June 18, 2014

Supply, Demand, And The Minimum Wage

Early last week, Lindenwood University Professor and Show-Me Institute Fellow Howard Wall debated the merits of raising the minimum wage on St. Louis Public Radio. It was an interesting discussion, but  one thing stuck out for me. In the debate, Chris Sommers, who co-owns Pi Pizza and is in favor of raising the minimum wage, stated that (at 5:37), “We raised the wage in order to also attract better people.” This was said in the context of Pi raising the wages its pays its employees.

This is interesting because Pi raised its wages voluntarily. It didn’t need the government to mandate a hike in pay, it chose to do it because it made sense from a business perspective. That is how it is supposed to be. In fact, that is what businesses do. They pay their workers a competitive rate commensurate with the value that these employees generate for the business. If they pay their employees too little, other businesses can offer these workers a higher rate and they will leave. Sommers mentioned his workers moving to another business because it offered a 25-cent increase in hourly wages (at 4:30). This is the market working.

Take what happened in North Dakota as an example. Because businesses were so desperate for workers, even fast food establishments had to significantly increase what they would pay their employees. For example, Taco John’s, a local area fast food restaurant, had to offer new employees $15 an hour salaries in order to get them to work there.

north dakota

I want to help the poor do better, but there are betters options available than raising the minimum wage, like the Earned Income Tax Credit. This would ensure the benefits would go to the people who really need them, the working poor.

June 17, 2014

Hairbrained Licensing Of Hair Braiders

Today, the Institute for Justice (IJ) filed suit in federal court in Saint Louis to overturn Missouri’s awful licensing system for women who wish to perform African-style hair braiding. Why is this particular licensing rule so objectionable? Because, while there are many other unnecessary occupational licensing regulations in Missouri, at least the others usually require you to do things that at least relate to your future professions. With African-style hair braiding, the required cosmetology coursework, training, etc., has absolutely nothing to do with hair braiding. It would be like requiring dog walkers to get an electrician license before they can walk dogs. It simply makes no sense.

Watch a clip from today’s press conference about the issue, and check out some of the Show-Me Institute’s prior work. I applaud IJ for taking up this cause in Missouri. More importantly, I applaud the two plaintiffs, Tameka Stigers and Joba Niang, for standing up for their chance to pursue their dream of owning their own business without unnecessary government interference.

May 12, 2014

Thoughts on Medicaid, Right to Try, and Paycheck Protection As Legislative Session Wraps Up

Government IconExpect things to get a little wild before the legislature finishes its work at 6 p.m. Friday. Here are some of the issues I’ll be paying close attention to.

First, Medicaid expansion. To reiterate, Missouri should not expand this expensive, broken health care program. “Medicaid Transformation” is not the same thing as “Medicaid reform.” Transformation is just expansion rebranded.

Second, Right to Try. The bill would allow terminally ill patients greater flexibility to seek experimental medications, making this bill the latest in a string of proposed reforms — including last year’s Volunteer Health Services Act and this year’s hemp oil bill – emphasizing greater access in care and treatment. I testified in favor of the law in both the House and Senate, and while several states are considering the law this year, Missouri could end up being the first in the nation to pass it.

Third, paycheck protection. Paycheck protection would allow public employees in unions to, by default, keep more of their money rather than have it automatically siphoned off for a union’s political activities. It’s a common sense approach to a thorny free speech problem, which I’ve testified about before. If it goes to voters, you’ll hear much more about this topic from me in the weeks ahead, but the Senate will have to vote on it first.

There are other issues which are also lingering in the legislature, including tax credit reform and voter ID. I support both. TIF reform and the transportation tax are also big issues, and I would direct you to David Stokes’ and Joe Miller’s excellent work on those topics respectively. The school transfer issue is still very much alive, and of course there’s Tesla versus the car dealers, which you can read more about here and here.

It’s been a long session, but it’s not over yet. Stay tuned to Show-Me Daily as the week goes on for updates on these issues.

Tesla, Car Dealers and Milton Friedman: The Problem of Protectionism and Cronyism

Last week at Forbes, I wrote about an attempt by Missouri car dealers to prevent electric car manufacturer Tesla from selling its cars directly to customers. Although the amendment in question quietly passed the state Senate, I do expect that free market advocates in the House will loudly reject this attempted protectionism and cronyism.

That said, it must be noted that although Tesla is being wronged by the proposed amendment, policymakers would do well not to proclaim the heavily-subsidized company to be some spirit animal of the free market. Indeed, many businesses are quick to proclaim their love of the market while simultaneously marshaling special protections and subsidies to themselves. Tesla fits that description to a T; hit up that last link for a list of examples.

The Tesla episode reminds me of an old video featuring famed economist Milton Friedman. Asked some decades ago about who can save the free market, Friedman framed his response this way:

You talk about preserving the free market system. Who has been destroying it? The business community must take a large share of the responsibility. … You must separate out being pro-free enterprise from being pro-business.

The short video, which I commend to all of our readers, is below:

There is a difference between being pro-business and being pro-market. Clearly the proposed legislation would be pro-dealers; it would not, however, be pro-Tesla or pro-consumer.

May 9, 2014

Missouri’s Tax Reform Journey Has Only Just Begun

Taxes IconFor Missouri’s tax reformers, this was one big week. Sure, the legislature passed the state’s first individual income tax reduction in nearly a century. But Tuesday’s override vote also signaled that the sands in the Missouri capitol are finally shifting toward sound, market-oriented, and growth-promoting tax policies, and away from Jefferson City’s business-as-usual tax policies.

As an organization that has helped lead tax reform efforts in Missouri for many years, the Show-Me Institute is pleased to see the legislature take this baby step of reform. Make no mistake — this is a very modest tax cut, and smaller than we preferred. But to be clear, this tax cut serves as a mile-marker on the path of greater reforms.

Thanks to the hard work of countless supporters of the free market, that pathway of reform is now opening wide. Policymakers are finally recognizing that the words “free market” actually mean something . . . and that free markets actually matter.

When we at the Show-Me Institute say that we believe in free markets, what we’re really saying is that we believe in people. We believe in people to invest in themselves and their families and to make this state a better place to live. We believe in that bottom-up solution which puts its faith in our people, not a top-down plan that puts its faith in the government. We believe in you.

And we believe this week’s tax cut is just the first step on the road to enduring, people-empowering tax reform in this great state. We look forward to the future, and we hope you’ll join us on our journey to make our state even better.

May 7, 2014

Going Too Far To Limit Voter Input

There are at least two efforts in the Missouri General Assembly to prevent the ability of local voters to restrict tax incentives within their community. I think these limitations are a very bad idea, to say the least. Both Senate Bill 672 and SB 693 have had the following amendment attached to them:

2. No political subdivision of this state shall by ballot measure impose any restriction on any public financial incentive authorized by statute.

This proposal is almost certainly in response to the attempt to limit tax incentives for Peabody and other energy companies within the City of Saint Louis. A judge’s order turned away that ballot initiative. While I certainly agreed with the attempt to limit tax subsidies, I was never comfortable with the way the initiative targeted one industry. So, you didn’t hear me objecting to the judge’s ruling. Furthermore, I have, in the past, supported legislative preemption of initiative petitions in certain cases, so I am not saying a referendum should always trump local officials.

However, a blanket prohibition against any local votes against the use of tax incentives such as Tax Increment Financing (TIF), etc., goes way too far. This is terrible public policy and improperly restricts local voter rights. If a city or county has an allowance for initiative petitions under their charter, they should be allowed to use it. If local voters want to reduce or eliminate the use of TIF, Transportation Development Districts (TDDs), Community Improvement Districts (CIDs), Enhanced Enterprise Zones (EEZs), abatements, etc., via their local tax dollars, they should be able to do so.

Attempts to use initiative petitions after the fact against approved TIFs have failed for several legal reasons. However, there should be no legal problem with preemptively prohibiting corporate welfare in a community, as long as the prohibition is even and not targeted at select industries. (Feel free to tell me how I am wrong there, lawyers, but the mere existence of these amendments tells me that is correct.)

These amendments are trying to create a legal roadblock against citizen involvement and input into how people’s own tax dollars are spent, and that would be unfortunate for Missouri.

April 22, 2014

Missouri Needs The Sunrise Act

Missouri Rep. Eric Burlison (R-Dist. 133) has proposed legislation tightening the requirements for licensing new occupations in Missouri. It is called the Sunrise Act, and I think it would be an important public policy change for our state. (The legislation has been added to another bill at this point.)

This legislation is not radical. It does not ban new licenses. It does not implement extraordinary new requirements for a new license law, such as a greater than 51 percent vote like some tax increases have. It simply requires that attempts to institute a new statewide occupational license actually provide some evidence for the need and benefit of the license. Right now, there is none. The state legislature could wake up tomorrow, agree that every dog walker in the state needs a license to walk dogs for a fee, and pass that law without any supporting evidence. That is not an exaggeration (leaving aside the fact that the bill introductory period has passed).

The legislation further requires that if a license is proposed, the lowest level of licensing necessary to accomplish the public good will be applied. In other words, if you successfully demonstrate that the public will benefit from some level of licensing of dog walkers, you can’t impose heart surgeon-type standards to accomplish that goal. If the necessary public good is served by simply requiring dog walkers to register with the local government and undergo a background check, then you cannot add educational requirements, training hour minimums, continuing education rules, insurance or bond mandates, uniforms, and a host of other rules, all of which are common in licensing laws. For more strict licensing requirements, the Sunrise Act would require some level of additional evidence that those tighter laws are needed.

This issue happens regularly. For example, why are lawyers more stringently regulated than accountants? If you practice law without a license (except representing yourself), that is a crime. But accountants can do many things without a particular license, they just cannot hold themselves out as a CPA (certified public accountant) unless they have met those requirements. People without the CPA license still can be paid to keep company books, prepare tax returns, and much more. They can still do a job they want to do without calling themselves a CPA, and that is what is important.

The point is not to debate lawyers versus accountants. The point is that imposing burdens on people’s jobs and occupations should be more difficult than it is. That is all the Sunrise Act really does. Instead of imposing new burdens on someone’s job, it actually imposes a burden on the person who wants to license that job. That is where the burden should be.

April 18, 2014

Saint Louis Taxi Commission Takes Consumers For A Ride

The only nice thing I can say about the St. Louis Metropolitan Taxicab Commission (MTC) is that at least there is only one taxi licensing agency doing a terrible job for Saint Louis. We used to have two (city and county), and they did a really terrible job.

Short of that, the MTC has made it plain for all to see that its role is to protect incumbent cab companies from competition. Who cares what changes technology brings? They are going to operate the same way no matter what. Mobile phones, GPS, Internet maps, new phone apps, who cares? They have a job to do, and limiting new entrants into the market is job No. 1.

Why does the new technology matter? It matters because it has dramatically evened out the information advantage that taxi drivers used to have over customers. Now, even a first-time visitor to Saint Louis arriving at Lambert-St. Louis International Airport can check out in just a few minutes on their phone: 1) online reviews of cab companies, 2) the clearest route to the destination, 3) estimated fares for the trip, and more information if needed. Consumers are ready and able to negotiate for themselves, and most cab or mobile app-based drivers know that.

We do not need the MTC protecting us. Just as important, by restricting competition, the MTC is actively hurting taxi consumers in Saint Louis (and Kansas City as well).

Bring back the crooked assessor.

March 18, 2014

More Than 500 Economists Oppose Minimum Wage Hike

In an open letter released March 12, 2014, more than 500 economists voiced their agreement that increasing the federal minimum wage to $10.10 would not reduce poverty. The letter’s release coincided with hearings in the U.S. Senate’s Health, Education, Labor and Pensions (HELP) Committee to debate raising the federal minimum wage. The letter notes that poverty is a complex issue and simply raising the minimum wage is not “a silver bullet solution.” The letter’s signatories include Nobel laureates Eugene Fama, Edward Prescott, and Vernon Smith along with a number of previous administration officials, among them Glenn Hubbard, Greg Mankiw, and Harvey Rosen, all past chairs of the Council of Economic Advisors. (The full letter and list of signatories is available here.)

Raising the minimum wage costs jobs for the very workers it is supposed to help. A recent study by the Congressional Budget Office (CBO) found that the proposed increase would cost the economy 500,000 jobs by 2016. This outcome from raising the minimum wage agrees with previous work, including analysis that David Neumark and I wrote for the Show-Me Institute.

Missouri policymakers must consider the full impact of raising the minimum wage. It simply is not good public policy to raise wages for some individuals at the expense of other workers who are made even worse off than they are now. The minimum wage simply is not a viable policy tool to fight poverty.

March 11, 2014

Lust For Licensure

I honestly think that one of these days someone is going to propose requiring a Missouri license to hypnotize chickens. During this year’s legislative session in Jefferson City, the quest to unnecessarily license new occupations continues. Next up: home health care agencies, electricians statewide, and expanded licensing rules for landscape workers. None of these new or expanded regulations are justified.

Did you know that areas with stricter electrician licensing actually have higher rates of electrocution? It’s true. Licensing increases costs, increased costs lead to more do-it-yourself work, and that leads to more accidents. Similarly, is there a current crisis in Missouri regarding landscaping that I am oblivious to?

Missouri has fewer licensed occupations than other states. We should be proud of that. Simply put, all of the occupations that have some sort of legitimate role for licensing are already licensed at the state or local level. We need to be removing unnecessary licenses and making it more difficult to implement new ones. When it comes to licensing rules in Missouri, we need to pass rules setting demonstrated needs and benefits before new occupations can be licensed. We don’t need to add new occupations to an already too-long list.

February 25, 2014

Why Would Unions And Some Big Businesses Support Raising the Minimum Wage? Some Reasons

Last week’s Congressional Budget Office (CBO) report brought the negative effects of a proposed minimum wage hike into sharp focus. The CBO found that while wages would, by definition, increase for some employees, up to a million of our most vulnerable workers could lose their jobs. For all the bluster about free-market advocates being “anti-worker,” I can’t imagine a more anti-worker effect to a policy than the one you would see with a minimum wage increase. After all, what could be worse for a laborer than having his or her job taken away?

That’s what makes support for a minimum wage increase from unions and big business seem so odd at first glance. Why would unions such as the American Federation of State, County and Municipal Employees (AFSCME) support a change of policy that would hurt hundreds of thousands of Americans? Why would some businesses want to increase the cost of labor?

A few reasons stand out.

For starters, artificially raising the cost of non-union labor can make union labor more attractive. As the Cato Institute noted more than a decade ago:

Unions are labor cartels that attempt to restrict the supply of workers entering given occupations. Since non-union labor is priced below the cartelized price of union labor, it is an attractive substitute for union workers. Because unionization of all potential competition to the cartel is impossible due to the high policing costs that would be involved, unions resort to the minimum wage. By artificially increasing the wage rate of lower skilled workers — who could substitute for union workers — the minimum wage increase the demand for union workers and hence their wage rates.

Hypothetically speaking, if the labor of an entry-level employee with no experience is worth $7.50 per hour in the open market but the law requires he be paid $15 per hour, trained union labor costing $20 per hour looks considerably more attractive. By harming non-union labor, unions are able to help themselves.

Moreover, some large businesses have supported increasing the minimum wage because it would harm their competition. Costco, for instance, supports raising the minimum wage today at least in part because the entry-level wage for a Costco employee is $11.50, more than $4 per hour above the federal minimum. At a minimum wage of $10.10 per hour, Costco’s business model would remain largely unaffected.

But you know who would be affected by the change in the law? Businesses, large and small, whose profit margins are far narrower. That’s especially true of small businesses in our communities already suffering under a mountain of tax and regulatory burdens in a difficult economy.

Yes, there are, no doubt, some in both the business and labor camps who in good faith might think a minimum wage increase won’t hurt our vulnerable poor. But labor and business leadership know better, and the economics are as clear as the incentives.

February 20, 2014

Left Wages War On Poor With Minimum Wage Push

Over the last few months, the push has been on to raise the minimum wage. While increasing the wage sounds altruistic, in reality, it harms many of the people it should be helping. Tuesday’s Congressional Budget Office (CBO) report — which showed that up to a million people could lose their jobs if the wage was hiked to $10.10 — serves to hammer that point home.

I discussed those policy problems in a KCPT interview broadcast last week, which can be viewed below.

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