University of Washington Study

Just last week we noted that McDonalds launched plans to replace 2,500 human cashiers with digital kiosks as a result of some US states where local politics is dominated by Obama mini-mees and accordingly the legal minimum wage has ben hoisted up to a completely uneconomic $15 per hour.

Of course, no matter how much anecdotal and/or hard evidence is presented to liberals on the negative consequences on higher minimum wages they simply can't be convinced it's a bad idea. Somehow, the basic economic concept that raising the price of good (i.e. wages) would somehow destroy demand (i.e. employment levels) for that good just does not compute in the minds of progressives.

Never the less, below is yet another study from economists at the University of Washington (not an institution noted for right wing sympathies) that reveals some fairly startling takeaways about Seattle's $15 per hour minimum wage. Per the chart below, minimum wages in Seattle increased from $11 in 2015 to $13 in 2016 and $15 in 2017 for large employers.

To our total shock, the study found that higher minimum wages caused a 9.4% reduction to total hours worked by low-skilled workers, or roughly 14 million hours per year. Given that a full-time employee works 2,080 hours per year, that's equivalent to just over 6,700 full-time equivalents who have lost their jobs, just in the city of Seattle, courtesy of moronic politicians who don't seem to grasp basic mathematical concepts.

Our preferred estimates suggest that the Seattle Minimum Wage Ordinance caused hours worked by low-skilled workers (i.e., those earning under $19 per hour) to fall by 9.4% during the three quarters when the minimum wage was $13 per hour, resulting in a loss of 3.5 million hours worked per calendar quarter. Alternative estimates show the number of low-wage jobs declined by 6.8%, which represents a loss of more than 5,000 jobs. These estimates are robust to cutoffs other than $19.45 A 3.1% increase in wages in jobs that paid less than $19 coupled with a 9.4% loss in hours yields a labor demand elasticity of roughly -3.0, and this large elasticity estimate is robust to other cutoffs.

Adding insult to injury, pay hikes weren't nearly enough to offset lost hours...

Importantly, the lost income associated with the hours reductions exceeds the gain associated with the net wage increase of 3.1%. Using data in Table 3, we compute that the average low-wage employee was paid $1,897 per month. The reduction in hours would cost the average employee $179 per month, while the wage increase would recoup only $54 of this loss, leaving a net loss of $125 per month (6.6%), which is sizable for a low-wage worker.

To our complete 'surprise', the study found that demand for low-wage jobs is more elastic than prior studies from more liberal institutions may have suggested. Shockingly, low-wage jobs are apparently particularly susceptible to automation...who knew?

by Phil T Looker, January 21, 2014

Unemployment is in freefall the latest government figures say. So why aren't we feeling it?

People are working, but work doesn't pay. Employment is up, but tax revenue is down. The economy is humming again, yet Britain is still in debt. What exactly is going on?

The latest statistics, published today show unemployment rates have fallen to their lowest level in five years. The Coalition has presided over an incredible boom in employment, with Britain gaining jobs at the fastest rate of any country in Europe. This week David Cameron even resurrected the old dream of “full employment”; our own leader column calls it a “jobs miracle”.

So why isn’t it doing us any good?

Even with more people in work than ever before tax revenues aren't what were predicted. Why? The usual suspects are involved, part time working, zero hours contracts, and the statistical trick of only counting those claiming job seekers allowance as unemployed and classifying the long term unemployed (jobseekers allowance runs out after two years,) as not economically actice. Count the real umemployed rather than the 'scientifically' umemployed and the figure has dropped little since its peak in 2009. As it happens, two analysts at Citigroup - Michael Saunders and Ann O'Kelly - have been considering exactly this question.

They found that the problem is not corporation tax – higher profits mean revenues have grown at almost double the rate they were predicted to this spring. Nor is it VAT, which has grown by exactly as much as expected. Stamp duty has gone up by 34 per cent. Neither high-rolling executives nor ordinary shoppers have slowed down their contributions. You can read the full analysis with charts in this Daily Telegraph article.

It is an excellent analysis and confirms all of the suspicions cited by busness managers and accountants. It will be useful however, for the benefit of those who are not accountants, to expand on the bare statistics in order to highlight where the under-employed, and those who claim the lion's share of working tax credits, are coming from. See this report created by a statistician with the help of a Freedom Of Information request. Yes, its another indictment of uncontrolled immigration and the eagerness of main pary politicians to smooth the path of those who arrive in our country illegally, to full residency rights.

The problem with the Government / Office of National Statistics methodology is the manner in which the UK assigns 'nationality' to anyone who wasn't born in this country, and excludes naturalised British citizens (i.e. it doesn't include non-UK born children who were naturalised).

From Table 2 in Saunders and Kelly's analysis it is notable that of lower income tax credits families with children - i.e. whose awards include both Working Tax Credit and Child Tax Credit - over a quarter (27.13%) are migrant families.

From Table 3 this group of lower income families with children forms almost half (48.25%) of all migrant families claiming tax credits. Lower income families with children form a smaller proportion of non migrant families claiming tax credits (39.14%).

From Table 3 a slightly lower proportion of migrant families are out of work families with children (26.5%) than non migrant families (31.4%). However, from Table 2 migrant families comprise nearly a fifth of tax credits families who are out of work couples with children (19.49%) but only half that proportion of out of work single parents (10.59%).

The key issue however is that despite the increase in employment numbers there has not been a corresponding increase in the income tax take.

Clearly there has been an increase in low paid low skilled jobs. The influx of labour from eastern Europe and the subcontinent combined with Gordon Browns working tax credits has meant that the elasticity of labour supply has depressed wage growth and it may be simply that the treasury models have incorrectly forecast, in their models, this effect. Secondly, there has been a significant increase in self employment, many of these self employment jobs have been created by East Europeans typically your Polish/ Romanian builders and as such the tax take from such employment is generally much lower than PAYE as a result of cash transactions etc.

Additionally, at least from my experience, much of the self employment increase has also been driven from higher Salary earners particularly in the media and IT sectors (so fed up with high levels of Tax and what they see as Government waste) that they opt out of PAYE employment and take on contract work under IR 35 where they can reduce their Tax charge by as much as 30% to 40% as well as their NI charges.

Thirdly, the very low even negative yields on fixed income investments that have resulted from the strength of the dollar must have a significant impact on the tax take.

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Unemployment falling? The Great Statistical Con Trick
President Barack Hussein Obama in his "State Of The Union" speech earlier this week was the president's claimed that his administration had turned the economy around and was creating millions of 'new jobs' every year. The US Labor Department claims the economy created 292,000 jobs in December alone ... In spite of the US economy having created almost 6 million jobs over the last two years according to official figures, more Americans than ever (93 million according to estimates) are out of work.

Even The Guardian Now Admits Immigration Depresses Wage Levels
The growth in wages for UK workers is set to remain stagnant, running parallel with inflation at just two per cent next year. This is due to the large number of migrant workers waiting to fill vacancies, as anyone with two or more functioning brain cells was aware and even the loony left newspaper The Guardian has now admitted.

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by Xavier Connolly - 11 November, 2014

In what must be bad news for anyyone earning under £30,000 per year (and that’s about 90% of the working adults in the UK) thisismoney.couk today revealed that a third of all British jobs could be replaced by machines in as little as 20 years because of rapid advances in technology, according to a new study.

The research, carried out by two Oxford University academics, and commissioned by management services conglomerate Deloitte, which was published earlier this week, found that repetitive processing and support service jobs are most at risk of being replaced. Rapid advances in computer intelligence puts jobs at high risk of disappearing, the researchers found.

“High risk” work areas also include office and administrative support, sales and services, transport, building and extraction, and production; just about everything then. This is not only related to increased automation and advances in 'artificial intelligence' (parsing data very rapidly) of course. Offshoring work to low labour cost economies and the ever widening wealth gap betwen rich and poor are also taking their toll.

Forty percent of UK jobs(mostly in London) however, are reported to be at low or no risk , the researchers said, including positions in senior management, financial services, computing, engineering and science, education, legal services, community services, the arts and media, and healthcare.

The study also found that jobs paying under £30,000 a year were almost five times more likely to be replaced by machines than jobs paying more than £100,000. In some ways this makes sense but its hard to see how a Filipina domestic on £30 a week, two pot noodles a day and a folding bed in the garage, or a Romanian women trafficked here to fill a vacancy for a sex worker, can be replaced by machines. OK, so there are plans to give us all a robot sex toy but such things will be a lot more expensive that a Romanian slave.

Another big question is left unanswered too, one that always strikes me when these speculations about a futurist utopia in which the needs of the elite are serviced by robots. How are all the high paying jobs going to be sustained and corporate profits kept in growth if a third of the working population have no jobs and hence no money to spend in a consumer driven economy that will completely collapse if it is allowed to stop growing? 10% unemployment is a bad news but 30%plus?

Just reading this report by the Equality Trust reinforces the fact the National Minimum Wage (NHW) is a completely useless piece of soundbite law designed to keep the poor quiet and their employers happy bunnies. Here’s a useless fact for you – If a Worker was paid the NMW he/she would have to work until September 2nd 2357 to earn the average annual pay of an average FTSE 100 boss.

More interestingly though is if the NMW had risen at the same speed as FTSE 100 CEO pay it would be worth £12.33 an hour today, almost double the current £6.50. Worse, Compared to the NMW’s 81% increase since it’s implementation, the price of a loaf of bread has increased by 149% and the price of gas by 192% – so in effect the NMW is going in reverse compared to actual living costs.

If NMW workers were paid the National Living Wage of £7.65 an hour instead, they would receive an extra £2,182 a year – which would help.

No good news for the low paid at any of the party conferences suggested that politicians are even thinking about reducing income inequality. In fact, a raft of policies announced on pensions, welfare and housing by Dave, Ed and the other one would likely see it increase – well done them.