Patterico's Pontifications


How it Works in the Real World — The Minimum Wage and Unemployment

Filed under: General — WLS @ 2:42 pm

[Guest post by WLS]

Bad news out today on the unemployment front — a big jump from 5.1 to 5.5%.

However, within the numbers are some interesting details.

First, the number didn’t spike due to a big loss of payroll jobs — those declined only by 49,000 in April. That would be only .0004% in an economy of about 138 million workers.

Instead, the number jumped because of a surge of new people who came into the job market looking for, but not finding work. The overall unemployment number is about 8.5 million, and the increase last month represented about 860,000 new job seekers — only 49,000 of whom had lost a job elsewhere.

Further, the unemployment rate for the 16-24 age group was up dramatically compared to other groups. Unemployment in that group rose 2.4%, compared to increasing by only .4% in the group of workers 25 and older.

Who does this age group represent? How about high school and college students coming into the job market for the summer.

And what do many such job seekers get paid? Minimum wage –which Congress increased last year from $5.15 to $5.85, and which will increase again next month to $6.55, and then again next year to $7.25.

Here’s a personal case study in how that works to squeeze workers out of the minimum wage job market:

My parents own an ice cream shop, and rely heavily in its operation on eight 16-20 year olds working part-time schedules of 16-24 hours a week, along with one full-time manager who is assisted by my parents in their free time. Over the course of a 7 day work week, they typically employ the part-time workers for a total of about 340 hours a week.

Raising the minimum wage by .70 increased their straight wage expense by $240 a week, or about $1000 a month. But it had collateral consequences as well, as their worker’s comp. and unemployment insurance costs rose in relation to their payroll, as did their payroll tax contributions. The combination of wage increase and the various increases that spin off that wage increase was about $1500 a month. This is against a total wage expense for the part-timers of about $8000 a month.

Now, the ice cream parlor business is somewhat inelastic from a price stand point — people won’t continue to pay higher and higher prices for an ice cream cone when the alternative is simply to do without. So, that increase in operating expense could not, in total, be passed on to the customers. Instead, my parents worked a few more hours themselves and trimmed back on the hours they had the part-timers working. When one of the part-timers quit, they didn’t hire a replacement for her.

Now, the same thing is going to happen next month — another increase of .70 per hour, totaling about $1500 a month in additional operating expenses is going to kick in. This will come on top of significant increases over the past year in product costs — multiply the increased cost of milk you are paying at the supermarket several times over and you get a feel for the increased cost of buying ice cream on a large scale for a business establishment.

They will raise the prices a little, but not enough to cover the total increase. They will cutback on the hours the part-timers work, and work a few more hours themselves. And if they lose another worker, they probably won’t hire a replacement.

My parents are both in their late 60s, and they don’t want to work 60 hour weeks at an ice cream parlor they bought on a lark after they retired.

But they aren’t going to operate it as a money loser either.

When Congress increased the minimum wage, for many many small business operators such as my parents, Congress took the profit from the business right out of their pocket. I’d be surprised if my parents’ shop made more than $3,000 or $4,000 month in profit — with them taking nothing in terms of a wage for themselves. If they had not cut-back their part-time work force payroll, the minimum wage hike would have taken every bit of that profit away.

Now they are working more than they want, and for a very modest annual return on their labor and investment.

And two fewer teenagers will be employed by them this summer than was the case last year.

The other six should have their resumes up to date.

— Guest Poster WLS

Political Apocalypse — The Perfect Storm in 2012

Filed under: 2008 Election,Politics — WLS @ 12:23 pm

Posted by WLS: 

In reading some columns the last couple days, it suddenly dawned on me the very real possibility of a coming political Apocalypse in the Presidential Election of 2012. 

First was this National Journal article  yesterday by Ronald Brownstein, which had this interesting observation:

But cumulatively through the primaries, exit polls found that Obama won only 35 percent of the Latino vote, 35 percent of the Catholic vote, 30 percent among whites without college degrees, and 28 percent among white seniors—groups that the party typically relies upon. He also faces doubts among Jews, a small bloc that might nevertheless tip the scales in Florida and Pennsylvania…. But his struggles with such groups as Latinos and working-class whites increase the odds that he will need to assemble a new coalition to win, probably one tilted more upscale than usual for Democrats.

The common theme here is that Clinton’s potential route to the White House was one that Democrats have followed successfully before. For Obama to win, he probably will need to blaze new paths.  

That second paragraph points out that Clinton could have assembled the same electoral equation that led to victory for her husband twice, Jimmy Carter, and a photo finish for Al Gore.  The path that Obama must take is the one that has failed the Dems with McGovern, Mondale, Dukakis, and Kerry.    The point simply is that the hand the Dems are playing from is historically a loser — not saying that they will lose this year, but only that it hasn’t been a combination that has prevailed in the past.

Next I was reading this column by George Will, in which I noted this observation:

…. many Democrats do not fathom the gratitude that less-blinkered Americans feel for Obama because he has closed the Clinton parenthesis in our presidential history.

Finally, I was taken by this observation in Peggy Noonan’s column today in the WSJ:

May I rise in a toast to the Democratic Party.

They had a great and roaring fight, a state-by-state struggle unprecedented in the history of presidential primaries….

All of this is impressive, but more than that, they threw off Clintonism…. They threw off the idea that dynasticism was an unstoppable dynamic in modern politics, that Bush-Clinton-Bush-Clinton could, would, go on forever. They said: “No, that is not the way we do it.”

They threw off the idea of inevitability…. She lost because enough Democrats looked at her and thought: I don’t like that, I don’t like the way she does it, I’m not going there. Most candidates lose over things, not over their essential nature. But that is what happened here. For all her accomplishments and success, it was her sketchy character that in the end did her in….

May this mark the beginning of the remoralization of a great party.

And, after cogitating on these thoughts for a few hours, it suddenly struck me that Noonan is completely wrong.   Here’s the scenario:

1)  It proves true that Obama comes into the general election season a greatly diminished candidate compared to what he was a year ago when he was a blank slate upon which the left wing and the media could project all their “If MLK/RFK could have had a baby together” fantasies.  Combine his electoral performance among DEMOCRAT voters over the last 10 weeks with the political beating he is about to experience for the first time in his career, and I think its quite possible he will prove to be another losing hand for the Dems trying to build a winning  general election coalition that relies primarily on the young,  the white affluent liberal, and the African-American voters in large blocks.

2)  Following a win achieved practically by default in a less-than-inspiring campaign, McCain is faced with an extremely hostile and even more liberal Democrat Congressional majority which feels cheated out of the WH by a bunch of bigoted rednecks in the flyover states.  True to his colors, McCain agrees to pursue  largely the liberal’s agenda in Congress, on which he manages to gain some concessions around the edges in order to pick up a smattering of GOP votes here and there, declaring himself a bipartisan success as President even if those policies wreck the country.  His term would clearly represent a disappointment to the GOP base.

3)  A health scare mid-way through the third year of his presidency — following another disappointing round of Congressional elections for the GOP in 2010 — and with horrendous approval ratings from both the GOP base and the left wing that continues to feel cheated out of the WH, McCain pulls an LBJ, and announces that he won’t run for a second term.

4)  Hillary, who began running for President the day of McCain’s inaugural on the “I Told You So” platform, and having reseized the levers of power in the DNC, uses the strength of her 17+ million primary votes in 2008, and the threat from every liberal Dem. woman to withhold certain pleasures from their Dem. male sig. others unless they too pledged unqualified fealty to Hillary 2012, to strong-arm every other challenger out of the primary contest before the first vote is cast in Iowa.    

5)  Social and evangelical conservatives, having drilled an empty hole in 2008 in trying to find a true conservative candidate — not a fake like Romney or an unelectable nutjob like Huckabee — coalesce very early around the one true conservative standard bearer who would draw no objection from the economic conservatives or national security conservatives, and who has always been viewed as the true political talent in his family….

And there you have it — the Political Apocalypse of 2012:  Hillary Clinton v. Jeb Bush.

Clinton v. Bush — to the death, winner take all.

 We can dream, can’t we?

Dollar Bill Jefferson Endorses Obama

Filed under: 2008 Election — Patterico @ 8:10 am

The news came on the same day Jefferson’s sister, brother and niece were indicted, and Obama pal Tony Rezko was convicted of 16 corruption charges.

Links in my post at Hot Air.

The indicted Bill Jefferson is not the man Obama knew.

Clinton and Obama Meet; Edwards Out of Running for V.P.

Filed under: 2008 Election — Patterico @ 6:36 am

MSNBC reports:

Barack Obama met privately with Hillary Rodham Clinton, a likely vice presidential candidate, as the Democratic nominee-in-waiting sought to unite his fractured party against Republican John McCain in November.

Meanwhile, John Edwards has ruled out running for Vice President. I regard this as very meaningful, because when politicians rule out running for office, they always keep their word.

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