The unintended consequences of the minimum wage

Minimum wage arguments are often laden with good intentions. Of course everyone believes in a fair wage for an honest day’s work. However, what’s generally lacking in the push for a minimum wage is an understanding of the broader consequences of the well-intentioned policies.

For instance, studies have shown that raising the minimum wage contributes to a rise in the high school dropout rate.

To read the rest of this article, click here.

Photo credit: Angelsharum via Wikimedia Commons

Poll: 82% of Utahns support right to work


nefwRoughly 4 out of every 5 Utah adults support allowing union employees to leave their union without force or penalty, a concept generally referred to as right to work. That’s the finding of a new poll, released today by Sutherland Institute as part of National Employee Freedom Week (NEFW). NEFW is a grassroots campaign of 81 organizations in 45 states dedicated to helping union employees learn about their right to leave their unions. This poll headlines the activities of NEFW, which runs from August 10 to 16.

The poll was conducted by Google Consumer Surveys between July 11 and July 31, 2014, and has a margin of error of 3.76 percent. The poll surveyed 500 adult Utah residents with the following question: “Should employees have the right to decide, without force or penalty, whether to join or leave a labor union?”

The coalition also released a poll showing 82.9 percent of Americans nationwide support the right-to-work principle. Currently 24 states have passed right-to-work laws which allow workers to leave their union with penalty or having to pay dues to an organization they choose not to belong to. To find out more about Utah’s specific right-to-work policies, you can read the “Utah Right To Work Law.” Read more

Hypnotized by the minimum wage – Mero Moment, 6/3/14

This post is a transcript of a 4-minute weekly radio commentary aired on several Utah radio stations.

streetworksI got my first job when I was 15 years old loading groceries into cars at one of the nation’s first membership stores in the suburbs of Washington, D.C. I made $2.15 an hour that, for a 15 year old in 1973, was nothing to sneeze at. After a while I got a 10-cent raise and was promoted to work inside the store in its warehouse.

I remember vividly the day that the union representative from the retail workers’ union stopped by to sign me up. He explained all of the benefits to joining the union. I knew how hard I worked and I recall asking him how much the guy pushing the broom all day was paid hourly. The union rep told me proudly, “He makes the same as you! That’s the strength of our union!” I told him I didn’t want any part of an organization that would pay that guy the same as me. We did different work. Furthermore, I did more work than the other guy and I expected to be paid more. I didn’t have anything against unions – how could I, I was 15 years old? – but I had a strong sense of self-interest.

The minimum wage has long been the sweetheart of unions and progressives alike. In 1973, the minimum wage was $1.60 – a point the union rep was sure to highlight when I was making $2.15 under union rule. But the same rules that paid me higher than minimum wage also kept me from making more if I worked harder and produced more.

Today, the minimum wage is $7.25 and the Obama administration is pushing for an even ten dollars or higher. Last February, around 100 employees of McDonald’s demonstrated and were arrested outside of its corporate headquarters for demanding $15 an hour. There is something hypnotic about the minimum wage for many people. Read more

Liberal fantasies and the promise of conservative common sense

family beach sunsetA family devastated when a parent comes home with news that they’ve lost their job. Human dignity crushed under the weight of multi-year unemployment. Hope for a better financial future slowly drained away by a seemingly endless drought of good job opportunities. This has become common for millions of (no longer) working families in America today.

Having overseen this new “progressive era” of economic stagnation, President Obama recently gave a speech addressing economic inequality, calling for an increase in the federal minimum wage (currently at $7.25 per hour) under his vision of how to “rebuild America’s economic and civic foundation to continue the expansion of opportunity for this generation and the next generation.” Since that speech, the president has been joined by local liberal voices in Utah, arguing the economic wisdom of a higher minimum wage because “the jobs that would be affected, mostly retail and food service, cannot be outsourced to Bangalore.”

Unfortunately, this misguided policy proposal suffers from “a reality problem.” The reality of a higher minimum wage is that it would steal away job opportunities that would otherwise exist for working families – such as the job at the local restaurant or grocery store that gives a family something to get by while they seek better opportunities through education and hard work.

For instance, several well-known chain restaurants (Applebee’s and Chili’s) have turned to technology to replace what low-wage employees have traditionally done while simultaneously improving the dining experience: installing “iPad-like tablets at every table” for customers to order their food with, rather than doing so through a waiter or waitress. In a politically correct manner, representatives of these restaurants “insist that they won’t be changing their staffing levels” with this technological innovation.

But what should we expect if the government makes maintaining staffing levels more expensive just as these cost-effective technological innovations begin to spread? Common sense would suggest that the predictions from liberal activists of economic renewal from raising the minimum wage would turn out to be little more than naïve optimism. In other words, what began as a progressive promise for a better life for working families would turn out to be a lie, reminiscent of “if you like your health plan, you can keep your health plan.”

Contrast that with the promise of conservative ideas, such as those found in the “conservative reform agenda” of Utah Senator Mike Lee.

Read more

Collective bargaining means less-affordable services for taxpayers

moneybagDo you think paying 12 percent more for a house than you need to is a good idea? What about when it comes to services provided by state and local government employees?

Economists at Miami (Ohio) University and Trinity University[i] analyzed a sample of 847 public employees for Sutherland Institute. Their analysis found that a state or local government employee in Utah working under a union-negotiated collective bargaining contract means taxpayers pay 11.6 percent more in wages and salary – the “union premium” – for services that they could be getting more affordably from a similarly situated nonunion employee.

The economists controlled for work experience, education, type of occupation, hours worked, other income, and demographics.[ii] If all compensation (including benefits) is considered, the union premium rises slightly to 12.7 percent. For comparison, the national union premium for public employees was 6.8 percent for wages and salary, and 7.4 percent for total compensation. All estimates were statistically significant (p<.05).


Wage and Salary

Total Compensation (including benefits)

Sample Size


Union Premium


Union Premium



















Bold = statistically significant at .05 level (t-state > 1.96)


The difference in the affordability of total compensation associated with collective bargaining varied by education level. The union premium was greatest and statistically significant (p<.05) for college graduates and for those with a high school education or less, at 8.4 percent and 11.6 percent, respectively. Read more

Minimum wage hike is a way to abdicate responsibility

USMC-16450Earlier this month I wrote a brief post explaining why raising the minimum wage is a dumb idea from an economic perspective and harms the very people it’s supposed to help. In a nutshell, setting an arbitrary minimum wage may make us feel good, but it shuts the young, the poorly educated, and the low-skilled out of the job market by ignoring the basic economic laws of supply and demand.

So raising the minimum wage allows us to smugly congratulate ourselves over the lucky few who still get jobs and are paid more, but we don’t see the many others who want to work but can’t because the value they can add to a good or service is less than the minimum wage an employer would have to pay them.

Actually we do see them.  They’re on the street corners with cardboard signs. They’re using SNAP cards at the grocery store. And they’re standing in the unemployment line.

But what about the argument we often hear that employers have a responsibility to pay people more? Minimum wage advocates make a compelling case that it’s just “right” that every worker should earn enough to live on irrespective of their work’s actual monetary value. The problem with that argument is that it confuses social policy with economic policy, and turns on its head the idea of who’s responsible for which of those things.

As a civil society we’ve voluntarily – and correctly – accepted a responsibility to help those among us who need help. Nothing wrong with that. But why have we made it the employer’s responsibility to fulfill that commitment? Why should we, as a civil society, pawn off our duty to ensure some level of dignity and safety for our most vulnerable citizens to businesses whose job it is to sell stuff and provide a return on their owners’ investments?

The answer is we shouldn’t. It’s irresponsible and, by creating an inefficient bureaucracy to enforce that abdication of responsibility, it’s enormously wasteful.

Read more

The myth of the gender wage gap, part 2

Last summer, I wrote about a 2009 government-financed research report which provided evidence that the so-called “gender wage gap” – the idea that women get paid less than men because of baseless discrimination – is largely a myth. The body of evidence supporting that position continues to grow.

Recently, I came across an article published in 2011 by the Federal Reserve Bank of St. Louis that further verified much of what the 2009 report suggested. The authors reviewed various economic studies of the “gender wage gap,” and point out that this research suggests the difference between pay of men and women can be explained by things like differences in educational attainment, work experience, and occupational choice; a stronger “labor force attachment” in men (i.e., a long-term commitment to a career); a higher willingness among women to work part time; and a stronger preference among women for good benefits such as health insurance, even if it means getting less take-home pay. Read more

Unions: ‘As dead as a Ding-Dong’?

The latest to fall victim to unions? The Twinkie. Hostess, the maker of the iconic Twinkie, announced it is filing for bankruptcy after unions rejected the company’s reduced union benefits proposal.

In short, the unions wouldn’t blinkie. Goodbye, Twinkie. James Sherk, a senior policy analyst at the Heritage Foundation, explains it this way.

[Unions] make companies less nimble, less competitive. A unionized firm takes longer to respond to changing market conditions. It has to negotiate any changes with the union, and unions are not always reasonable. So unionized companies invest less, make less, and create fewer jobs than non-union firms. Over time they wither away.

Union membership is shrinking as the damage they do to businesses and employees becomes increasingly clear. Unions have responded by trying to make it harder to refuse their services. As Sherk concludes,

These changes would only make union organizing easier. They would not make unionizing a better deal for workers. The union movement won’t recover until it gets a new business model — one that actually helps companies and workers compete in the marketplace. Few workers want to make their company as dead as a Ding-Dong.

The myth of the gender wage gap

The modern feminist movement cares most about appearances, not realities. Let me endeavor to illustrate this to you.

Last week, the U.S. Senate failed to pass a bill called the Paycheck Fairness Act, which was intended to help combat wage discrimination against women based on their gender. The vote, which occurred along partisan lines, was immediately spun by the bill’s proponents (modern feminists and their political allies) as evidence that those who oppose the bill put “politics ahead of women and their families.” The bill’s proponents knew beforehand that the legislation did not have the votes to pass, and it was widely recognized (and reported) that the primary purpose of pushing the legislation to a vote was to paint the bill’s opponents as uncaring in regard to women.

The fact is, however, that the “gender wage gap” – the very problem that the Paycheck Fairness Act is meant to solve – is largely a myth: differences in pay between men and women can be explained almost entirely by behavioral differences between men and women.  Read more

The ultimate reform for public employee unions: ditch them

In the wake of yesterday’s bigger-than-expected margin of victory for Wisconsin Governor Scott Walker in his recall election, we thought we’d highlight just what his reforms have accomplished so far and suggest the “ultimate” reform: end public employee unions by making collective bargaining illegal for government employees in Utah – in effect, simply turning public employee unions into professional associations.

Governor Walker’s major reforms included:

  1. requiring public-sector workers to contribute more to their pension and health benefits
  2. restricting collective bargaining for most workers and making dues collection more difficult

What was the effect of these reforms? According to the The Wall Street JournalRead more