Manufacturing Confusion

If your economic theory is right, we should expect that poor people are doing worse in countries with a high degree of economic freedom. They should either be poorer, or at least their share of the national income should be lower. The actual findings contradict this prediction: Poor people in economically free countries are consistently richer than in less free ones, and their share of the national income is about the same regardless of economic freedom. (see page 21 of this PDF document.) In other words, the cake is larger in economically free countries, and the poor people's share of the cake is about the same as in less free ones.

Joe - Do we really need to prove causation to make Thomas' point? Isn't it enough to show that the two are related as indicated by the report to conclude that you are likely to find people less impoverished in societies with greater economic freedom?

Joe - Now you're twisting words. Nobody said anything about finding "poor people in poor countries". What was written was that you find more poor people (or people more impoverished) in countries with less economic freedom.

Let's try to stay on the same page, and not put words in each other's mouths, okay?

Thomas wrote:

If your economic theory is right, we should expect that poor people are doing worse in countries with a high degree of economic freedom. They should either be poorer, or at least their share of the national income should be lower. The actual findings contradict this prediction: Poor people in economically free countries are consistently richer than in less free ones, and their share of the national income is about the same regardless of economic freedom. (see page 21 of this PDF document.) In other words, the cake is larger in economically free countries, and the poor people's share of the cake is about the same as in less free ones.

Surely, Thomas, you're smart enough to recognize that this study runs a very serious risk of falling into a cum hoc ergo propter hoc fallacy. The notion that levels of "economic freedom" and poverty correlate, and that, therefore, a lack of economic freedom causes poverty, is simply not substantiated.

Poor countries all have
Less economic freedom.
That's the study's flaw.

The degree of economic freedom present is influenced
by numerous factors. No single statistic will be able to
capture all of these factors or to represent their interre-
lations fully. We believe that the index presented here
captures most of the important elements and provides
a reasonably good measure of differences among
countries in economic freedom. However, something
as complex as economic freedom is difficult to mea-
sure with precision. Thus, small differences between
countries should not be taken very seriously.

As this work goes forward, it should open
doors for fruitful research in several areas. Certainly,
it should be of value to those seeking to pinpoint the
strengths and weaknesses of institutions and policies.
It should also be useful to those seeking to enhance
our knowledge of economic development and the pro-
cess of economic growth. Researchers analyzing the
interrelations among economic freedom, civil liber-
ties, and democratic decision-making should also find
these data of value.

If they didn't change minimum then folks like my grandfather would still be working for pennies. Why is that so hard to understand?

Why not set the minimum wage at $100.00/hour? You are clearly a strong advocate for the minimum wage, so you should have an answer.

If they didn't change minimum then folks like my grandfather would still be working for pennies.

I tend to assume that if you keep coming back you may be curious as to why you aren't seeing the bigger picture here

So to cut it all short I will just end it by saying that I disagree with all your reasons and Thomas's reasons of why having a minimum wage standard is not a good thing and the chances are no matter what you come up with I am not going to agree...

But I understand that you don't care to understand that point.

Signs that the "jobless recovery" is starting to generate jobs after all should not prevent our looking at some of the factors in the earlier slow growth of employment while the economy was growing vigorously otherwise.

Although the unemployment rate has been at near record lows, despite the slow growth of employment, this has been because of people who simply dropped out of the labor force, and were therefore not counted as unemployed. But think about it. Can you or I simply drop out of the labor force?

Of course not. We have bills to pay. Who can drop out then? Usually either those who are rich, those who are willing to live on handouts or young people still living with or off their parents.

According to the March 22nd issue of BusinessWeek magazine, "almost all" of the decline in the number of people seeking work "has occurred in the 16- to 24-year-old age group." Labor force participation among people older than that has continued to be what it usually is.

In other words, people who have to support themselves and their families were not the ones dropping out of the labor force. When things get tough for younger people, they can turn to mom and dad. Others turn to the taxpayers.

There is another aspect to this, however. Jobs have long been harder for young people to find. Some might say that this is due to their lesser skills and experience. But there is no inherent reason why low-skill people should be any less employable at low wages than high-skill people are at high wages.

The difference is that the government sets a lower limit to the movement of wages and also mandates working conditions and other benefits that are the same for everyone. All these things cost money and in effect make the minimum wage higher.

These things that cost employers money and cost workers jobs do not, however, cost anything to those who pass laws that enable the legislators to feel good about themselves and look good to the voters. These costs do not get counted.

California in general, and San Francisco in particular, think nothing of piling on goodies that employers are required to provide. Costs are no deterrent to the politicians, who can always call the goodies "rights" or part of business' "social responsibilities."

That kind of rhetoric is sufficient for those who have been through the dumbed-down education of our times. Costs, consequences, logic and evidence are concepts that are too old-fashioned for those who are in tune with our times.