• Tag Archives Bernie Sanders

  • Why Bernie Sanders’s Universal Job Guarantee Is Fool’s Gold

    Posted on by Azrael Comment


    Presidential candidate Bernie Sanders doubled down when asked about his universal jobs guarantee included in last Tuesday night’s Democratic debates. “Damn right, we will” create jobs for every adult in the workforce, he insisted.

    But Sanders’s promise of jobs for all, however appealing it may sound, aims at the wrong target.

    In what Henry Hazlitt described as “the fetish of full employment” in his 1946 classic Economics in One Lesson, Hazlitt declared that the goal of full employment is fool’s gold.

    Instead of focusing on policies to maximize employment, Hazlitt declared, “We can clarify our thinking if we put our chief emphasis where it belongs—on policies that will maximize production.”

    Why focus on maximizing production rather than jobs?

    Creating jobs is easy. As Hazlitt wrote, “Nothing is easier to achieve than full employment, once it is divorced from the goal of full production and taken as an end in itself.”

    Economist Milton Friedman was once traveling overseas and spotted a construction site in which the workers were using shovels instead of more modern equipment like bulldozers. When his host responded that the goal was to increase the number of jobs in the construction industry, Friedman replied, “Then instead of shovels, why don’t you give them spoons and create even more jobs?”

    The key to a healthy economy, conversely, is increasing production using less and less labor. Trying to exclusively “create jobs” or provide universal job guarantees can lead to perverse incentives like restricting workers’ access to productivity-enhancing capital goods in order to require more workers than necessary to produce goods and services.

    Under a plan like Sanders’s, a project would be considered more successful the more people it employed relative to the value of the product of the work performed. In short, success would be measured by making labor less and less efficient.

    How can it benefit society to demand, say, 200 workers build a bridge that could have been built using 100?

    As Hazlitt wrote,

    The economic goal of any nation, as of any individual, is to get the greatest results with the least effort. The whole economic progress of mankind has consisted in getting more production with the same labor.

    Value creation, not a measure of employment, is the true measure of economic well-being. Imagine if society could enjoy a luxurious standard of living that requires only half of the people to work to provide it.

    Hazlitt asked,

    The real question is not how many millions of jobs there will be in America ten years from now, but how much we produce, and what, in consequence, will be our standard of living?

    Moreover, Hazlitt dismissed concerns that labor-saving capital goods would cause significant unemployment. Indeed, he argued the opposite. “[O]ur real objective is to maximize production. In doing this, full employment—that is, the absence of involuntary idleness – becomes a necessary byproduct,” he wrote.

    Prioritizing employment over productivity puts the cart before the horse. He noted,

    [P]roduction is the end, employment merely the means. We cannot continuously have the fullest production without full employment. But we can very easily have full employment without full production.

    And the labor that is freed up due to productivity gains can be employed in satisfying other needs and wants of consumers, often new or not-yet imagined desires.

    As Steve Jobs said to Business Week in 1998: “It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”

    If labor is tied up using spoons in make-work, government-sponsored “job guarantee” jobs, who will produce the next big thing?

    Government jobs programs will not only tend to reward less efficient labor but will also tend to tie the labor force to current modes of production, allowing less opportunity for life-changing innovations.

    In sum, high levels of employment do not necessarily mean prosperity. As Hazlitt concluded, “Primitive tribes are naked, and wretchedly fed and housed, but they do not suffer from unemployment.”

    Bradley Thomas


    Bradley Thomas

    Bradley Thomas is creator of the website Erasethestate.com and is a libertarian activist and writer with nearly 15 years experience researching and writing on political philosophy and economics.

    Follow him on Twitter: ErasetheState @erasestate

    This article was originally published on FEE.org. Read the original article.


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  • Economics Lessons for Bernie Sanders

    Posted on by Azrael Comment

    It’s hard to tell at this point if Bernie Sanders’s presidential campaign is faltering because his ideas have gone from bad to worse or if his ideas are getting worse because his presidential campaign is faltering. Causality notwithstanding, both things are undoubtedly true. Just three months ago Sanders was solidly in second place with 24 percent support. That number has now dipped to under 17 percent. Over that same period, Elizabeth Warren has gone from about 6.5 percent to more than 16 percent, just half a percentage point below Sanders.

    It is clear that Sanders’s best chance at the White House was four years ago, and his 2016 run is not translating into success this time around. As that becomes more apparent, Sanders is becoming increasingly desperate to recapture the momentum he once had. All he can do now, though, is point the finger of blame at a growing list of villains.

    This time, it’s “big media.” More specifically, and predictably, it’s Google and Facebook.

    In a late August Columbia Journalism Review op-ed, Sanders opined that the United States doesn’t have “enough real journalism” because “many outlets are being gutted by the same forces of greed that are pillaging our economy.”

    The error lying just beneath the surface of this claim is the same error that causes all of Sanders’s economic proposals to go off the rails. Bernie Sanders simply has no idea what role profit plays in an economy. Because of this, he naively equates “profit” with “greed.”

    Of course businesses pursue profits; they always have. They did before the current higher education bubble, before the housing bubble of the 2000s, before the stock market bubble of the 1990s, and before the precious metals bubble of the 1970s. Businesses even pursued profits before the Industrial Revolution—a time, presumably, that Sanders would not characterize as being “gutted by greed.”

    Sanders loses his way, regardless of what kind of greedy person he happens to be demonizing, by ignoring two important facts.

    First, businesses will always pursue profit because the human beings who run them want things. This is true regardless of whether the political system embraces free markets or requires complete socialism. Why? Because it is human nature to want things, and profits, regardless of how those profits are acquired, make it possible for people to get what they want.

    Second, there are only two ways a business can obtain profit. One is to offer consumers products they like so much that they willingly hand over their money. The other is to offer politicians favors, contributions, and considerations they like so much that they take consumers’ money and to hand it over to the businesses the politicians prefer. Incredibly, every one of Sanders’ economic proposals involves the latter approach.

    Are media outlets pursuing profits? Yes. What else would they do? But to achieve profits, they have to give people what they want. If there is a problem with the media, it doesn’t originate in the media but in people’s preferences.

    Sanders points to the 1,400 communities that have lost local newspapers as proof positive that the government needs to intervene in the news market—something he promises to do if elected president. What he doesn’t seem to understand is that these news outlets went out of businesses precisely because people in the communities in question did not support the outlets. Why not? Because those news outlets were selling things that people simply did not want to buy. Now, Bernie Sanders wants to spend tax dollars to support these newspapers, thereby forcing people to pay for news products they have already demonstrated they don’t want.

    He is saying, in short, that he knows better what people should want than do the people themselves. But he doesn’t know better, and he proves as much regularly, which is why his campaign is faltering in the first place.

    This article was reprinted from Newsday.


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  • Sorry, Sen. Sanders: Minimum Wage Hikes Reduce Real Income for Workers

    Posted on by Azrael 1 Comment


    Many of us remember the anticipation and pride of opening our first paycheck, only to feel sick and indignant at that tiny after-tax total. We might feel salty toward that stingy grocery store or restaurant chain that couldn’t cough up more than minimum wage. The truth is, your employer pays far more to employ you than your hourly rate. Thanks to government-imposed burdens, your bosses could be paying twice as much to employ you as you’ll see in your take-home pay.

    Presidential candidate Sen. Bernie Sanders was blasted from all sides in July after his staff’s complaints about their pay were leaked to The Washington Post. Sanders made the “Fight for $15” minimum wage cause a centerpiece of his campaign, but his lowest-tier employees reported salaries and long hours that amounted to less than $13 per hour.

    Campaign field organizers, usually recent graduates seeking the prestige of a national candidate, generate relatively little value and are sometimes volunteers. Rather than boost salaries, Sanders initially suggested cutting staffers’ hours, upping their per-hour pay but cutting the valuable experience and face-time many had signed up for. The proposal was met with contempt from his supporters and sighs from economists who’d predicted that’s just what employers would do under Sanders’s proposed policies. Battered by the negative press, the campaign relented, goosing lower-tier salaries to $42,000. But at what cost?

    It’s not hard to imagine a field organizer—let’s call him Leon—experiencing the same annoyance and resentment many of us felt opening those first paychecks. If Leon is paid $15 per hour to work full-time, he earns $31,200 per year. But under federal law, his employer also pays $1,934.40 in Social Security taxes and another $452.40 in Medicare taxes. Sometimes you’ll see these two items combined as “FICA” or the “Federal Insurance Contributions Act.” Your employer pays FICA taxes in addition to your wages and by law must withhold your individual share, as well; independent contractors pay both portions themselves. Federal unemployment and retraining taxes cost employers another $427.

    Sanders’s campaign, like other employers, also has to pay health insurance premiums for employees—by far the fastest-growing portion of employee compensation—an average of $15,000 per employee per year.

    All told, Leon’s wage is $31,200, but the cost to employ him under federal law is $49,012. This does not include state and local taxes, unemployment insurance, uniforms, onboarding, and other employment costs.

    But it’s unlikely that Leon actually works 2,080 hours a year. If, like most Americans, he took some paid time off—perhaps a few sick days, even a short vacation—he actually worked more like 1,990 hours.

    If Leon earns $15 per hour, taxes and top-down mandates mean he takes home about $12, but his employer pays $24.63 per hour for his labor ($49,011.80/1,990).

    If Leon and his employer had the flexibility to negotiate, they could easily create a much more equitable agreement for the value of Leon’s labor, but this is illegal. Instead, federal mandates limit their choices and enforce trade-offs to which neither of them agreed.

    Setting a minimum wage doesn’t make everyone’s labor more valuable. It simply makes it illegal for lower-skill, less-experienced workers to be employed at all. By definition, the minimum wage permanently excludes some people from the workforce. Teenagers, the disabled, the recently incarcerated, and exactly the kind of low-experience, low-skill workers the minimum wage purports to protect will be priced out of the job market, trapped in poverty.

    Fewer than 1 percent of total US workers make the federal minimum wage. That small but vulnerable population is statistically much more likely than the workforce in general to be under 20, lack a high school diploma, work part-time, and work in food preparation.

    Workers just starting out will not be helped by making their labor more expensive to employers.

    For presidential campaigns, which nearly always end in debt, $25 an hour may be feasible. But for the kind of businesses that employ most minimum wage workers (retailers, food service), profit margins are extremely thin. If low-skilled labor gets suddenly more expensive, those employers will hire fewer low-skilled workers. Maybe they’ll install more self-checkout stations or a burger-flipping robot. Maybe they’ll have to raise prices or cut hours to make up the margin.

    The Congressional Budget Office released a report confirming that federal wage increases mean less real income for all affected families. At best, government has selected the winners and losers—but in fact, we are all losers.

    Denmark, like other Nordic countries, has no national minimum wage. Instead, minimum wages are negotiated voluntarily by each economic sector. As in the United States, only 1-2 percent of employees actually earn the minimum for their sector, and employment is fairly flexible. In spite of their reputation for a decadent social welfare scheme, pension accounts are private, rather than government-run, meaning your contributions are earmarked for you personally. Personal income taxes are very high (56 percent on average), but the added cost to employers is below 2 percent of wages.

    With the cost of labor kept low, employment is steadily high. With the confidence that they’ll be able to fire an employee who turns out to be a bad investment, companies will “take a risk” to hire and train individuals who otherwise might be excluded from even interviewing. A much closer relationship between individual wage and cost-to-employer also aids low-margin workers in getting the positions they need to gain skills and move up to higher tiers of employment.

    The instinct to help the least fortunate among us is a noble one, but hiking the minimum wage punishes exactly those Sen. Sanders hopes to help.

    Laura Williams


    Laura Williams

    Dr. Laura Williams  teaches communication strategy to undergraduates and executives. She is a passionate advocate for critical thinking, individual liberties, and the Oxford Comma.

    This article was originally published on FEE.org. Read the original article.


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