Warren Buffett on the Minimum Wage

I mostly agree with Warren Buffett’s commentary on the minimum wage in the Wall Street Journal. Here’s one nice paragraph:

The poor are most definitely not poor because the rich are rich. Nor are the rich undeserving. Most of them have contributed brilliant innovations or managerial expertise to America’s well-being. We all live far better because of Henry Ford, Steve Jobs, Sam Walton and the like.

But, I have issues with this paragraph:

In 1982, 15% of Americans were living below the poverty level; in 2013 the proportion was nearly the same, a dismaying 14.5%. In recent decades, our country’s rising tide has not lifted the boats of the poor.

This is a good example of where statistics and real life can diverge dramatically.

How you perceive a rising tide depends on what you use to compare to. If you are on a tall boat, it’s no good to use a smaller boat to determine the effects of a rising tide as both go up. Yet, that’s what Buffett is doing. The American poverty level goes up and down with American prosperity.

To truly see the effects of a rising tide you need a better comparison. You need a GPS unit or a marker that is firmly connected to the ground so that you won’t be easily deceived like Buffett has been. This is what I like to refer to as a true measure.

So, what’s a true measure for American poverty? American poverty vs. American poverty at other times in the past or vs. poverty that exists in third world countries.

Given a choice to live in poverty today vs. poverty in 1982, most people would easily choose today for one simple reason: a rising tide has lifted all boats.The standard of living, even for the poor, has improved considerably since 1982 and that is not appropriately reflected in the statistic.

Given a choice to live in the U.S. in poverty or in third world country poverty, most people would choose the U.S. That’s yet another sign that the tide has lifted all boats in the U.S.

But, the rest of the article is worth a read.

Graduation Speech Nugent

Nice. Yep.

Here’s what he calls The Big Nuge 13:

  1. Life is not fair. Get used to it.
  2. Social justice is a commie scam. Read the drivel of Saul Alinsky and fight it with all you’ve got.
  3. Nobody owes you jacksquat. You will either earn your own way, or feel like a helpless leech. There is no middle ground.
  4. Economic equality is for sheep. If you really believe we are all equal in our capabilities you will go nowhere.
  5. The minimum wage is for minimum wage earners. If you believe you are worth more, go get it. Show by your productivity and professionalism that you are better than minimum. Upgrade awaits upgraders.
  6. The government cannot create jobs for you. You must create your own worth by proving yourself to be a gungho benefit for your employer. If you think you can do better, by all means, do better.
  7. Partying should not include dangerous or foolish behavior. Clean and sober always provides the most memorable parties without the danger of puking, stumbling, making an ass of yourself or passing out and dying.
  8. Peer pressure is for sheep. Stand up for what you believe in.
  9. The whole world sucks, but America still sucks less. Learn your history and be the best we the people participant that you can be.
  10. Don’t fall for the curse of political correctness. Feeling good is not as important asdoing good.
  11. Posture and hygiene matters. Carry yourself with dignity and treat others as you would have them treat you.
  12. Tell me who you go with and I will tell you what you are. Avoid losers for they will drag you down.
  13. Sometimes you give the world the best you got and you get kicked in the teeth. Give the world the best you got anyway.

A few thoughts on Robert Reich’s video on the minimum wage

In this video, Robert Reich suggest raising the minimum wage to $15/hr. He says that:

Studies have shown that when minimum is raised, more people are brought into the pool of potential employees.

He doesn’t mention why. Our country has a generous safety net. Some of that goes away when you get a job. Why take a pay cut to go to work?

Folks like Reich have a lot to do with creating that generous safety net, but don’t acknowledge that it’s those interventions that make working less economically viable than not.

He also says (emphasis added):

Some opponents [to raising minimum wage] say minimum wage workers are teenagers seeking some extra pocket money. Wrong. About half of minimum wage workers are about 35 or older. Most are women. Many are key breadwinners for their families.

He hopes that you’re stupid to follow his straw man and red herrings off the trail of the original question.

What’s the straw man? That minimum wage workers are ‘teenagers’ seeking extra pocket changes.

I think a more charitable representation of this argument would be that people making minimum wage are generally looking to make extra pocket change, not to solely support a family.

So, throwing in the word ‘teenagers’ allows him to address that and make it appear that he has actually confronted a true opponents argument. He hasn’t.

But, I can’t help help myself. If this argument was about teenagers, why doesn’t he just tell us how many minimum wage workers are teenagers? Probably because that wouldn’t be convincing.

According to this from the Pew Research Center (sourced from the Bureau of Labor Statistics), 24% of minimum (or below) wage workers are teenagers and 50% are ages 16-24. Or, people are who are generally in the first few jobs that most people with a bit of common sense would expect to be making minimum wage.

Progressives like to point to Australia’s high minimum wage, but neglect to mention that even they recognize that teenagers shouldn’t make it. They have a lower, sliding scale minimum wage for people younger than 21.

But, Reich’s red herrings don’t stop there. What does ‘Most are women’ have to do with the argument that minimum wage workers are teenagers? Nothing.

What does “Most” mean? Is it 50.1%, 78% or 90%? This Bureau of Labor Statistics report shows that 50.6% are women. So, roughly a little less than make up as the general population, 50.8%. So that’s a worthless statement.

What does “many are key breadwinners” mean? Nothing.

How much is “many?” A third? 10%? 80%? Could be 100.

What does ‘key breadwinner’ mean? Again, nothing. It could mean that the person contributes a portion to household income. But what portion? Is 5% enough to be considered key or 50%? Since there are usually only two breadwinners per household, it doesn’t take a lot to be considered key, especially if that extra income helps the household make ends meet.

So, in short, Reich did not answer the question. Nor, did he he even attempt the larger question of answering how many minimum wage workers are looking to solely support their family or themselves on the wage.

What is a job? Part III

Arnold Kling defines a job here.

I have to previous posts with the same title as Arnold’s here and here for more reading on the subject.

I think this is a good discussion because the concept of a job is simple, yet easy too bastardize in the political process.

In its simplest form, a job is paying the neighbor kid to shovel snow off your driveway.

To illustrate Kling’s definition, shoveling the the driveway is the context in which the neighbor kid exchanges his performance of a small set of tasks (removing snow from your driveway) to gain the means ($20) to obtain goods and services produced by a far larger set of tasks (uses the $20 to help by a video game).

But, when we step away from this simple and concrete concept of a job where we are the employer seeking to gain something of value and discuss jobs abstractly, a job quickly transforms into an entitlement, as does the wage paid.

Do we owe the neighbor kid a job? Of course, not. Should we pay the neighbor kid a living wage? Absolutely not.

We clearly envision the value of achieving a snow and ice-free driveway without the back-breaking labor of shoveling. We clearly see the neighbor kid is thankful for the job and the chance to earn a few extra bucks.

We don’t see the need to burden that simple exchange with other expectations because we clearly see how both parties come out ahead. We don’t expect the neighbor kid will only rely on shoveling our driveway for his livelihood in the future and, frankly, we’d think somebody was not the sharpest tool in the shed for suggesting that he should.

We’d think the same thing if they suggested that there should a minimum, “living wage” rate for shoveling snow from your driveway. Hey, from now on, if you’re going to pay someone to shovel, the minimum is going to be $100. How can you expect someone to be able to feed their kids off a $20?

If that did happen, your first thought may be, how much is that snow blower?

What is education?

I found the discussion in the comments of this Marginal Revolution blog post, Jon Stewart is Wrong on Education in Baltimore interesting.

On his show, Jon Stewart made the following joke (observation, false comparison, whatever you’d like to call it):

If we are spending a trillion dollars to rebuild Afghanistan’s schools, we can’t, you know, put a little taste Baltimore’s way. It’s crazy.

Marginal Revolution’s Tabarrok counters that Baltimore spends 27% more on schools, per student, than an affluent suburb and a good portion of that incremental spending is from Federal and State sources.

Simply put, Baltimore is already getting more than “a little taste.”

That post generated some comments exemplified by MD2’s comment, as follows (emphasis added):

Let’s get past a $-per-student perspective and think about the total amount of resources invested in these kids. I’m comfortable saying the average Baltimore student gets half or less of the parental involvement and societal enrichment than the kids in Fairfax do.

We probably can’t put a dollar value on parental involvement, but it’s part of the total investment package, and many would argue more important to actual student outcomes than the way some of the school money in Baltimore is spent just to keep bad schools from turning into gang recruiting zones.

That’s not an argument for or against throwing more money at Baltimore, just that good education is not a boxed service we just write a check for. It requires a lot of personal investment as well.

I agree that parental involvement is more important to student outcomes and you can’t put a dollar value on it.

But, I would also argue that you won’t make up for lack of parental involvement with school spending. That’s like thinking that buying a bag of Cheetos can unclog a drain.

Many disagree, which causes the school directive to change from educating (something it can do well) to parenting (something it won’t do well).

Many also believe that keeping kids occupied in schools — whether they are learning and being productive or not — is a net gain for the greater good since it keeps kids off the streets, which changes the school directive from educating to warehousing criminals (something that makes educating others more difficult).

Both of these changes in the school directive have disastrous effects on school’s main purpose — education.

Maybe good parenting is what helps students in good school districts have better educational outcomes.

Or, maybe good parenting is just a signal, not a cause, of school districts that have not been expected to expand its charter too far beyond education. Simply put, maybe bad school districts could be better if they were only expected to educate.

I’m not saying that there isn’t need for other efforts in those areas, like addressing parental involvement issues or keeping disruptive people occupied. It’s just that it seems pretty clear that school is not a good place for that.

How Raising the Minimum Wage May Be Contributing to Riots

In the book, Freakonomics, there’s a story about the downfall of Romanian dictator Nicolae Ceausescu. The author’s of the book, Dubner and Levitt, suggest that a ban on abortion and restricting contraception — intended to increase the population of Romania — may have led to a more unwanted children who grew up under less than ideal conditions and when they came of age they rebelled and took the dictator down.

I have a similar thought about riots.

Raising the minimum wage is a reliable vote getter of the political left. Advocating the raising of it sounds good enough to get votes in a classic example of what Frederic Bastiat called the Seen and the Unseen.

The seen: It’s easy to see the benefit to those minimum wage workers who keep a job and get a raise.

The unseen: It’s not so easy to see that a higher minimum wage reduces legitimate job opportunities for these very same workers.

It’s not so easy to see that the benefits of an entry-level job isn’t just the wage earned. It’s also the gaining of job experience and learning how to be useful and productive, which makes these workers — often teenagers — more valuable and more likely to earn a higher wage in the future.

It’s also about having opportunities to occupy your time doing something productive rather than whine that ‘there’s nothing for us to do,’ so when you get the text or Facebook message from your friend that says, “let’s riot,” you’re more likely to respond, “Can’t, gotta work,’ instead of, “I’m in!”

Unemployment among teenagers is high, even higher among black teenagers. The opportunity cost of rioting is low.

Smart guys tell us that studies show that the minimum wage have little, no, and sometimes positive effects on unemployment. Many believe them without question. They’re smart, after all. But, we forget, smart people can be dangerous. They have the ability to rationalize anything. To filter the evidence and present to support their forgone conclusions. Like magicians create illusions. And one affliction these smart people have, that magicians don’t, they are prone to believing their own bullshit. Magicians know their tricks are tricks.

These smart folks don’t tell us about the problems with such studies, or the studies that find the opposite, or the plain evidence that’s right in front of their eyes — unemployment is the highest among the very population who make low wages.

That’s the illusion. The smart people turn your attention away from that plain fact. Or, if they acknowledge it, they convince you (and themselves) that it’s better to be unemployed and wait for a job with a higher wage than it is for them to accumulate productive experience — even if the minimum wage does happen to have an ill effect on unemployment.

They also don’t acknowledge that while they’re holding out for such jobs (when they will magically appears, who knows), they are also more likely to show up and riot.

“How Every Company in America Can Save 23% on Wages”

We need more videos like this (thanks to Carpe Diem for the pointer):


True measure (at 48 seconds):

Do you want to know how I know that women aren’t being paid 23% less than men for the same amount of work? Because if they were, women would make up the overwhelming majority of the workforce. If companies could simply save 23% on salaries just by hiring women, why wouldn’t they?

Exactly. People who cite the ‘gender pay gap’ are often the same folks who believe that companies will go to great lengths to cut corners and pay as little as possible for things. If that’s true, why wouldn’t they exploit this cost difference and hire more women in place of men to save money?  Because it’s not true.

Oh yeah, I forgot. While employers are cheap and greedy, they are also willing to let their biases cost them big money and all of their competitors are complicity. Give me a break.

Kudos to this guy for doing his homework and producing a video to call BS.

The problem with many issues is that they really aren’t issues, they are bad stats. There seems to be an ample supply of people who want to make that bad stat their pet cause, rather than do their own homework to find out that the injustice they staked a claim is really BS.

What’s more is that most of these issues can be debunked with just a little bit of thinking and not a lot of research, like the guy in the video did. If women really were paid less for the same work, women would make up a greater share of the work force.