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Submitted by Ryan McMaken via The Mises Institute,

Labor activists have continued to press for a nationwide minimum wage of 15 dollars, and in a surprisingly economically-literate article at ABC news, commentators recognized that the higher a minimum wage is pushed, the more it will increase unemployment:

"It seems to me very probable that the employment losses would be quite a bit larger under a $15 federal minimum than under a $12 minimum," Burtless said. "And I am speaking as a labor economist who strongly supports the president's call for an increase in the federal minimum wage to $10.10 an hour. I can even be persuaded that a hike in the minimum wage to $12, if phased in over a long enough period, could be a good idea, depending on the condition of the economy and the rate of increase in U.S. median wages."

 

"If we want low-skilled people to still get or keep jobs, $12 is a stretch for many, while $15 might be impossible. Think of someone earning $10 right now," Holzer said. "They probably get hired or kept at $12 but not $15. And those earning $8 right now might be priced out the market at both wages."

In other words, if you set the minimum wage at a point where it won't affect that many workers, and you won't end up with noticeably higher unemployment rates on your hands. 

Make no mistake: as a result of any increase in the minimum wage, fewer new hires of low-skilled workers will take place, and some may even be laid off (ceteris paribus). But proponents believe that the workers who are priced out of a job are just the price "we" pay for raising the wage of those lucky enough to keep their jobs. 

At $12 per hour — this way of thinking goes — some people will simply be unlucky and lose their jobs. At $15 per hour, though, an even larger number will lose their jobs. 

This fact is hard to deny, and it's why no one advocates for an increase in the minimum wage to $50 dollars per hour. Virtually everyone instinctively knows that no one will hire low-skilled workers at that wage. Nevertheless, there remains an idea that the downside can be minimized by raising the minimum wage incrementally.

That's just wishful thinking, but it is true that raising the minimum wage incrementally is better than raising it $10 or $20 all at once. That would throw the labor markets into complete disarray. 

Minimum Wages : Keep it Local 

Another less-bad way of dealing with minimum wage increases is to make sure that they are done only at the local level. A nationwide minimum wage is one of the more damaging ways of implementing a minimum wage, and this also brings us back to what the economist Holzer was saying in the opening quotation. 

Holzer correctly notes that the more you try to push the rate above the current market rate, the more unemployment will result.

This fact is important in understanding why a nationwide minimum wage would be so damaging. Wages are not uniform across the country, so increasing a national minimum wage to $12 would mean the wage in an area with relatively low money wages would have to push wages up higher to meet a new minimum wage — as compared to an area with money wages already close to $12. Thus, the resulting unemployment wold be higher in those low wage areas and in other areas. 

To illustrate this, let's use "food preparation workers" as classified by the Bureau of Labor Statistics. These workers are often used by the media as "typical" minimum wage workers. We can use the BLS's numbers to get an idea of what hourly median wages are for low-skilled workers from state to state.  Keep in mind that the median wage is calculated only using people lucky enough to be employed above the minimum rate. A worker who is qualified to earn $7 per hour is forced to earn a wage of $0:

Naturally, every state has a median wage above the national minimum wage of $7.25. (It's required by law.) 

On the other hand, every single state has a food-prep median wage well below $15 per hour. Thus, raising wages in any of these states to $15 will be problematic and price people out of job. However, the median wage for food-prep workers varies by as much as three dollars from state to state. As one might expect, places that tend to have a higher cost of living and/or a relative shortage of workers (e.g., Alaska and North Dakota) have higher wages. Areas with a low cost of living, such as Alabama and Kansas, have lower wages. 

In Kansas, for example, if the minimum wage were raised to, say, $8.25, we would indeed see some marginal workers lose their jobs, and low-skilled workers would not be hired, when they might have been hired at $7.25. However, the numbers in this case may not be enough to cause a large enough change in the unemployment rate to be noticed by the media, or made into political hay by politicians. Given the current median wage, it's clear that many employers would continue to value many food prep workers at a rate above the minimum wage, even if it were increased.

An Increase to $15 Would Be Huge in Some States 

In some states, though, the effect of a national minimum wage of $15 could be devastating. In Louisiana, for example, a median wage earner in food prep would have to see his wage increase 75% just to stay legal. In Alabama, the increase would be 67%. Of course, few wage earners would be likely to actually see wages increase 60 or 70 percent. Many would instead likely see their wages go to zero by being laid off. Obviously, few businesses — especially small and medium-sized ones —could afford to raise wages 60 or 70 percent and still keep all their employees. Or, as would likely be the case, many employers would simply go out of business and lay off 100% of their work force. 

Here's how much the median food-prep wage in each state would have to be increased to meet a mandated $15 wage (for food-prep workers): 

In Some States, Median Wages Are Barely Above Minimum Wages 

Let's look at it another way. Things are actually worse in some states than is implied in the graph above. Some states already have median wages barely above their set minimum wages, meaning that any additional increases in those states would be even more problematic that we might initially think. 

The next graph shows us how far above the food-prep median wage is above the set statewide minimum wage. Some states have their own, higher minimum wage rates. states without their own minimum wage simply defer to the national rate: 

This graph gives us a sense of which states could increase their minimum wages with the least amount of disruption to the existing labor market. The states with "room to grow" their minimum wages — so to speak — include Nevada, where the median wage for food prep is more than $2.50 above the state's minimum wage of $8.25. In North Dakota, where there has been an oil boom and labor shortage in recent years, the median wage for food prep is nearly $4.50 above the minimum wage. In other words, you could increase the minimum wage in North Dakota a dollar or two and most North Dakotans would keep their jobs. 

Some other states, though, have already set their minimum wage so high that food prep workers have a median wage very close to the mandated minimum wage. 

Nebraska, for example, has a surprisingly high minimum wage for a state with such a low cost of living. There, the median wage for food prep workers is a mere 21 cents above the minimum wage. That means if you work in food prep in Nebraska, you probably aren't making much more than the minimum wage, even if you have experience. It also means that most workers who could have earned a wage that was a dollar below the median wage is instead rendered unemployed by the price floor. 

In Nebraska, increasing the minimum wage even 25 cents would place the median wage below the minimum wage. That means fully half the work force in that field would then potentially be priced out of a job. 

Similar situations are apparent in California, Rhode Island, West Virginia — and to a slightly lesser extent — New York. 

Food-prep wages in these states are already so close to minimum wages that a significant number of workers in the food prep field are unlikely to survive a minimum wage hike much beyond where they are now. 

In New York, for example, we see in the first graph that the median wage for food prep is $10.03, or only $1.03 above the minimum wage of $9. Thus, we could reasonably conclude that if we move the minimum up only one dollar and three cents, the median wage will then be below the minimum wage, with all below-median wage earners in trouble. Things get much worse if wages are increased to $15 per hour which would place the minimum wage nearly five dollars above the median wage for prep workers. 

The more intelligent politicians behind the planned minimum wage increase there know this, which is why they've chosen to phase in the increases over time. This phase-in will also allow for price inflation to force up median wages, thus diminishing the effects of the increase in the mandated wage. The politicians, though, will receive credit for their "compassion" in raising the price floor. 

It's understandable, though, why New Yorkers and Californians would want a raise. Those two states are among the worst places to be a low-skilled workers, once the cost of living is factored in. Even if one is a low-skilled California worker who's lucky enough to have a job at the mandated minimum wage of $10, that's still one of the lowest wages in the country in real terms.

The third graph shows the median food-prep wage in each state when adjusted to "regional price parity" as provided by the BLS:

 

Theoretically, a low-wage worker in New York could give himself a quick raise simply by moving to New England or the Midwest. Of course, many New Yorkers for some mysterious reason think New York is a wonderful place and refuse to leave. This is a choice they make, and their demonstrated preference is to remain in New York and receive a lower wage. 

The lesson to be learned here is that, while minimum wage laws are bad, uniform minimum wage laws imposed across dozens of diverse economies are much, much worse. Naturally, imposing minimum wages at the statewide level leads to the same problem, but on a slightly smaller scale. 

If politicians wanted to increase real wages, they'd instead focus on lowering the cost of living and increasing worker productivity. 

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As markets flutter to life following the Doha disappointment, it is clear some turmoiling is to come. Canadian Dollar is down over 1% against the US Dollar – the biggest drop in 4 weeks – erasing all of last week’s gains. Ahead of this evening’s crude futures open, CAD implies a sub-$39 open for WTI…

Still, some participants are spinning away…

• *NOVAK: RUSSIA THINKS “DOOR NOT CLOSED” TO AGREEMENT
• *SOME COUNTRIES CHANGED POSITION RIGHT BEFORE MEETING: NOVAK
• *NOVAK: SAUDI ARABIA AMONG NATIONS DEMANDING ALL OPEC JOIN DEAL

So no deal is still a big deal? Markets are not buying that for now… but then again we would fully expect some central bank buying here to ensure the narrative remains positive.

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Just days after the US destroyer Donald Cook had a close “buzzing” with two Russian Su-24 fighters which performed several low passes as close as 30 feet away in the Baltic Sea, the US Air Force complained about another close encounter which took place on Thursday.

According to US European Command, during a routine flight by a US EC-135U reconnaissance plane which was flying over international waters (again in the Baltic Sea) a Russian Flanker barrel rolled from the left side of the U.S. RC-135 and went over the top of it to end on the right side of the aircraft.

As CNN details, the Russian jet “performed erratic and aggressive maneuvers” as it “flew within 50 feet of the U.S. aircraft’s wing tip“, Danny Hernandez, a spokesman for U.S. European Command, said. The Russian Su-27 began the barrel roll from the left side of the U.S. RC-135 and went over the top of it to end on the right side of the aircraft, European Command said.

The RC-135 aircraft was “intercepted by a Russian SU-27 in an unsafe and unprofessional manner,” Hernandez said, adding that the U.S. plane never entered Russian territory. “The unsafe and unprofessional actions of a single pilot have the potential to unnecessarily escalate tensions between countries,” said Hernandez, who added the United States is protesting with the Russian government.

As expected, Russia’s military rejected criticism by U.S. European Command on Sunday, and said that reports on Thursday’s incident were “not consistent with reality” and that the Russian aircraft’s maneuvers had been “performed strictly in accordance with the international regulations on the use of airspace.”

Ministry spokesman Gen. Igor Konashenkov said the Su-27 had been dispatched after Russian air defense facilities spotted an unknown target over the Baltic Sea, approaching the Russian border at high speed.

It identified the jet as an American reconnaissance aircraft, and after visual contact, the U.S. plane “changed its course to the opposite direction, away from the Russian border,” he said. No incidents were recorded over the encounter, he said.

For now no photos or video of the incident have been released but here is a somewhat comical artist’s interpretation of what may have happened, courtesy of The Aviationist.

This is merely the latest in a long series of close encounters between Russian and US airborne forces. Here, once again courtesy of The Aviationist, is a brief list of the most recent Russian-US encounters:

• On Jan. 25, 2016 a U.S. RC-135 intelligence gathering jet was intercepted by a Russian Su-27 Flanker fighter jet over Black Sea: during the interception, the Su-27 made an aggressive turn that disturbed the controllability of the RC-135.
• On Apr. 7, 2015 another Su-27 flew within 20 feet of an RC-135U, over the Baltic Sea.
• On Apr. 23, 2015 a U.S. Air Force RC-135U Combat Sent performing a routine surveillance mission in international airspace over the Sea of Okhotsk, north of Japan, some 60 miles off eastern Russia was intercepted by a Russian Su-27 Flanker that crossed the route of the U.S. aircraft putting itself within 100 feet of the Combat Sent.

It’s not just the Russians. Chinese pilots have also come close:

In 2014, a Chinese Flanker made a barrel roll over a U.S. Navy P-8 maritime surveillance plane 135 miles east of Hainan Island, a spot of a far more dangerous close encounter of another U.S. electronic surveillance plane with the Chinese Navy back in 2001.

On Apr. 1, 2001, a U.S. Navy EP-3E with the VQ-1, flying an ELINT (Electronic Intelligence) mission in international airspace 64 miles southeast of the island of Hainan was intercepted by two PLAN (People’s Liberation Army Navy) J-8 fighters.

One of the J-8s piloted by Lt. Cdr. Wang Wei, made two close passes to the EP-3 before colliding with the spyplane on the third pass. As a consequence, the J-8 broke into two pieces and crashed into the sea causing the death of the pilot, whereas the EP-3, severely damaged, performed an unauthorized landing at China’s Lingshui airfield.

The 24 crew members (21 men and three women), that destroyed all (or at least most of ) the sensitive items and data on board the aircraft, were detained by Chinese authorities until Apr. 11.

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Has there ever been a more ill-timed example of the curse of the Barron's cover than this?

After months of "strong" sales, rising prices, and Phil-LeBeau-gasms, Barron's decides that – following the biggest used-car price plunge since 2008, amid a drastic drop in sales, and near-record high inventories – now is the time to print this…

RBC recently asked if the automakers were "the card that brings the whole house down," as Alhambra's Jeffrey Snider asked rhetorically, "will autos be the recession trigger?"…

What is most amazing about the current “manufacturing recession” is that it has occurred while automobile production has remained rather stout. That would suggest the state of production beyond motor vehicles is much worse than the headline contraction rates. However, that might all be changing as we know “something” is amiss in the auto segment. Inventories of all kinds of vehicles have piled up especially on the wholesale level, leaving channels stuffed to a degree not seen since the worst of the Great Recession.

 

 

As inventories rose, auto production stumbled on both the domestic and import side. US production, or the Fed’s data series within Industrial Production counting motor vehicle assemblies, showed a sustained drop that began around August. That is, of course, likely not coincidence given that it is coincident to the “global turmoil” policymakers have referred to of late as a benign pretext in substitute for the previously benign “transitory.” Assemblies rebounded somewhat in February, but inventory remains downright repulsive and even that upturn in production may be nothing more than the usual monthly variation.

 

Benchmark revisions in the data released this month have taken some of that volatility out, but it still leaves questions about where auto production is heading not just on its own terms but relative to the overall engrossing slowdown and manufacturing recession.

 

 

The problem is not just the disparity suggested by inventory, as the inventory surge these past few months is itself being driven by an actual and serious setback in overall motor vehicle sales. In other words, it seems something altogether different than a more benign scenario where car and vehicle manufacturers have had to slow production temporarily in order for sales to catch up; vehicle sales are actually tanking.

 

 

Sales have been quite robust as, again, autos have been about the only bright spot in this recovery and especially during the slowdown portion of it. Peaking in October and November at 18.6 million units SAAR, the level of sales has dropped by an astounding 9% to just 16.9 million in March – with sales falling 1 million SAAR in March alone. It certainly would seem to confirm the channel stuffing at the wholesale level (it should be pointed out that a good portion of the decline is due to reduced sales and demand for commercial fleets especially in the transportation sector).

 

With auto sales being driven at the margins by leasing and subprime financing (included in those leases), it is not surprising to find suggestions of a financial component to the auto retreat. Taking the Federal Reserve’s estimates for monthly flow of non-revolving consumer credit minus government additions to that flow reveals exactly the same pattern as seen in the data above. Though this adjustment admittedly conflates more than just auto loans since non-revolving credit includes other expressions of consumer credit, the calculation provides a reasonable proxy for potential financial conditions very much related in good part to the auto sector.

 

 

On a trailing-twelve-month basis, non-government non-revolving consumer credit flow has clearly dropped off after stagnating somewhat coincident to the onset of the “rising dollar.” The decline is not enormous or even perhaps alarming except that it suggests one reason for first softening sales that have turned since last summer to something potentially more significant than “softening.” The peak credit level in my calculation above was also October, matching exactly the peak in motor vehicle sales.

 

There has been a tendency at times to qualify the “rising dollar” issue as some kind accounting matter, as if it were just numbers changing on everyone’s spreadsheets absent any real world implications. We can’t know for sure whether this potential shift in borrowing is due to demand for funding and credit (or cars, specifically) or whether it is the initial symptoms of a credit crunch and thus bank and finance-offered supply of debt. And there are many other factors to consider as well, including that these various data points do not strictly adhere to each other, conflating and including other parts of each data series. All that in mind, however, the fact that there is a high degree of agreement among these accounts suggests that there is likely something to it all and the “dollar” playing some role in it (either directly as reduced credit or indirectly economically as reduced demand for it).

 

 

If that is the case, it might propose that the “manufacturing recession” which to this point has been outside of autos might be set for an unfortunate augmentation – pushing the whole economy out of just slowdown and into the dreaded cyclical.

The answer – we suspect – is yes!

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While George Clooney defends the “obscene amount of money” he just raised for Hillary Clinton, Bernie Sanders’ supporters outside the actor’s home expressed their dis-satisfaction at money in politics… by showering Clinton’s car with $1000-bills…

Sanders supporters outside Clinton’s Clooney fundraiser in LA shower her motorcade in $1,000. http://pic.twitter.com/ivbu024IcG

— Dan Merica (@danmericaCNN) April 17, 2016

Ironically, as Mediaite reports, Actor George Clooney, who just hosted a $353,000.00-per-couple fundraiser for the Hillary Clinton Victory Fund at his home Friday night, has been getting a lot of play Sunday morning over an excerpt from his Meet the Press interview with Chuck Todd in which he agrees that it’s “an obscene amount of money,” and that the pro-Bernie Sanders supporters who protested the event were right to do so.

George Clooney Explains Why ‘Obscene Amount of… by DailyPolitics

Elsewhere in the interview, Clooney expressed admiration and respect for Bernie Sanders, vowing to support him if he winds up being the Democratic nominee, and even offering to raise money for him if that should be the case:

George Clooney Offers to Raise Money For Bernie… by DailyPolitics

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The most anticlimiatic culmination to the most farcical “agreement” of 2016, one which could have been seen a mile away for any carbon-based trader not housed in a collocated facility in Secaucus, has taken place and here, according to Reuters, is the result:

• OPEC, NON-OPEC MINISTERS FINISH OIL TALKS IN DOHA, NO AGREEMENT – RTRS
• OIL PRODUCERS END DOHA TALKS: OMAN MINISTER -BBG

While there is still some chance that this is merely jawboning bluster to get some agreement, it doesn’t look likely.

What happens next? Again here is Citi’s Ed Morse with the obvious next steps:

If there is no agreement, then expect a sharp oil market sell-off on Monday.

And now we being counting down the hours until oil opens for trading, pardon, selling unless the BOJ decides it will soak up every last drop on offer.

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In the first market glimpse of the fallout from a disappointing Doha conclusion, Saudi stocks have fallen by the most in three weeks retracing most of last week’s exuberantly hopeful gains.

As Reuters reports,

Early on Sunday it appeared that producers were close to agreeing an oil output freeze, but negotiations were later delayed into the afternoon as a new proposal called for all OPEC members to agree even though Iran has said it will not take part.

 

“Investors interpreted the delay to possibly mean a lack of a solid deal,” said a Jeddah-based trader, adding that investors would prefer to wait until an agreement was reached.

We look forward to the chaos that the machines have in store when crude futures re-open.

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As reported on Friday afternoon, ahead of Dilma Rousseff’s impeachment vote to be held in Brazil’s Congress later today, a critical threshold was passed when, according to local Folha newspaper, more than the required 342 votes had been gathered.

Sure enough, today all the main Brazilian newspapers dedicate their entire covers to impeachment, with Folha and Estado bringing nominal list of lawmakers’ expected votes for and against, Bloomberg reports. Furthermore, according to the latest tallies from Folha, Estado and Globo the “For” impeachment vote is currently anywhere between 347 and 350 votes, above the 342 needed.

But while the popular sentiment is largely in the pro-impeachment camp (even if many of those standing to benefit from Rousseff’s ouster have been alleged to be as corrupt with participation in either the Carwash scandal, or to have funds parked in various offshore accounts), Rousseff refuses to go without a fight and earlier today Attorney General Jose Eduardo Cardozo wrote an op-ed in Folha saying the impeachment won’t pass if lower house respects constitution, adding that “whatever decision lower house makes today won’t solve Brazil’s political, economic and moral issues” and that many lawmakers show they don’t know the crimes on which impeachment request is based.

He is probably correct.

Meanwhile, PP, the party on which govt was relying on after PMDB split, may have 100% of its votes against Rousseff.

Bloomberg notes that if Rousseff survives the impeachment vote today, Rousseff plans calling meeting with opposition leaders including PSDB’s Aecio Neves and Fernando Henrique Cardoso, and adds that if the govt loses, it will likely focus attacks on Temer to try and stop process in the Senate.

For now however it is all about the Congressional vote, whose impeachment session started moments ago with the following headline:

• BRAZIL LAWMAKERS IN SHOVING MATCH AS IMPEACHMENT SESSION STARTS

Let the games begin (with shoving and shouting) http://pic.twitter.com/wJ8yzYRwIg

— Jan Piotrowski (@janppiotrowski) April 17, 2016

Expect more of the same for the next several hours.

Live feed from Brazil’s capital Brasilia below where thousands are already gathering ahead of tonight’s session which is expected to continue until around 10pm local time according to Eduardo Cunha, president of the chamber of deputies.

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Nope…

Source: Investors.com

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