Lies, Damn Lies, and the Minimum Wage Deception

Guest post by Richard Larsen

Sleight of hand and illusion have their role in the entertainment world; but when the same tactics are employed in the real world, the stakes are much greater, and the intent more dubious. David Copperfield has met his match in fabricated magic and illusionary tactics. For as any illusionist knows, in order to avoid letting the spectator see what’s really going on, you distract the spectator’s attention. And none are better at that than those leading the country today.

With the spectacular flop of the Unaffordable Care Act rollout, the moribund economy, disappointing jobs growth, dramatic widening of the income gap, higher poverty rates than the country has seen in 50 years, and an impotence with world leaders on the global scene, the Magician In Chief reached for his magician’s hat. And what did he pull out in an attempt to distract the nation from his colossal failures? A minimum wage increase! Voila! And now on cue, let us all be impressed! On second thought, let’s not be.

Let’s look at the data from the Bureau of Labor Statistics (BLS) on who is affected by the minimum wage. According to the BLS, 3.6 million of our total civilian workforce of 155 million workers are at or below the minimum wage compensation level. That is 2.5% of all workers in the U.S. Comprising that group of minimum wage earners, 31% are teenagers, and 55% are 25 years old or younger. That means that just slightly more than 1% of the total workforce over the age of 25 is earning minimum wage.

Even that 1% over the age of 25 earning minimum wage are not typically the primary breadwinner of an American family. According to BLS data, 63% of workers who earn less than $ 9.50 per hour (remember, the minimum wage is $ 7.25) are the second or third earner within their household. And nearly half of those live in households with earnings over $ 50,000 per year. So not only is the group very small that’s affected by the minimum wage, but the data don’t support the notion that they’re the “working poor.”

This segment of the population has been shrinking over the past thirty years. In 1980, nearly 15% of hourly workers were compensated at the minimum wage level. Considering how moribund the economy has been the past few years, it’s nothing short of remarkable that the total percentage of the workforce now paid at that level is a scant 2.5%.

The Congressional Budget Office (CBO) estimates that raising the minimum wage from $ 7.25 to $ 10.10 per hour will lift approximately 900,000 people out of poverty. And it will take a few years to do it. But according to the BLS, there are 50 million Americans living in poverty, as defined by the government. That’s less than 2% of those living in poverty that will be elevated beyond that classification. The rest of those in poverty are in the custody of the state. Perhaps they just need a good job.

But the CBO also estimates that there will be a loss of half a million jobs by raising the minimum wage. Keep in mind that their estimates are always lower than reality. Current Federal Reserve Chairman Janet Yellen affirmed the economics behind the CBO projections. “I think almost all economists think that the minimum wage has two main effects,” Yellen said. “One is to boost pay for low-wage workers and the second is that there would be negative impact on employment.” Considering the realities of laws of economics, if we wanted to see more job creation, perhaps the minimum wage should be lowered, especially since most of those who work at that level are (according to BLS data) young people, and not primary wage earners for a household.

For those who venerate peer-reviewed research, here’s an economic feast of data. Joseph J. Sabia and Richard V. Burkhauser in a research piece a few years ago stated, “While reducing poverty among the working poor is a laudable policy goal, the evidence suggests that minimum wage increases have thus far provided little more than symbolic support to this population.”

“Several explanations have been offered for this finding. Card and Krueger (1995) emphasize that minimum wages fail to reduce poverty because many poor Americans do not work. Others have argued that even among the working poor, the relationship between earning a low hourly wage rate and living in poverty is weak and has become weaker over time (Stigler 1946; Burkhauser, Couch, and Glenn 1996; Burkhauser and Sabia 2007).”

“Moreover, even among affected workers, there is strong evidence that increases in the minimum wage reduce the employment of low-skilled workers (Neumark and Wascher 2008). While an increase in the minimum wage will lift out of poverty the families of some low-skilled workers who remain employed, other low-skilled workers will lose their jobs or have their hours significantly cut, reducing their income and dropping their families into poverty (Neumark and Wascher 2002; Neumark, Schweitzer, and Wascher 2004, 2005; Sabia 2008).”

Unions are fully supportive of an increase in the minimum wage, but it’s not out of solidarity or altruism for the low-income earner. It’s because they benefit directly. The Center for Union Facts indicates that many unions tie their base-line wages to the minimum wage, which means as it goes up, their coffers benefit.

There is another inconvenient truth that the advocates of raising the minimum wage need to address. Our de facto open border policy has depressed wages. Approximately a million low-skilled workers illegally come into the country every year, driving down wages, especially at the lower end of the spectrum. Harvard economist George Borjas has documented how our immigration policies have reduced American wages by $ 402 billion a year, while increasing profits for employers by $ 437 billion a year.

Once the actual BLS data are examined, and the laws of economics applied, there is little objective reason to increase the minimum wage. The only reason is political. And in an election year, nothing plays better to the uninformed masses than a populist message, especially when it diverts attention so conveniently away from so many other problems created or exacerbated by the administration’s policies.

Read more of Richard Larsen

Doug Ross @ Journal

AWESOME: Union Front Group Got Taxpayer Funds From Department of Labor to Push Minimum Wage Hikes

Guest post by Eric Boehm

The U.S. Department of Labor handed over $ 275,000 in taxpayer-funded grants in 2009 to an organization that claimed to be a charitable nonprofit with tax-exempt status from the Internal Revenue Service.

But that organization was not officially certified as a 501(c)3 charitable nonprofit until 2010, documents show.

The Restaurant Opportunity Center, or ROC-United, a national organization working to raise the minimum wage and improve working conditions for restaurant workers by combing the labor organizing muscle of powerful unions with Occupy Wall Street protest tactics, got the grant anyway.

The group is organizing several high profile events this week to highlight the $ 2.17 national minimum wage for tipped workers.

In the 2009 grant application, ROC United submitted a letter to the Department of Labor that showed the IRS had granted tax exempt status to ROC New York — an affiliated but legally separate organization — even though the $ 275,000 grant would flow to ROC United.

The department was either fooled by the application or didn’t check it closely enough.

Either way, ROC was awarded the grant through the Susan Harwood Grant Program, which is supposed to be limited to 501(c)3 charitable nonprofits, a status not granted to ROC United until June 2010.

“This is also further reason why ROC should not be receiving taxpayer funds. ROC takes taxpayer money, then turns around and lobbies Congress and pushes labor-backed initiatives across the country,” said Mike Paranzino, communications director for ROC Exposed, a political nonprofit that obtained the 2009 grant application via a Freedom of Information request.

Documents obtained by ROC Exposed show that when ROC United applied for the federal grant in August 2009, the group was in the midst of a back-and-forth battle with the IRS over its tax status.

On the application, ROC United claimed to be a “nonprofit with 501(c)3 status.”

But six months later, in February 2010, lawyers representing ROC United were still haggling with the IRS over the organization’s status, and indicated in a letter that the IRS hadn’t granted ROC United official 501(c)3 status.

By that time, the grant records show, federal cash was already flowing to the organization.

A spokesman for the department didn’t respond to a request from Watchdog.org seeking information about the grant application and whether it could be reviewed five years after it was approved. The department also didn’t respond when asked if there could be penalties imposed for grants that were obtained with inaccurate application information.

ROC United didn’t return calls for comment.

When the Labor Department announced the grants in 2009, the award given to ROC United was supposed to “provide training to small restaurant employers” and to develop “local health and safety committees for ongoing workers and employers.” The grant said ROC United would provide training to 50 restaurants and an estimated 2,000 workers in Chicago, New York, Detroit, Los Angeles, Miami and Washington, D.C.

Since 2009, affiliates of ROC United have sprung up in each of those cities.

But training workers on safety issues is hardly the organization’s primary purpose.

Founded after 9/11 to help restaurant workers displaced from their jobs in lower Manhattan, ROC has morphed into a national organization with branches in most major cities. The organization’s goal is “to improve wages and working conditions for the nation’s restaurant workforce,” according to its website, which brags about ROC’s role in several states’ recent decisions to raise the minimum wage.

The organization has helped organize protests against several restaurant chains and is helping promote protests on Thursday — February 13, a date meant to draw attention to the $ 2.13 per hour wage for tipped workers — around the country.

The group joined U.S. Sen. Sherrod Brown, D-Ohio, on Wednesday for a conference call urging an increase to the national minimum wage, and ROC United bragged on its Facebook page about being at the White House for an event focusing on the minimum wage.

The group has slowly gained more influence with the Labor Department since that initial 2009 grant, regardless of whether the grant was obtained properly.

In 2011, the department announced an “alliance” with ROC to promote workplace safety.

Its success has caught the eye of major unions, who see service sector employees as a new frontier in labor organization.

All over America, workers are organizing in all kinds of ways, and they call their unity by all kinds of names — workers’ unions, associations, centers, networks,” said AFL-CIO president Richard Trumka in September, praising ROC United’s executive director Saru Jayaraman for her role in organizing restaurant workers.

While ROC United puts pressure on restaurants to increase wages, Congress might soon put pressure on them.

Two years ago, the House Oversight Committee caught wind of the 2009 grant application and the seemingly inaccurate representation of the group’s tax exempt status.

In a letter to the Labor Department, committee chairman Rep. Darrell Issa, R-Calif., asked for information about that questionable 2009 grant and why it was awarded when the organization wasn’t yet recognized by the IRS as a nonprofit.

ROC’s history of intimidation towards opponents and management problems with its own restaurant raises significant questions about why DOL decided to form an alliance with and provide federal funding to the organization,” Issa wrote.

The grant is one of six taxpayer-funded grants ROC has received from the federal government — the other five came from the U.S. Department of Health, federal records show — totaling more than $ 1 million.

Caitlin Carroll, spokeswoman for the House Oversight Committee, said lawmakers and staff are currently reviewing additional materials received from the Labor Department concerning the issues raised in the July 2012 letter.

Boehm is a reporter for Watchdog.org and can be reached at EBoehm@Watchdog.org. Follow @WatchdogOrg and @EricBoehm87 on Twitter for more.

Doug Ross @ Journal

With the combination of minimum wage hikes and Obamacare, destroying jobs is this president’s job one

At some point in the not very distant future the complete failure of Barack Obama’s economic policies will become evident to even the most obtuse liberal. But I repeat myself.

Case in point: the destructive combination of Obamacare and hikes in the minimum wage.

Here’s the saddest thing about President Obama’s proposal to raise the minimum wage to $ 9 an hour — because “no one who works full time should have to live in poverty.”

A fine sentiment, but many full-time, low-wage workers he aims to help are sure to become part-time as employers dodge ObamaCare’s hefty fines. Undoubtedly, even after a minimum wage hike, many who now earn less than $ 9 an hour would have paychecks that are no bigger — or even smaller than today.

In his State of the Union, Obama didn’t mention ObamaCare could add $ 2.40 an hour to an employer’s cost for a full-time, very-low wage worker. Add it up and Obama is really proposing a full-time minimum wage of as much as $ 11.40.
The economic cost of raising the minimum wage is fiercely debated and likely overstated. But there’s little doubt about how employers will react if they can simply sidestep ObamaCare’s equivalent of a steep minimum wage hike for full-time workers: By making them part-time.

ObamaCare’s potential $ 2.40/hour cost to employers would result from a $ 3,000 fine for offering coverage deemed either too pricey or too skimpy. Tack on an additional $ 1.75/hour wage hike and the pressure would be extreme on employers to cut hours to avoid ObamaCare fines.

…For profit-making firms facing a combined 40% state and federal tax rate, ObamaCare’s nondeductible $ 3,000-per-worker penalty is the equivalent of $ 5,000 in deductible wages. Divided by 52 weeks and 40 hours a week, that fine would equal $ 2.40 an hour.

But because employers would owe no fine for a 29-hour-per-week worker, the $ 5,000 cost could amount to $ 96 an hour for the 30th hour of work. That’s why the 30-hour workweek may disappear.

Let me repeat: thanks to a tsunami of unintended consequences unleashed by Obamacare — a massive bill that not a single Democrat lawmaker bothered to read — paying a worker for a 30th hour of labor in a week might cost a company around $ 100.

To paraphrase Ronald Reagan, for six decades we’ve sought to solve the problems of unemployment and affordable health care through government planning, and the more the plans fail, the more the planners plan.

But there’s a simple recipe for success. It’s called the Constitution and a federal government limited to the enumerated powers specified therein.

Our blueprint embraces all races, all religions, all creeds and all colors. Our formula is the biggest tent of all, because it is not achieved by pandering to smaller and smaller slices of the population, but by embracing and celebrating individual liberty, private property rights, free markets and — most of all — limited government.

These aren’t complicated concepts. They aren’t difficult to embrace. But the powers that be — the corrupt, the immoral and those tempted by the trappings of Washington — must be dislodged post haste if we are to save this Republic, this shining city on a hill.

Doug Ross @ Journal

The IRS Scandal and Obamacare, Part II: Your “Shared Responsibility Payment for Not Maintaining Minimum Essential Coverage”

Jeff Taylor, commenting at “THE IRS SCANDAL AND OBAMACARE: Yes, Your Private Health Information Will Be Used Against You“, offers the following:

Shared Responsibility Payment for Not Maintaining Minimum Essential Coverage” [PDF] is the enabler. And enforcing that gives the IRS a free hand to do anything it wants regarding your medical benefits.

I’ve shared this document with trusted pros in the insurance and financial sectors and they are absolutely shocked at what it portends.

For one, absolutely no reliable safe-harbor — as everything is based on “community” ratings and averages, you may not know until it is too late that you have failed to buy “too little” coverage.

But don’t take my word for it — read every last word of this official IRS documents and then come back and tell me what you think.

If you don’t have time to peruse all 72 pages and then research the ties to thousands of other pages of cross-referenced regulations, here are some sample passages:

• “…Alternatively, the proposed regulations provide that a taxpayer may elect to use the premium for the lowest cost bronze plan that would apply to a set of individuals that have the same characteristics as the taxpayer’s nonexempt family (such as one adult plus children) as if one plan covered all members of the taxpayer’s shared responsibility family.”

• “…In general, a premium tax credit is allowable under section 36B for any coverage month (within the meaning of §1.36B-3(c)) that occurs in a taxable year in which a taxpayer is an applicable taxpayer (within the meaning of §1.36B-2(b)). A month is not a coverage month for an individual, and thus no premium tax credit is allowable for the individual’s coverage, if the individual is eligible for minimum essential coverage other than coverage offered in the individual market for that month…”

• “…(ii) For the period January through June 2016, under paragraphs (b)(2)(ii) and (b)(2)(iii) of this section, the applicable dollar amount is $ 1,737.50 (($ 695 x 2 adults) + ($ 695/2) x 1 child)). Under paragraph (b)(2) of this section, the flat dollar amount is $ 1,737.50 (the lesser of $ 1,737.50 or $ 2,085 ($ 695 x 3)).”

These are 72 incomprehensible pages that grant the IRS unfettered power over your financial and physical well-being.

The IRS has a long and ignominious history of targeting political opponents. Its latest actions make it clear that it has been serving as a political retribution wing of the permanent Obama campaign or “Organizing For America”.

In the midst of this madness, Obamacare is set to magnify the power of the IRS by a factor of 10 or more.

Based upon the record, empowering the IRS to control health care will turn out to be a disastrous mistake, no matter who is in power. Absolute power corrupts absolutely and the IRS will have absolute power over your health care.

The IRS will punish its political foes by withholding treatment and it will reward its political friends by offering it expedited services.

That much is clear from the latest scandal.

And earlier today, President Obama topped off this debacle by refusing to appoint a Special Prosecutor.

Eighteen strikes and you’re out. As Mark Levin suggests, the IRS must be disbanded and replaced with The Fair Tax. It’s time to unleash the economy and constrain the federal government’s weed-like urge to grow. The Fair Tax accomplishes both ends.

Cartoon: Dave Granlund, Cagle.com.

Doug Ross @ Journal