Those working-at-the-car-wash blues.
Posted on July 24, 2008 - Filed Under Economics, Minimum Wage 
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At midnight Wednesday, base labor in America became worth 70 cents per hour more than it had been just one minute before. Just like that, an employee making $5.85 an hour began making $6.55 an hour, the new federal minimum wage. That’s an increase of twelve percent.
Wow! Isn’t that great? If you have employees earning the minimum wage, they’re worth more today than they were when you went to work on Wednesday. A twelve percent gain in productivity from those employees couldn’t come at a better time.
What gain in productivity?
Well, the gain in productivity that would certainly be the precursor to a significant increase in compensation. This is America. You don’t just get a raise. You have to earn it.
No, not necessarily.
The federal minimum wage has little to do with the market for labor. The federal minimum wage was born of the Fair Labor Standards Act of 1938. Minimum wage was political then. It’s political now.
Franklin Roosevelt promoted the Fair Labor Standards Act as a way of getting around the fact that it was impossible to unionize the entire country without running afoul of the law in many states. It was a purely political move. Trying to overturn right-to-work laws in states such as Texas would have touched off a constitutional firestorm. The Fair Labor Standards Act was an end-around for the benefit of the labor unions that supported FDR.
For 70 years we’ve had minimum wage and it’s not going away. But it is important to understand that minimum wage is not set by those engaged in the buying and selling of labor. It is not set by an employer’s offer of work at a specified wage and a worker’s concurrent acceptance. Minimum wage is set by Congress. The same Congress that specifically exempts itself from most of the provisions of the Fair Labor Standards Act that established minimum wage in the first place.
And every time Congress raises the minimum wage, we get the news stories about how inadequate the new wage is. Just this past Wednesday, Christopher Rugaber of the Associated Press wrote of Walter Jasper, a car wash worker in Nashville, Tennessee.
“It [the increase in minimum wage] will help out a little,” says Jasper, who with his fiancée supports a family of seven. “I’d like to be on a job where I can at least get a car,” he says.
Well, good gosh, $262 a week isn’t going to get Mr. Jasper a car. Not if he wants to eat, feed the five kids and come in out of the rain. Neither will the $290 a week when minimum wage goes up again, this time to $7.25 an hour, 363 days from now.
So let’s raise the minimum wage to $25 an hour. That’s a thousand dollars a week or $52,000 a year. Out of that $1,000 in gross pay every week, Mr. Jasper would net about $780 or $3,380 a month. Out of that he could surely afford the rent in a decent place and a serviceable car and food for himself, his fiancée (and the five kids that obviously came from some union somewhere that is apparently not connected to an extant marriage).
But, Paul, I’m not sure what Mr. Jasper does at the car wash but it’s probably not worth $52K a year. If you raise the wage too high, instead of minimum wage he’ll get no wage.
Well that’s true and that’s the point. The car wash is going to try to get the work Mr. Jasper is doing done for as little as possible. Possessed of the knowledge that they would have to pay $5.85 an hour for the job Mr. Jasper holds, they offered employment and Mr. Jasper took it. If there had been no takers at that price, the car wash would have had to decide to either raise the wage offering or eliminate the position. And thus, with each increase in minimum wage, Mr. Jasper’s employment is further jeopardized.
Please understand that I’m not putting Mr. Jasper down. The fact that he has lived long enough to produce and/or have to feed five children and can still only command minimally compensated employment speaks to a very serious problem.
But thinking that Congress can solve the problems faced by the Walter Jaspers of the world by setting the base price of labor by fiat is delusional.
Education and experience are the essential variables in selling one’s labor to employers. Education can be obtained in America by just about anyone willing to put forth the effort. Experience is obtained by starting at the bottom of the ladder and working one’s way up.
Each increase in minimum wage risks raising the bottom rung of that ladder out of the reach of Walter Jasper.
Congress: Lead (not likely) or get out of the way.
Posted on July 17, 2008 - Filed Under Congress, Energy, Gasoline Prices Print This
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Click here to listen to the broadcast of You Tell Me on Newstalk 600 KTBB, Friday, July 18, 2008.
All the recent opinion polls say the same thing. The majority of Americans want action on high energy prices and they want action today. Right now.
Citing just one poll, the Fox News/Opinion Dynamics poll taken June 17 and 18, 76% of respondents favor more drilling for oil in the United States, 77 percent favor increased offshore drilling, 51 percent favor building more nuclear power plants and for the first time a majority - 53 percent - favor drilling in the Arctic National Wildlife Refuge (ANWR).
And yet, Congress obstructs.
The arrogance of the Congressional leadership with respect to America’s energy security and the clear desires of the American people is simply breathtaking.
Those in Congress who oppose increased oil exploration justify their objections by saying that the fruits of such efforts won’t be seen for five to ten years. They ignore the fact that President Bush put forth an energy proposal that called for increased oil and gas exploration, the construction of new refineries, the construction of new nuclear power plants and $10 billion in tax incentives to promote new energy technologies in June 2001, seven years ago. The Congress thwarted that plan and they have thwarted all administration proposals put forth since.
The Republicans say we need to drill for oil. The Democrats say we need to forget about oil in favor of alternative energy sources. But they don’t say what those alternative energy sources are. That’s because the sources don’t yet exist. Your car still needs gasoline. The truck that brings food to the Brookshire’s still needs diesel. The airplane that flies you to your business meeting or brings you your overnight package still needs kerosene.
The fact is if we are to prosper, we need to do it all. We need to drill for oil. We need to develop wind and solar power. We need to find a clean way to use coal. We need to build nuclear power plants. We need more refineries. We need to find a safe way to use natural gas to power vehicles. And we need to do it all now.
Former house speaker Newt Gingrich made a very powerful point earlier this week. He said that World War II proved that we could move with amazing speed on multiple tasks. And he cited the numbers.
In the 1,347 days between Pearl Harbor and the Japanese surrender, we built 102 aircraft carriers, one every 13 days, 5,626 merchant ships, one every five hours and 42 minutes and 273,882 aircraft, one every seven minutes and five seconds.
As I have said before, we are the offspring of people who got things done.
So in this time when we ourselves should be getting things done, what’s happening?
Well, here’s one example. British Petroleum (BP) obtained all necessary permits from the Indiana Department of Environmental Management to expand an existing refinery in Whiting, Indiana. The expansion would allow the production of an additional 620 million gallons of gasoline each year. It will create 2,000 construction jobs and 80 additional permanent jobs.
You can bet that getting the permits from the state was no picnic. But with BP having complied with the law and standing ready to go to work, an environmental group called the National Resources Defense Council swooped in and filed a lawsuit in federal court to stop the project. Check back with me in five years and we’ll see if the project is even started.
Folks, we can no longer afford this. At the time of the Arab Oil Embargo we imported approximately 25 percent of the oil that we needed to fuel our economy. Today, that number is over 70 percent.
If Congress had acted on President Bush’s proposals in 2001, we would have accomplished much of the plan by now, we would have created thousands of American jobs, we’d be pumping millions of barrels of oil, we’d be producing millions of watts of environmentally clean electricity and we would be dramatically less dependent on the thugs in the Middle East.
And gas wouldn’t be $4.00 plus a gallon.
When the Democrats took over the Congress in 2007, oil was $50 a barrel and corn was $2 a bushel. Today, oil is over $130 a barrel and corn is $6.50 a bushel. What is the Democrat plan to deal with these unacceptable facts?
As we proved in World War II, we can get things done. The time has again come for us to do so. And step number one in our new plan of action is to demand that Congress get out of the way.
Moses would have drilled.
Posted on July 10, 2008 - Filed Under Energy, Environment Print This
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Click here to listen to the broadcast of You Tell Me on Newstalk 600 KTBB, Friday, June 11, 2008.
I won’t often quote scripture in this space. This is not a religious debate forum.
But I’m going to this time because the scripture I’m about to quote is illuminating in today’s situation. I’m quoting Deuteronomy, the eighth chapter beginning with the seventh verse. Moses is speaking to the Israelites:
‘For the LORD your God is bringing you into a good land, a land of brooks of water, of fountains and springs that flow out of valleys and hills; a land of wheat and barley, of vines and fig trees and pomegranates, a land of olive oil and honey; a land in which you will eat bread without scarcity, in which you will lack nothing; a land whose stones are iron and out of whose hills you can dig copper. When you have eaten your fill you shall bless the LORD your God for the good land that He has given you.’
What was true coming from Moses 5,000 years ago in the Land of Israel is true today in America. We have been given by God a land that is rich in resources from which He intends that we live and prosper. We are obligated to respect that gift and to use it wisely. We are to be good stewards of the resources we have been given. But make no mistake, our abundant resources were given to be used.
It is said that Samuel Slater launched the Industrial Revolution in America in Pawtucket, Rhode Island in 1789. Slater used hydro-power from the Blackstone River to power the first mechanized textile mill and, in the process, became the first industrial polluter by discharging waste from the plant back into the river.
Slater was the first but by no means the last. As America industrialized, steel mills and manufacturing plants sprang up along lakes and rivers and waterways, discharging waste products into the water and particulates and toxic gases into the air. As just one example, in 1969, Lake Erie captured public attention when its tributary, the Cuyahoga River, became so polluted by petrochemical discharge that it actually caught fire spontaneously.
That was a needed wake up call and it led to the Clean Water Act of 1972 and, more important, focused our attention on the need to conduct our industry in ways less damaging to our natural resources. And we have done so. Today, Lake Erie, once pronounced “dead”, lives.
Today in America, air and water pollution are dramatically reduced compared to the early 1970s. Cleaner burning engines, better industrial practice and a widespread public ethic on environmental stewardship have all combined to make us more productive than ever with less negative impact on the environment.
This is true with respect to oil and gas production. Better technology together with workable government regulation has served to make American oil companies the cleanest oil producers in the world. One of the many perverse effects of the current obstruction to oil and gas production in the United States is that we are effectively exporting environmental damage by virtue of increased production in the Persian Gulf and in Siberia, two areas where the producers are much less fastidious about the environment than we are.
America led the world in improving its environmental stewardship because it was sufficiently prosperous so as to be able to do so. Our successful economy afforded us the means and the will to clean up our own environmental house. To imperil that prosperity now by choking off the energy that fuels our economy ultimately poses a threat to the very environment we hope to protect.
Being responsible about our environment is a good thing. Taking that responsibility to a ridiculous extreme - an extreme that becomes a substitute for concrete action in the face of adversity - is not.
We humans did not invade the earth. We were put here by the same God that led the people of Moses to the Promised Land. Like it says in the Desiderata, no less than the trees and the stars, we have a right to be here.
We were meant to live off the earth.
Drilling for oil in own land in a way that respects the environment is not only possible, it is, in light of our obligations to our own citizens and our role in the world, the only responsible thing to do.
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