract them away from competitors contracting to supply goods and services to the city, Jackson will become an even less business-friendly location than it is already. Higher wages on city contracts will come at the expense of private-sector positions.

Rather than decreeing a living wage, Dr. McLemore and his fellow council members could achieve their goal by other, less intrusive means.

The recipe for Jackson’s economic development is well-known: cut taxes, cut regulatory red-tape and reform the city’s public school system so that young people graduate with the knowledge and skills that qualify them for high-paying jobs.

Europe Goes Right 
June 10, 2009
Alvaro Vargas Llosa

WASHINGTON—The European parliamentary elections have dealt a devastating blow to the left. Even if many of the victorious right-wing parties have been responding like socialists to the economic recession, the election results express mistrust in the ability of Europe’s true socialists to address the so-called failures of free enterprise.

In those countries where socialist parties are in power—such as Spain, Portugal, Austria, Britain or Hungary—they were resoundingly defeated. In conservative-controlled countries such as France, Italy, Germany, Poland, Denmark, the Netherlands, Finland or the Flemish part of Belgium, the socialists also took a severe beating. Only in two countries, Slovakia and Greece, did the left beat the right—in the case of Greece because of an ethical scandal. The right-wing parties will control roughly 40 percent of the European Parliament against the socialists’ 22 percent.

The right’s triumph is primarily explained by the insecurity that Europeans feel in the face of the economic meltdown. The people’s response has not been to seek protection against the “fall of capitalism” and the “collapse of the American model” in socialism, as one would have expected in Europe, but to seek reassurance among those parties perceived, rightly or wrongly, as safe stewards and guarantors of the free-market system.

Even before the crisis, the European Union was registering the slowest rate of economic growth in the developed world. Now a catastrophe is taking place: The mighty German economy will shrink by more than 6 percent this year, and Spain, one of the success stories of the modern era, is nearing 20 percent unemployment. Not to speak of central and eastern Europe, where extremism has been on the rise since the first manifestations of the crisis. Exacerbating an already bleak socioeconomic environment, the brutal recession has instilled more fear among Europeans than at any time since the worst days of the Cold War.

Despite their faults and excesses, Angela Merkel, Nicolas Sarkozy and Silvio Berlusconi are perceived as better managers of the free enterprise system than their foes. The electorate is much more fearful of left-leaning leaders and their parties who seem to be questioning the free-market model and pushing for a substitute.

That this should be the attitude of Europeans at a time when their governments are applying fiscal and monetary stimulus remedies to the moribund economy would appear contradictory. After all, the Europe in which the state has committed $2.5 trillion to bank rescues, about three times the package approved by the U.S. Congress last year, is one in which right-wing governments already outnumber those of the left. But Europeans seem to be saying: If we are going to have socialism, we would rather have it applied by leaders who don’t have much faith in it and deep down are not aiming to reverse the system.

Particularly noteworthy is the result in Germany, where the free-market liberals, known by the initials FDP, won 11 percent of the vote, almost doubling their performance in 2004. Their advance means that after the general election scheduled for September, the current coalition between the Christian Democrats and the Social Democrats will likely be replaced by a new coalition between the Christian Democrats and the FDP.

The implications could be momentous. Partly because of the pressure from the Social Democrats and partly because her own party (and its Bavarian Social Christian cousin) has a legacy of statism, Chancellor Angela Merkel has had to make concessions to government interventionism. The authorities have incurred much new debt and come to the rescue of companies such as Opel, Arcandor, and Schaeffler. With the FDP in a government coalition, Germany could begin to lead the developed world away from the interventionist mania gripping its leaders.

One should not pass over the other important headline of the hour—the gains made by extremist, xenophobic parties in the Netherlands, Austria, Hungary, Slovakia, Finland and, to a lesser extent, Britain, where the British National Party obtained a seat.

Herein lies a major challenge for the victorious right-wing parties. They are the ones in a position to marginalize the right-wing extremists. The danger is that the democratic right will absorb part of the extremist agenda, thereby legitimizing it. Should it be tempted to do so, it would render Europe a grave disservice and resuscitate the catatonic socialists.

Obama Versus Osama 
June 5, 2009
Ivan Eland

Fearing a new, more formidable opponent than the often buffoonish and macho cowboy George W. Bush, the two leaders of al Qaeda have tag teamed Barack Obama with twin audiotapes condemning him. Unlike Bush—who made little effort to understand the Islamic world and whom al Qaeda could easily bait into reckless acts that raised its stature among Muslims—Obama is more thoughtful and empathetic to Muslims and consulted many experts, including scholars on the Islamic world and actual Muslims, before delivering his much-promoted speech on U.S.-Islamic relations in Cairo, Egypt.

The twin audiotapes indicate that Osama bin Laden and his sidekick, Ayman al-Zawahiri, are worried about Obama. Instead of blundering into talk of spreading democracy in the lands of “evil-doers” through “crusades” as Bush did, Obama, being the son and grandson of Muslims and growing up in Islamic Indonesia, gets the benefit of the doubt, at least initially, from many Muslims.

Unfortunately, I don’t think bin Laden and Ayman al-Zawahiri need be as worried as they appear to be. In the Islamic world, talk is cheap and actions do matter. Although Obama presents a more reasonable, less scary, and more empathetic image towards Muslims, the actual policy disagreements between the Bush and Obama administrations have been overstated. In any presidential campaign, to win votes, Democrats and Republicans magnify their differences in approach.

Al Qaeda successfully baited George W. Bush into overreacting to the 9/11 attacks—a typical ploy by guerrillas and terrorists vis-à-vis a more powerful enemy to win more money and support within their own communities. George W. Bush not only launched a very public “war on terror” centered in Afghanistan—instead of using more effective and lower-profile intelligence, law enforcement, and occasional secret Special Forces activities—he also invaded and occupied another unrelated Muslim country. The bonus of a U.S. occupation of Iraq must have made bin Laden and al-Zawahri ecstatic.

Given his more sober inclinations, Obama, in the same situation as Bush after 9/11, might very well have avoided this trap. Yet Obama’s problem is that he inherited the twin occupations from Bush and is attempting, as many operatives in Washington do, to spin his way out of the difficulty using a public relations campaign.

And obviously, Obama is a much more skilled P.R. man than Bush was. Yet feeling Muslims’ pain rhetorically does nothing about the primary reasons for radical Islamist militancy and terrorism toward the United States—U.S. (that is, non-Muslim) occupation of and meddling in Islamic lands. Bin Laden originally went to war against the United States for this reason and mentions it yet again in his most recent threatening audiotape:

“Obama has followed the footsteps of his predecessor in increasing animosity toward Muslims and increasing enemy fighters and establishing long-term wars. So the American people should get ready to reap the fruits of what the leaders of the White House have planted throughout the coming years and decades.”

Obama has pledged to fulfill the Bush administration’s agreement with Iraq that the United States will withdraw all U.S. forces from there by the end of 2011. However, because the United States has had difficulty leaving the Persian Gulf, Korean peninsula, and Europe after conflict or Cold War ended, the Islamic world cannot be blamed for taking a “seeing is believing” attitude toward this promise. In addition, instead of winding down Bush’s nation-building quagmire in Afghanistan and focusing on neutralizing al Qaeda, Obama is escalating this un-winnable war. The war in Afghanistan has already fueled dangerous Islamist militancy in Pakistan and had helped al Qaeda find more recruits.

Unfortunately, Obama is not the only person in the United States who fails to understand this key cause of anti-U.S. terrorism originating from the Islamic world. The foreign policy establishment—both Democratic and Republican elements—believes that the United States must solve all of the Islamic/Arab world’s problems to turn things around there. For example, the establishment New York Times, in a news article on Obama’s Cairo speech, pontificated:

For Mr. Obama to win favor, . . . he needs to address the challenges facing the Arab world, from poverty and inadequate education systems to limits on democracy and human rights.

That is exactly wrong and a complete misunderstanding of the roots of the basic problem. The imperial mentality of solving all such problems got the United States into its current riff with the Islamic world. To get rid of this dangerous source of friction, the United States should just stop meddling in that part of the world.

New from Ivan Eland! THE EMPIRE HAS NO CLOTHES: U.S. Foreign Policy Exposed (Updated Edition) Most Americans don’t think of their government as an empire, but in fact the United States has been steadily expanding its control of overseas territories since the turn of the twentieth century. In The Empire Has No Clothes, Ivan Eland, a leading expert on U.S. defense policy and national security, examines American military interventions around the world from the Spanish-American War to the invasion and occupation of Iraq. Learn More »»