Wednesday, June 29, 2011

But At Least the Politicians Care... In Theory.

Current teenage unemployment rates for May 2011:

All teenagers: 24.2% 


Black teenagers: 40.7%

Male black teenagers: 45.1%

Female black teenagers: 35.9%


To paraphrase Larry Elder, let's sum up. Politicians and the mainscream media ignore market forces, don't care about the reality that demand curves slope downward, and overlook the significant adverse impacts of raising the minimum wage on teenage unemployment.  But hey, at least they care. In theory. Especially for minorities.

31 Comments:

At 6/30/2011 1:21 AM, Blogger PeakTrader said...

Let's look at it from a business point of view.

Since there are more workers than jobs, I've been able to make increasingly more profit, get more and more productivity out of workers, and keep prices competitive, particularly over the past decade.

Students are even willing to pay me to work at my firm!

What a great labor market!

If it wasn't for that annoying minimum wage, I could hire workers for $2 an hour, which will drive down wages even more for almost everyone, and trillions of dollars of more profits could be made.

 
At 6/30/2011 2:10 AM, Blogger Ron H. said...

"If it wasn't for that annoying minimum wage, I could hire workers for $2 an hour, which will drive down wages even more for almost everyone, and trillions of dollars of more profits could be made."

But then there wouldn't likely be more workers than jobs. What effect would that have on wages?

Your making "trillions of dollars of more profits", means your workers are producing more than they're paid, at an even higher level than before. Won't your competitors bid some of your more valuable employees away from you?

 
At 6/30/2011 2:54 AM, Blogger PeakTrader said...

Ron, I suspect, most U.S. workers would choose to fire a co-worker to maintain their wage than take a substantial wage cut to maintain employment (or get the country to full employment).

 
At 6/30/2011 6:08 AM, Blogger geoih said...

Quote from PeakTrader: "Let's look at it from a business point of view."

To make the most profit based on the costs of production. Prices (and profits) are set by demand, not by costs. If the costs of production (e.g., labor) are higer than can be supported by the demand price, then there will be no profits and the business will fail (unless you have some politician friends to steal other people's money to give to you).

Artificially raising the costs of labor (i.e., minimum wage) will not make workers more productive. It will only make them more costly. A business will either be able to absorb that cost increase and still profit (a supply and demand issue), be able to shift costs into capital instead of labor(a time function), or will become unprofitable.

Businesses want to maximize profits that same as labor (i.e., higher wages). It's a supply and demand relationship the same as any other. Artificially raising the price of labor can only result in lower demand for labor. It has absolutely nothing to do with ethics or morals.

 
At 6/30/2011 6:59 AM, Blogger Larry G said...

I don't think the disparity between blacks and whites can be explained by the minimum wage.

It's not the same issue unless one wants to think that somehow blacks are worth less as employees and we need to take care of that problem by reducing the minimum wage so they can get hired.

and I wonder how the minimum wage law effects the wages of illegal immigrants.

Does the minimum wage law apply to them?

In theory, employers should not be able to hire illegals but if they do - is the minimal wage law and FICA tax law followed?

 
At 6/30/2011 9:18 AM, Blogger Tom said...

The longer we try to outsmart the free market, the longer we will have high unemployment and a stagnant economy. The do-gooders are hurting most those they pretend to help.

 
At 6/30/2011 9:32 AM, Blogger Jet Beagle said...

Larry G,

I've known several folks who have hired illegal workers here in texas. All have told me that no male illegal immigrants will work for minimum wage - that $7.00 was the lowest they were able to pay. I'm not sure about females. The employers I knew were hiring for male-dominated occupations: construction and landscaping.

Many illegal immigrants apply for social security numbers and then have FICA taxes deducted from their paychecks. They do so in order to use the social security records down the road as evidence that they've been employed in the U.S. for x number of years. Apparently the immigration judges consider years of employment in making decisions about whether or not to deport immigrants.

 
At 6/30/2011 9:33 AM, Blogger Jet Beagle said...

Correction: "All have told me that no male illegal immigrants will work for less than the minimum wage"

 
At 6/30/2011 9:45 AM, Blogger Larry G said...

" Many illegal immigrants apply for social security numbers and then have FICA taxes deducted from their paychecks"

I strongly suspect that employers have to report and pay FICA unless they are hiding their employees off books.

Applying for a SS card does not identify the employer, right?

 
At 6/30/2011 12:35 PM, Blogger Jet Beagle said...

Larry G,

My last comment was incorrect. The Social Security Administration does not issue SSN's to illegal workers. Rather, the IRS issues a 9 digit Individual Taxpayer Identification Number (ITIN)to such a person so that he or she can file a tax return.

As I understand it, many employers had been treating those ITINs as SSNs prio to 2004. But the federal government has cracked down on this practice, and prosecuted some illegal workers for misusing the ITIN as a SSN.

Illegal workers can file a tax return using the ITIN. I think that means they can subsequently use the tax returns as evidence to the immigration judge that they were employed in the U.S. for years.

I am certain that some illegal workers continue to use legal workers names and SSNs in order to gain employment.

 
At 6/30/2011 12:35 PM, Blogger Jet Beagle said...

Larry G,

My last comment was incorrect. The Social Security Administration does not issue SSN's to illegal workers. Rather, the IRS issues a 9 digit Individual Taxpayer Identification Number (ITIN)to such a person so that he or she can file a tax return.

As I understand it, many employers had been treating those ITINs as SSNs prio to 2004. But the federal government has cracked down on this practice, and prosecuted some illegal workers for misusing the ITIN as a SSN.

Illegal workers can file a tax return using the ITIN. I think that means they can subsequently use the tax returns as evidence to the immigration judge that they were employed in the U.S. for years.

I am certain that some illegal workers continue to use legal workers names and SSNs in order to gain employment.

 
At 6/30/2011 12:44 PM, Blogger Larry G said...

If a worker files an ITIN - they would also have to file a W2 or 1099 right if they are reporting income.

on that 1099 or W2 is the name of an employer... and that employer is going to be subject to paying FICA taxes on that employee... I would think.

I'm not entirely clear on how all the pieces fit together but I've done volunteer taxes and have seen a number of W2 and 1099 and they all have a box for FICA and if that box is zero... then the employee has to pay the FICA tax on his tax return ( which self-employed people or independent contractors also have to do).

but most folks when they file taxes and claim income - have to provide documentation as to where that income came from and whether or not FICA taxes were paid.

 
At 6/30/2011 12:59 PM, Blogger Regan said...

Usually no taxes are taken out on a 1099. When you file a 1099 you are responsible for the tax on that income and both the employee's and the employer's share of FICA taxes.

 
At 6/30/2011 1:06 PM, Blogger Larry G said...

but isn't the 1099 issued by the employer?

why would an employer issue a 1099 in the first place if they were employing an illegal?

Wouldn't the 1099 cause the govt to go back and ask for the FICA Taxes?

again.. I don't know how all of this works so any further discussion would be useful...

even in the contest of minimum wage laws...

 
At 6/30/2011 1:08 PM, Blogger juandos said...

Look At It From A California Politico's Point Of View

 
At 6/30/2011 2:29 PM, Blogger Benjamin said...

Yes, and let's see a cartoon about how states and local government prevent people from starting up their own businesses as jitney drivers, push-cart vendors, barbers, speakeasy operators, hookers, recreational drug dealers etc.

When we have real free enterprise, then I will support no minimum wage.

BTW, what about child labor laws and the minimum wage. Should we legalize child labor and crush the minimum wage too?

Why or why not?

 
At 6/30/2011 3:01 PM, Blogger Jason said...

If it wasn't for that annoying minimum wage, I could hire workers for $2 an hour, which will drive down wages even more for almost everyone,

Which will drive down prices… and profits.

 
At 6/30/2011 4:49 PM, Blogger PeakTrader said...

Geoih & Jason, what does that have to do with economics?

If the unemployed are willing to work for low enough wages, the country could get to full employment.

Perhaps, they could produce luxury goods for $2 an hour, because profits would soar from low wages.

Then the U.S. economy, and labor market, would look more like the Chinese economy, and labor market.

 
At 6/30/2011 4:50 PM, Blogger Regan said...

"but isn't the 1099 issued by the employer?"

Not exactly. Just because a plumber was hired by a general contractor that does not mean that he or she is an employee of the company. He or she is considered self employed and under contract with the GC. The box on the 1099 where the income is listed is marked "Nonemployee Compensation."

 
At 6/30/2011 9:33 PM, Blogger Larry G said...

" The box on the 1099 where the income is listed is marked "Nonemployee Compensation."

right... and when they file their taxes, they have to pay the FICA tax.

the question is - how does the IRS handle the FICA payment?

Ultimately the FICA payment ought to go to a SS account.

but if the employee does not have a SS account but instead just a ITIN... then where does the FICA money go?

I've seen people who work for churches as custodians get cash and a 1099 in January and had to pay 1/2 the FICA tax.

It often takes whatever refund they may have had coming and then some.

but why would the employer file the 1099 to start with if ultimately tipped off the IRS that the employee was a potential illegal?

but this also goes back to the minimum wage.

how does the govt verify that an employee - illegal or not - is receiving the minimum wage ?

If you got rid of the minimum wage - would it result in even more illegals employment?

 
At 7/01/2011 2:13 AM, Blogger Ron H. said...

"right... and when they file their taxes, they have to pay the FICA tax.

the question is - how does the IRS handle the FICA payment?
"

You should ask Larry G. He is, by his own admission, a world class expert on the subject. He has claimed the following:

"I don't have problems with FICA at all. I know it backwards and forwards in terms of how it works and can provide the sources that I use - which are all credible and authoritative."

 
At 7/01/2011 5:57 AM, Blogger Larry G said...

"I don't have problems with FICA at all. I know it backwards and forwards in terms of how it works and can provide the sources that I use - which are all credible and authoritative."

Ron, methinks you took that out of context which is a dishonest thing to do my friend.

That statement was made with respect to HOW FICA is SPENT on SS and Medicare Part A ONCE it is collected - and I stand by that.

The other thing to keep in mind about FICA is that it provides almost 40% of the U.S. budget (865 billion) and is collected in the same percentage no matter how much you earn (below about 100K) even if you earn minimum wage or are self-employed or a contract employee.

the other point worth knowing is that the personal income tax revenues in the U.S. total only 900 billion - only 35 billion more than FICA.

but how FICA "works" with illegal aliens, I'm not yet clear on (but working on it).

 
At 7/01/2011 5:58 AM, Blogger geoih said...

Quote from PeakTrader: "If the unemployed are willing to work for low enough wages, the country could get to full employment."

Bingo! You see you can understand economics.

People's wages are based on their productivity within the economy, not by some arbitrary decree cooked up by poiticians and bureaucrats trying to sponge off people who don't know any better.

 
At 7/01/2011 6:29 AM, Blogger Larry G said...

well if you wanted to get technical, most employers have to actually pay MORE than the minimum wage because on top of the minimum wage - they have to pay their half of the 15.3% FICA tax.
7.6%.

 
At 7/01/2011 8:40 AM, Blogger Regan said...

As Uncle Milty reminds us, the employer's share of the taxes is really paid by the employee.

 
At 7/02/2011 3:25 AM, Blogger Ron H. said...

1. "the question is - how does the IRS handle the FICA payment?"

2. "That statement was made with respect to HOW FICA is SPENT on SS and Medicare Part A ONCE it is collected - and I stand by that."

At statement #1 the FICA payment has been collected, and the money is in the general fund. Why do you claim confusion about how it will be spent, when you "know it backwards and forwards in terms of how it works"?

Maybe you don't understand your own comments, and perhaps they don't say what you hoped they would say, but nothing was taken out of context.

Is there a problem with the word 'handle'?

 
At 7/02/2011 3:38 AM, Blogger Ron H. said...

"well if you wanted to get technical, most employers have to actually pay MORE than the minimum wage because on top of the minimum wage - they have to pay their half of the 15.3% FICA tax.
7.6%.
"

This is a discussion of employer costs, and the fact that increasing them to a rate higher than the amount an employee produces, means that employee will likely lose their job.

The cost of hiring an employee includes cash wages, 1/2 FICA, unemployment insurance premiums, workman's comp premiums, and any vacation, holiday, sick days, maternity leave, retirement, medical payments, etc. made on the employee's behalf.

An employee must produce more in value to the employer than they are paid, or they won't remain employed.

 
At 7/02/2011 7:02 AM, Blogger Larry G said...

" This is a discussion of employer costs, and the fact that increasing them to a rate higher than the amount an employee produces, means that employee will likely lose their job."

It's a nice but misguided theory if you look at the payroll taxes paid in Singapore which are about twice what we pay and yet they have a solid economy AND genuine universal health care.

 
At 7/02/2011 7:07 AM, Blogger Larry G said...

"At statement #1 the FICA payment has been collected, and the money is in the general fund."

the money does not go to the general fund - it goes to the trust fund which is not an accumulating fund but more like a single purpose checking account to pay SS and Medicare Part A (but not Part B) benefits.

I don't mind being wrong on the finer points... that's how I learn but I find very few here that actually know the basics of how FICA and SS work to start with - just what they learned from propaganda ...

For instance, it became clear that few here recognize how different Medicare Part A and B are in terms of how they are funded and how "unfunded liabilities" are calculated.

 
At 7/02/2011 11:44 AM, Blogger Ron H. said...

You're wrong about the learning part, Larry, it's apparent from your comments that you haven't learned a thing. There's no hope for you Larry.

 
At 7/02/2011 5:18 PM, Blogger Larry G said...

sorry to disappoint you Ron.. but I'm also disappointed in you.. poor fella.

 

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