Book Review IV: The Tragedy of American Compassion

Overall Rating: 4.5/5

Estimated Reading Time: 8 hours (244 pages, ~2 minutes/page)

Why I choose to read -

• I enjoy learning and writing about public assistance programs
• I feel America’s public assistance programs can be improved, but I am unsure how

Background -

• Author: Marvin Olasky
• First Edition: 1992
• Cultural Context: Not particularly important as book deals with wide range of historical years

Author Details -

• Born 6/12/50 in Boston, Massachusetts
• Engaged in journalism, editorship, speech writing
• Wikipedia Biography
• World Magazine
• Video series detailing Olasky’s life and thought progression. I did not view these videos, however they appear to be very detailed.

Reflections -

What I appreciated:

• Olasky attempted to remain unbiased while detailing what he believes
• Author makes a strong case of the need to alleviate more than just physical suffering to break destructive cycles
• Very detailed historical foundation of how government came in position of providing the majority of social services

Shortcomings:

• Vague and limited on proposed solutions. Focuses on here is where we are and here are examples of what has worked before. This allows Olasky to have less bias, but results in a lack of specific suggestions for change.
• Published in 1992, thus 20+ additional years of poverty alleviation efforts with limited results have elapsed. It would be ideal if an updated version was released.

Key Messages -

• Culture constructs systems of charity in the image of the god(s) they worship

• America:
• Money – We throw money at problems
• Independence – We do not want to become personally involved. We would rather give money than become personally involved.
• Comfort – We largely believe no one should suffer, regardless of the circumstances leading to their suffering.
• Feed and forget model
• Current public assistance and charities are designed more for givers than receivers. They are designed to make people feel as if they are doing something and no longer responsible or inconvenienced by the needs of the poor.
• Nothing is more demoralizing to the struggling poor than successes of the indolent or vicious
• Indolent: wanting to avoid activity or exertion; lazy
• Author asks: “If social universalists believe money will create goodness, then why does the wealthiest nation in the world suffer from high levels of crime, despair, and depression?”
• (My thought) Increased wealth only makes us more of who we are
• Author greatly supports affiliation/bonding through personal relationships, work tests, and is vehemently against indiscriminate giving.
• Bad charities drive out good charities
• Bad charities: Defined as those who give aid indiscriminately to relieve solely physical needs
• Good charities: Defined as those engaging in: 
• discriminate giving to the worthy poor
• alleviation of psychological, emotional, social, and physical needs 
• modifying the underlying behavior of why individuals are currently in poverty
• Discriminate giving to the worthy and unworthy poor
• Author supports there are those in poverty who are worthy of assistance and those who are unworthy. Olasky goes on to describe how discriminate giving is needed in such situations. Unfortunately large scale public assistance efforts are unable to engage in discriminate giving. Rather it must use impersonal mathematical formulas and flowcharts. (Food Assistance, Unemployment Insurance)
• Charities found some individuals needed to suffer in order to be willing to change
• Similar to a person needing to hit “rock bottom” before change can occur
• Difficult and unpopular belief in America. We are often too impatient with relieving suffering, likely due to idolizing comfort
• Suffering aside, cited charities supported not allowing anyone to starve regardless of the cause
• Litmus test: Do we care for the hearts, minds, and souls of those who are suffering or just their bodies (physical)?
• Welfare often creates an appetite which is more harmful than the pain it is intended to relieve
• AICP (Association for Improving the Conditions of the Poor) stressed all relief should be temporary
• AICP found chronic, unexpiring relief bred huge problems in both the recipients of aid and in the resulting compassion fatigue of workers who felt disheartened, exhausted, and ineffective.
• Read When Helping Hurts for more on compassion fatigue
• By concentrating on the millions (federal public assistance programs), we lose compassion for individuals (local assistance)
• S. Humphreys Gurteen with Buffalo COS (charitable organization society) implemented work test and used loans (rather than free handouts) with impressive results
• Work tests allowed dispensing of aid while retaining dignity
• One of the key psychological and social factors to poverty is the need to restore a person’s dignity. Work tests enabled those receiving aid to begin the restorative process.

• Philanthropy has become as cold as the payment of taxes - mostly because it is the payment of taxes
• Federal Emergency Relief Administration on direct relief (1934): 
• “Direct relief has little to commend it. While at the present time it may happen to be the cheapest way of meeting the problem, in the end . . . it probably will prove the most expensive”
• Direct relief being meeting only individual’s immediate physical needs rather than going further to meet emotional, psychological, knowledge, and skill needs/gaps
• (My thought) It is humorous to read public assistance proponents demand federal leadership to solve poverty and enact wealth distribution. They are equating “leadership of federal government” with progressive taxes and redistribution of resources.
• As I place a high value on freedom (My Voting Issues), I would error on leaving the level of public assistance up to the people. If they do not want to give indiscriminately, then the people have spoken.
• If the federal government was a charity, how much (if any) would you choose to donate? 
• There is no right or wrong answer. Your answer simply reflects how effective you believe the federal government is at alleviating poverty/hardship.
• I disagree with author’s suggestion of using tax deductions and credits to lower economic barrier to funding private charities.
• Again, leave it up to the people, if they do not want to give indiscriminately, then the people have spoken. Subsidizing certain organizations only distorts people’s true preferences.
• Many charities found people needed to be able to freely come and leave poor houses (personal choice)
• Individual choices are the means to end poverty
• Difficult, if not impossible, to help those who do not want to be helped
• Again, see When Helping Hurts
• Historically, most aid given was actual materials, not money
• Actual materials, rather than money, restrict recipients choice of how to utilize aid (loss of freedom)
• Author believes aid should come at an expense of freedom
• Could argue a black market would emerge, but efficiency is lost by selling/bartering actual materials (food stamps, ect.)
• In addition, a well organized, local charity participating in discriminate giving would likely be informed of aid abuses and no longer provide aid to such individuals. Unfortunately large government charities are slow/unable to discriminate in such a way.
• Charles Brace – “the best politics and the most complete form of government are nothing if the individual morality be not there
• Brace found a combination of personal, theological, and economic incentives moved families to care for impoverished children
• Josiah Quincy (1821 chairman of Massachusetts legislative committee) on pauper laws concluded:
• “There must always exist, so many circumstances of age, sex, previous habits, muscular, or mental strength, to be taken into the account, that society is absolutely incapable to fix any standard, or to prescribe any [universal] rule by which the claim of right to the benefit (public assistance) of the public provision shall absolutely be determined.”
• Paraphrased: Universal, mathematical formulas would be unable to determine level of need or qualifications for aid

To who would I recommend reading?

• Anyone frustrated with current poverty alleviation efforts
• Anyone currently affiliated or considering participating in any form of poverty alleviation effort (public or private systems) 

To who would I not recommend reading?

• If you have no interest in public assistance programs

The Tragedy of American Compassion succeeds in detailing a history of poverty alleviation efforts. While lacking in proposed solutions, it shines in providing hope and encouragement efforts can be improved.

For me, overcoming poverty in America and the world seems overwhelming. Olasky stated, "by concentrating on the millions, we lose compassion for individuals." I believe it is important to start small, one person/family at a time.

How do you eliminate poverty in one's lifetime? I start today and remove the poverty label from just 1 person this year (lets assume you were this person). Next, you and me in the second year remove the poverty label from 1 person each (2 total). In the third year, the 4 of us snowball our efforts and each remove 1 person from poverty in year 3 (8 total out of poverty label). Even though after 34 years, I personally would have only removed the poverty label from 34 individuals, everyone's efforts combined would purge the entire world of poverty (8.5 billion total persons). Astounding.

Next Post Topic: Fantasy Football 2014: Draft Prep

Minimum Wage Part IV: Uncle Rico, Buzz Lightyear, and Questionable Claims

We have all experienced it. Someone has exaggerated the greatness of something or someone.

Last month, I detailed cited effects I believe are caused by minimum wage legislation. Today, I will detail cited effects I would refute or find unreliable to be caused by minimum wage, much as I believe we all find the claims of Uncle Rico and Buzz Lightyear to be unreliable at best :).


Cited effects I would refute –

1. Increases productivity

• As Governor Peter Shulmin, Governor Dan Malloy, and Mike Konczal have stated (Minimum Wage Part II: Cited Effects), higher earnings encourage employees to work harder and when workers have more to lose, they do their jobs better leading to productivity increases. Unfortunately none of these authors cited the studies they referenced.
• I agree as minimum wage increases, average worker productivity increases. However, I would suggest this occurs as individuals and businesses are forced to find ways to increase average worker productivity to cover increased employee costs. Unfortunately productivity increases often come in the form of automation, outsourcing (China, India), consumer effort (self checkout lines), labor-labor substitution (replacing less productive workers with higher productive workers), and/or increasing prices. All of which primarily affect the least productive workers.
• Much like the price of an item does not affect its function, productivity capacity is not connected to wages. Paying twice as much for the same item does not increase the function or productivity of the higher priced product.

• An artificial wage floor may increase average worker productivity, however it decreases total economic productivity as some workers are priced out of employment. As detailed last month, it is unfortunate those workers most in need are often the ones who find it increasingly difficult to acquire and maintain employment.

2. We should support it because it is popular

• We have all seen it. Just because something is popular does not make it good or truthful.

• I disagree we should pass legislation simply because a majority wants it. Rather, policies should be considered on the basis of sound theory/logic and available empirical evidence demonstrating a measure accomplishes our core desires.
• Enough said, just don’t support something on the sole basis others do. We don’t need to follow the fool’s parade.

Cited effects I find unreliable -

1. Boosts economy

• A general consensus states low income earners spend a greater proportion of their income than they save. The opposite is said of higher income earners who tend to save and invest rather than spend. Subsequently, it is proposed by raising minimum wage, money will be transferred into low income households who will in turn spend their earnings immediately providing an economic boost.
• Many authors cite a study by Daniel Aaronson and Eric French from the Chicago Federal Reserve estimating  raising the minimum wage to $9 an hour would create a $28 billion boost in 2012 GDP.
• I agree with the general consensus and the results found by the Chicago Federal Reserve. However, as stated in Aaronson and French’s conclusion (below), I find the effect of an economic boost unreliable as it depends on what time frame you assess. It is likely a short term economic boost is seen with minimum wage increases. Unfortunately this effect appears unsustainable and potentially detrimental to sustainable economic growth, a core desire of mine (Minimum Wage Part I)
• Aaronson and French conclusion
• “Finally, it’s important to stress that the aggregate household spending response discussed in this article is relevant for only the first few quarters after a minimum wage hike. Beyond that time frame, households must pay off debt they incurred in the short run by spending less. Thus, a minimum wage hike provides stimulus for a year or so, but serves as a drag on the economy beyond that.”

2. Pulls people out of poverty

• A popular cited effect of minimum wage legislation is raising the wages of the lowest income earners will raise people out of poverty through increased incomes. With countless variables affecting the poverty rate, it is difficult to determine the true effect of minimum wage legislation on the nation's poverty rate. Hence I consider it an unreliable cited effect as:
1. Due to efforts to increase average worker productivity (automation, outsourcing, etc.), minimum wage increases the difficulty of workers most likely living in poverty acquiring and maintaining employment, the exact population minimum wage is intended to help.
2. It may push as many people down into poverty as it raises out. Middle class gets a double whammy by paying all the costs of minimum wages (increased prices) while receiving none of the benefits (income is not increased).
3. From 1959 to 2012, in the year of and year after minimum wage was increased, average poverty rates increased 0.9% while in all other years the poverty rate decreased 2.3%.
• Not strong enough data to make a sound judgment, however the data does trend towards minimum wage failing to pull people out of poverty.
• Data Source: United States Census Bureau 

3. Reduces use of public assistance programs

• Similar to pulling people out of poverty, it is cited raising the wages of low income earners will decrease public assistance expenditures. Determining the utilization of public assistance programs has innumerable variables leading me to label this effect as unreliable. I have these concerns why this effect may be unsound:
• Welfare expenditures increased an average of 9.2% in the 2 years following a minimum wage increase while welfare expenditures decreased an average of 1.2% in other years.
• Again, if automation, labor-labor substitution, increased prices, outsourcing, and increased consumer effort (self checkout lines) increase, more workers will find themselves in search of work (CBO study) and therefore utilizing public assistance programs.
• If prices rise, some will be pulled down into poverty who have their expenses increase without a subsequent rise in income (middle class especially).

• As James Sherk writes, wages are not the primary barrier to higher incomes, obtaining employment is. 67% of individuals living below the poverty line did not work during the last year.
• Does not account for those who would have earned raises by increasing productivity through experience/training. James Sherk cites an Employment Policies Institute (EPI) study which found 2 out of 3 minimum wage workers received an average raise of 24% within 1 year.
• Of minor note, I consider minimum wage a subsidized wage. It is an indirect form of public assistance that is paid for by private individuals rather than directly by government expenditures (which are also paid for by they public through taxes).
• All things considered, I believe minimum wage will lift some out of poverty, but largely at the expense of the least productive workers being replaced/not hired and higher prices placing an added burden on all, especially low and middle income households. With cost of living rising, more people will find themselves in poverty rather than out of poverty. A trend supported by the subsequent increases in both public assistance program expenditures and the poverty rate in those years following a minimum wage increase.

4. Reduces gender and income inequality

• I am for equal compensation across all demographics (Minimum Wage Part I). I find implementing policies on the basis it favors certain demographics more than others a slippery slope. I believe the means to accomplishing the end of reduced gender and income inequality do matter. Attempting to cater public policy to favor certain demographics over others may reduce quantitative inequality, however I fear it may be detrimental. Rather than giving equal treatment to all, it attempts to favor disadvantaged groups perpetuating the cycle of favoritism.
• While I oppose prospective favoritism to rectify past injustices, I do support retrospective litigation to compensate workers who experienced past injustices.
• In addition, if gender and income inequality exists because of differences in productivity, the least productive workers will find it increasingly more difficult to obtain employment in a world of automation, outsourcing, consumer effort (self-checkout lines), and labor-labor substitution. Thus, minimum wage legislation may actually worsen inequality by enacting a policy that is prohibitive of the lowest productive workers to acquiring employment. Referring again back to James Sherk, 67% of workers living in poverty have not worked in the last year. Thus, employment is a bigger problem than wages.

5. Morally just

• Workers should be paid fair wages and not unjustly employed. However, I believe this should ideally come from generosity, not forced payments (see Private Charities).
• We should desire to care and meet one another’s needs, however I believe this is more effectively and efficiently accomplished by individuals and private charities rather than impersonal public assistance programs.
• I am unconvinced you can force morals upon people. I believe pandering "good morals" will at best change some outward behavior while producing inward bitterness and resentment.

Many states and cities have taken action apart from the federal government to raise minimum wage in its jurisdiction. Most notably, Seattle has passed legislation to raise minimum wage to $15. Seventeen months after President Obama proposed a higher minimum wage in his January 2013 State of the Union Address, minimum wage has remained a prominent topic in the news media.

With a myriad of potential effects, who benefits from minimum wage legislation? My next minimum wage series post will detail who I believe benefits and is harmed by minimum wage. Lastly I will explore viable alternatives to minimum wage and determine which, if any, may more effectively accomplish my original desires.

Next Post Topic: Book Review

Minimum Wage Part III: American Samoa, The Face of Minimum Wage, and Sound Cited Effects

Difficulty finding jobs, frustration over income inequality, annoyed with politicians, jobs going overseas, greater automation, increased difficulty maintaining former standard of living. These are all events I observe in American society.

Can minimum wage laws halt, reverse, or eliminate any or all of these? In my study of cited minimum wage effects (Part II), I am left with more questions than answers.

I need to determine which effects I believe to be sound and those I believe are unsound. After reaching a conclusion on the validity of cited effects, I may compare these effects with my original desires (Part I).

But wait there’s more! One of my pet peeves is to offer support or opposition prior to evaluating and providing alternative solutions. For even if minimum wage does not satisfy all my desires, it remains possible it is the best solution compared with plausible alternatives. Thus, only after weighing the pros and cons of viable alternatives will I make a final decision on if, and why, I support or oppose minimum wage legislation.

• Example
  
  
  

  

  Minimum wage legislation could be like flying. Sure it would be better to teleport to your desired destination rather than combat TSA agents and crowded spaces. However flying, while not as ideal as teleportation, is definitely better than many available alternative transportation methods such as riding a camel.

Disclosure #1: I am considered young, naive, and well educated with an upper middle class income. According to County Health Rankings and Roadmaps, I live in Minnesota's 3rd lowest social and economic county and work in the 2nd lowest.

Disclosure #2: As stated in Part I, I disagree an individual's value is tied to their income, wealth, or productivity.

Tldr(too long didn't read)

Cited effects I believe to be true of minimum wage legislation –

1. Wages are determined by productivity

• The more productive an individual is, the higher the wage they will attain.
• Example: Peyton Manning’s $20 million annual salary versus Christian Ponder’s $3.5 million annual salary. Even though both athletes are employed in identical positions, no one would argue Ponder should be paid the same as five time MVP Manning. This is a direct result of productivity. NFL teams will pay more for 5,000 yard, 50 TD seasons than 3000 yard, 15 TD seasons marred by injuries and inconsistency.

2. Increases consumer prices

• If you raise production costs (labor), the increased costs must be paid for by consumers via increased prices or investors/owners through decreased profits. For better or worse, prices are more likely to be increased rather than owners/investors taking a pay cut.
• This effect can seen by comparing the Consumer Price Index (CPI) of years minimum wage was increased to years when it was not. Starting with the minimum wage increase in 1974:
• CPI increased an average of 6.3% in years minimum wage was increased
• CPI increased an average of 3.0% in years minimum wage was not increased
• Additional note
  Owners can also choose to reduce other, non-wage production costs. These often include loss of employee benefits, increased automation, reduced service/production hours, and utilizing less expensive inputs (raw materials)
  

3. Increases difficulty of less productive workers gaining and retaining employment (possibly leading to unemployment)

• Laws can demand workers be paid a certain wage. However, to maintain fiscal solvency and remain competitive, employers will choose to not hire, nor retain, employees whose productivity does not cover the cost to employe them. Rather, as Peter Roth writes: 
• “Unskilled workers get laid off, replaced by machines and higher-skill workers who are more valuable. Self-checkout lines appear in grocery stores. Credit card machines take the place of the fellow who used to take the money in the parking lot.” 

Case Study: American Samoa and Commonwealth of the Northern Mariana Islands (CNMI)

Timeline -

• 2007: American Samoa’s minimum wage: $3.26/hour
• 2007: Congress enacts legislation to raise American Samoa’s minimum wage by $0.50/hour  annually until it meets the United States minimum wage ($7.25/hour)
• 2009, May: Minimum wage has risen to $4.76/hour
• 2009, 2011: U.S. Congress passes legislation to halt minimum wage increases until September 2015
• 2011: American Samoa National Emergency Grant 
• March 2011 unemployment rate: 46.9%!
• Historic unemployment rate: 7.0%
• We are now spending public funds to rebuild American Samoa
• 2011: Government Accountability Office (GAO) report found unemployment increased by 14% and inflation adjusted wages fell 11% between 2006 and 2009
• 2011: American Samoa Governor Togiola Tulafona testifying before Congress in September 2011 objected that:
• “this GAO report does not adequately, succinctly or clearly convey the magnitude of the worsening economic disaster in American Samoa that has resulted primarily from the imposition of the 2007 US minimum wage mandate.” 
• Gov. Tulafona pointed out that American Samoa’s unemployment rate jumped from 5 percent before the last minimum wage hike to over 35 percent in 2009. He begged Congress to stop increasing the islands’ minimum wage: 
• “We are watching our economy burn down. We know what to do to stop it. We need to bring the aggressive wage costs decreed by the Federal Government under control. But we are ordered not to interfere… Our job market is being torched. Our businesses are being depressed. Our hope for growth has been driven away… Our question is this: How much does our government expect us to suffer, until we have to stand up for our survival?”
• Samoan employers responded to higher labor costs the way economic theory predicts: by hiring and retaining fewer workers. Congress hurt the very workers it intended to help. Fortunately, Congress heeded the Governor’s plea and suspended the future scheduled minimum wage increases. (Source: James Sherk at the Heritage Foundation)

2014 GAO Report - Talanei.com Summary

• Both territories (American Samoa, Commonwealth of the Northern Mariana Islands - CNMI) experienced economic downturns between 2007 and 2009, including the complete exodus of the CNMI’s garment industry and the closure of one of two tuna canneries in American Samoa.
• 45% increase in unemployment in CNMI for the entire period from 2006 to 2012, with most of the overall decrease occurring from 2006 to 2009 (garmet industry closed)
• 36% decrease in CNMI's real gross domestic product (GDP) from 2006 to 2012 
• 4.5% decrease in American Samoa’s real GDP from 2006 to 2012
• 58% employment loss in American Samoa's tuna canning industry from 2007 to 2013
• 5% decrease in average inflation-adjusted earnings from 2007 to 2012
• The inflation-adjusted earnings of minimum wage cannery workers who retained their jobs and work hours also fell by ~5% from 2007 to 2012.
• CNMI: Over the entire period from 2006 to 2012, average inflation-adjusted earnings fell by about 2 percent, with an about 29 percent increase in average earnings offset by an about 31 percent increase in prices.
• 2014 GAO Report Conclusion -
• Both American Samoa and the CNMI have experienced decreases in employment, earnings, and GDP since minimum wage increases began in 2007. 
• In 2012, about 36 percent of American Samoa’s workforce worked in the government sector and about 12 percent worked for the canneries.
• In 2005 18.9% of workforce worked in the government sector (American Samoa Department of Commerce)
• CNMI employment dropped every year from 2006 to 2012 (graph on p.73)
• American Samoa response: (Governor Lolo Moliga)
• "Undergoing this exercise [GAO Report] every two or three years is meaningless and a waste of resources. A better alternative would be to have American Samoa develop its own minimum wage schedule with appropriate guidance and oversight provided by the US Department of Labor and US Department of Interior."
• "For reasons stated above, I strongly urge you and US GAO to send a clear and strong message to the Congressional Committees to postpone once more the looming minimum wage increase in 2015. Please bear in mind this federal minimum wage set for 2015 is nothing but a prescription for total economic ruin for the territory of American Samoa."

4. Inefficiently distributes income to those it is intended to help

• Given a desire to increase the standard of living of low income earners from the poorest households, I believe James Sherk and Joseph Sabia are correct in stating the minimum wage is an inefficient method of accomplishing this desire.
• The following numbers assume all of the least productive workers (as measured by income) would retain their positions. An assumption I find unreliable at best, and likely false as seen in American Samoa and CNMI.
• Sherk – Who earns the minimum wage ($7.25)?
• Valid numbers, but somewhat misleading as only accounts for those currently earning the minimum wage, not those who would be affected by increasing it. None-the-less, it does provide some insight into who earns low income wages.
• Only 23% of all workers earning the minimum wage live in poverty while 65% live in households with incomes > 150% of the poverty line
• More than 50% of minimum wage workers are less than 25 years old. Of these 50%, 62% are currently enrolled in school. Only 22% of these live at or below the poverty line.
• 67% of individuals living below the poverty line who were > 16 years old did not work in the last year. Thus, more than 2/3^rds of those in poverty are unaffected by minimum wage.

• Sabia - Will a $9.50 Federal Minimum Wage Really Help the Working Poor?
• 2010 study looking at who would be affected by a minimum wage increase to $9.50/hour. Intriguing study as uses income-to-needs ratio to allow scaling of income to needs based on household size and poverty level.
• 17.7% of all workers earn between $5.70 and $9.50 and would be affected.
• Of the 17.7% in line to be affected by a minimum wage increase to $9.50 an hour, only 11.3% of these come from the poorest households (less than the poverty line), with an additional 12.1% of workers coming from households living above the poverty line, but below 150% of the poverty line. 
• Almost twice as many workers who stand to be affected by a minimum wage increase to $9.50 live in households with incomes more than 3 times the poverty line. (42.3% of minimum wage workers)
• 1 in 9 workers from households under the poverty line would be affected. Less than 1 in 4 workers earning less than 150% of the poverty line would be affected by minimum wage increase.
• 4.4% of the general working population comes from households with incomes below the poverty line. A minimum wage increase to $9.50 will only affect 2.0% of the poorest households.
• Of the 9.5% poorest households in America, minimum wage will affect less than half of these households. (4.1% of the poorest households)
• As for helping families with children, 26.2% of workers earning minimum wage are the highest earner in their family with children under 18 years old.

• Refering back to Sherk’s article, one of the primary reasons people live in poor households is not that they are earning minimum wage, rather, it is they do not have work (67% have not worked in the last year).
• Sabia’s findings provide strong evidence minimum wage is an inefficient tool for helping households below or near the poverty line.
• Natalie Sabadish at the Economic Policy Institute 
• 2012 study which is for increasing the minimum wage. Uses similar base data, however data is presented in a way to support minimum wage increase.
• Boasts minimum wage increase to $9.80 an hour would raise the wages of ~28 million workers (20 million directly, 8 million indirectly)
• I agree with this, but as Sabia found, only ~3 million of these 28 million come from households living below the poverty line. (11.3%)
• 23.6% of workers affected by a $9.80 raise live in households that make less than $20,000 while 76.4% of affected workers have higher incomes
• For ever 1 low income earner, minimum wage is helping 3 higher income workers. Ideally a measure to increase the standard of living of low income households would affect a majority of low income households.
• Unlike Sabia, does not take into account household size.
• Cites 28.0% of affected workers live in households with children. This is similar to Sabia’s findings and does not exclude those workers who are not the highest income earners of their household.
• Boasts it would boost the economy, I find this effect unreliable as I will discuss later.
• Boasts would disproportionately help women, minorities, and workers of all ages. I would disagree with none of these.
• An interesting graph highlighting the percent of the population that earns minimum wage (Source: Antony Davies at Mercatus Research)

5. Reduces individual freedom

• I am pro-freedom in I believe individuals should be able and encouraged to make self-determined decisions in their own best interest. (exception being when one’s choices infringe upon the rights of others such as murder, theft, etc.) 
• This includes the voluntary accepting and denying of wage contracts. As Murray Rothbard writes:
• “This [minimum wage legislation] means, plainly and simply, that a large number of free and voluntary wage contracts are now outlawed…”
• I acknowledge some freedom must be surrendered to acquire certain securities (Freedom vs. Security Post). Thus, while I believe minimum wage does decrease our individual freedoms, it remains possible it provides needed income security.

6. Popular proposal across a variety of demographics (democrats and republicans, rich and poor)

• Minimum wage legislation has a broad base of support across a variety of demographics as highlighted by recent polls:
• Gallup Poll - 76% of Americans support raising the minimum wage to $9 (Nov. 2013)
• NELP Poll - 80% of Americans support raising minimum wage to $10.10 (July 2013)
• Of note, Emily Ekins at reason.com found minimum wage was significantly less popular if it was assumed to cause job losses or raise consumer prices.
• 67% support increase to $10.10 per hour given no adverse costs
• Drops to 51% support if caused businesses to raise prices
• Drops to 39% support if caused businesses to lay off or hire few workers

7. Decreases our global competitiveness

• Combining increased prices, reduced freedom, and inability to pay low wages, the United States struggles to compete in the production of low skilled and low cost goods and services. This is readily seen in the outsourcing of manufacturing to China and customer service to India.
• Whether or not this is a poor outcome remains in question.

I congratulate you on your perseverance in reading technical jargon and in surviving a metaphorical textbook being through at you. To recap and bring our tldr viewers up to speed, the list below summarizes effects of minimum wage legislation I find sound:

1. Wages are determined by productivity
1. Case Study: Peyton Manning and Christian Ponder Salary
2. Increases consumer prices
1. CPI Historical Data
3. Increases difficulty of less productive workers gaining and retaining employment (possibly leading to unemployment)
1. Case Study: American Samoa and CNMI
4. Inefficiently distributes income to those it is intended to help
5. Reduces individual freedom
6. Popular proposal across a variety of demographics (democrats and republicans, rich and poor)
7. Decreases our global competitiveness

There are many effects cited surrounding minimum wage legislation. Which effects do you believe are true? Why and how did you determine the validity of each effect? Personal experience? Logic? Study results? Other’s opinions?

Minimum wage is complex topic and one size may not fit all (American Samoa and CNMI). In the face of increased unemployment, income equality, difficulty finding jobs, and inability to maintain former standard of living, I believe we can no longer afford to remain ignorant of potential outcomes of minimum wage legislation.

Next Post Topic: Minimum Wage Part IV: Unsound Cited Effects