Sunday, July 23, 2017

On The Lighter Side at Indianapolis

A lighter moment in the Xfinity race at Indianapolis as William Byron went three wide into turn one. The announcers were freaking out, probably already trying to decide how to describe the terrible wreck which was about to happen, because even two wide into the turns at Indianapolis is less than a wonderful idea.

One of the announcers then says, “Okay, we’ll have to give him that one. He’s never raced here before so he didn’t know that you cannot do that, and that’s why he was able to pull that off.”

I enjoyed the hell out of that. You can do that only if you don’t know you can’t do it. I don’t actually think it was as stupid as it sounds, he was just so flustered he got his tongue all twisted up. I’m still chuckling about it the next day.

The driver, a rookie, went on to win the race; not only the first time he’s raced at Indianapolis, the first time he has ever seen the speedway in person. Not the first time he’s won an Xfinity race, though; at age nineteen, this was his 3rd win.

No, he did not repeat the three wide into the turn thing.

Saturday, July 22, 2017

Not a Rising Tide

I do not object to raising the minimum wage. It benefits those who work for minimum wage, and for a liberal that should be a sufficient reason. Liberals, however, can never be satisfied with doing good for its own sake, because the modern convention is that voters should vote only in their own self interest.

(I actually reject the concept of voting only in one’s own self interest, but that’s a different subject for a different time.)

The only voters whose own self interest supports raising the minimum wage, however, are those working for minimum wage, and they don’t make campaign contributions. Nor are there enough of them to assure the reelection of liberal politicians, so the assistance of economists is secured to tell us that raising the minimum wage “injects money into the economy,” thereby increasing consumer spending and raising the GDP, which is in everybody’s self interest.

Sort of “the rising tide that raises all boats,” but does it actually work? Lets look at Dean Baker’s example of the roofer in Nebraska, who he suggests should raise her workers’ wage from $17/hr to $20/hr and thereby gain more business and enrich the economy by increasing the GDP because the workers will have more money to spend.

The average roofing job takes about 150 man-hours, so each for job the higher wage will enrich the workers by about $450, typically about $90 per worker. This is where the difference between economics and business enters the picture, because Dean Baker thinks that the discussion ends here, with telling us that the economy has been enriched by $450 per roofing job, the additional amount that the workers have been paid.

There is, however, the issue of payroll deductions which usually run about one third of gross pay, so the economy is actually enriched by about $300 per roofing job, which is the increased spending power that is realized by the workers due to the increase in wages. That’s a good thing, of course, but it’s still not the end of the discussion.

The roofer’s cost to do the job has increased by $450, and Dean Baker will tell us that the roofing company can just absorb that additional cost and move on. Any business that allows its cost to increase without a consequent increase in selling price, however, is all be certain to be going out of business in very short order. That’s not economics, so Dean Baker would not know anything about that. It’s basic business management, which a kid selling lemonade on the street corner figures out pretty quickly.

And the direct wage increase of $450 is not the whole story either. There are costs related to wages, such as workers’ compensation insurance, unemployment insurance tax and payroll tax. There are others, such as sick pay, vacation pay and, increasingly, mandated maternity pay, and they all usually add up to about 30% of direct wages. I suspect that the rate for a high risk business such as roofing is a little higher than that, but we’ll stay with the average and say that this factor bumps the average cost increase to about $585 per roofing job.

And that’s without the roofer adding anything for profit on that increased cost, which is actually a must if she wants to stay in business, not to mention applying a factor called “burden” onto the additional cost. The latter is a factor to cover the fixed overhead of the business, and companies who do not apply it regularly on job costing fail every time. I have seen it more than once. Profit and burden add another 20% at the very least; it is usually a percentage significantly much larger than that.

So the increased sale price of the roofing job is some $700 due to the $3/hr wage increase that Dean Baker urged the roofer to award her employees. That means that five employees have a total of $300 more spending money from this roofing job as a result of the wage increase, while the homeowner has $700 less spending money. The economy, then, had a net loss of $400 in consumer spending power.

I suspect that somebody is going to say that the homeowner is so wealthy that the cost of the roofing job does not affect his spending habits. I will prevent that person from looking foolish by reminding him of the “American dream” of every person a homeowner, and that over 50% of the population has already realized that dream. I would not for a moment suggest that 50% of the population is indifferent to spending resources.

That argument is beside the point anyway, because the “injection of money into the economy” is not about how much will actually be spent, but is about how much will be made available for spending, and we have shown that the economy did not realize any net benefit from the Nebraska roofer raising her workers’ wages.

Tuesday, July 18, 2017

Economics Is Idiocy

Dean Baker explains why we stupid people do not understand “how the labor market works” to the owner of a roofing contractor in an extraordinarily thick headed manner last week. This is an example of why I seldom read Dean Baker’s column any more. (I quit reading Paul Krugman more than a year ago.)

The roofer is paying a starting wage of $17/hr, well over the state’s minimum wage of $9/hr, and not getting enough new hires. She explains that she would cheerfully pay $35/hr but is constrained by competition and, even more so, by what insurance companies dictate for roof repairs.

Baker’s response is that, if she cannot pay $35/hr, she can still pay $20/hr and thus hire new workers away from her competition, thereby solving her worker shortage. His column continues, offering erudite comments about “textbook economics,” which is a lot less enlightening than he thinks it is, because the roofing company owner is not dealing in Dean Baker’s “economic world” but rather in a business world.

He suggests that, “Maybe the government should provide employers with an incentive for learning basic labor economics,” but I’m thinking that maybe the course should be for economists. Raising wages to hire workers away from competing companies in the same industry is a refrain continuously sung by Dean Baker, and it is utter drivel. Moving a worker shortage from one employer to another does not eliminate the shortage.

Thursday, July 13, 2017

"Primary Cause"

To set the scene, a semi-truck is parked at the curb on a boulevard, one with multiple lanes in both directions. It is there illegally, blocking a bicycle lane, while the driver goes into a fast food place for breakfast. Along comes a person driving a car and slams into the rear of the truck. His car goes under the trailer of the semi, shearing off the top of the car and killing the driver. There is no evidence that the driver of the car ever touched his brakes before he was killed.

The police are citing the truck as "the primary cause of the accident."

That makes no sense to me. It was a clear day, on a straight stretch of road, with no hills. How did the driver not see a semi-truck? How does a parked, unoccupied semi-truck in plain view of oncoming traffic cause an accident? Police do not whether or not a cell phone was found in the car, by the way.

Certainly the truck driver was wrong, and certainly in parking where he did he created a hazard. I would not argue if the police cited his truck as a contributor to the accident. But the truck, an inanimate, stationary object, as the primary cause of the accident? If the driver of the car, who pretty obviously never saw the truck, had hit a tree, would the tree have been the "primary cause of the accident?"

If the other party does something illegal, that does not relieve me of responsibility for my own safety. If a car runs a red light, it is not okay for me to use that as license to run into him and blame him for the carnage; I still have the responsibility, morally and under the law, to avoid hitting him if possible. What are the police thinking here, claiming that a stationary truck is the "the primary cause of the accident?"

Wednesday, July 12, 2017

Crazy, Stupid, or... ?

I sometimes get the feeling that Trump is doing to the establishment what Osama bin Laden did to the United States. We drove him out of Afghanistan in three months, and sixteen years later we are still fighting, dying and bankrupting ourselves there; such a long time and with such futility that we no longer even know why the fuck we are there.

The establishment is descending to a similar level of insanity in their war against Trump; using the same lack of sanity and the same desperate dishonesty in their frantic thrashing around, and steadily destroying what little ability they ever had to govern.

Not that I'm into carrying any water for Donald Trump, I despise the man, but the establishment has abandoned any pretense that we have a constitutional government.