Hurting the Poor...by "Helping" Them

By Greg Harvey, Treasurer

It’s hard to advocate against policies designed to help the misfortunate. However, one of the worst ideas floating around Washington is to raise the federal minimum wage to $10.10 an hour. But before you call me heartless and say I hate poor people, let me quote Milton Friedman, who said that “one of the great mistakes is to judge policies and programs by their intentions rather than their results.” I believe that many have made this mistake over raising the minimum wage because, while it’s noble, it’s not an effective way to alleviate poverty in America.

The main reason is that a higher minimum wage causes lower employment among low-skilled workers, most often teenagers. A study by economists Sen, Rybczynski, and Van De Waal found that every 10% increase in the minimum wage rate causes a statistically significant 3%-5% drop in teenage employment. In addition, it also corresponds with a 4%-6% increase in the number of households categorized as “Low-Income” (2011). Interestingly, the increase in poverty constitutes lower earning families relying on working children for a significant portion of their wages. Therefore, the loss of teenage employment hurts them significantly.

Other studies have found the effects to be greater. Joseph Sabia while at the University of Georgia found that a 10% increase in the minimum wage causes teenage employment to drop between 5%-9%, and it reduces working hours for still-employed teens by 5% (2006).

The reason youth employment data are important is because, according to The Entrepreneur, the vast majority of minimum wage jobs are either entry-level positions useful for career advancement or low-skill ones that give quality work experience. In addition, “employers often select teenagers from middle-class families over poor adults” for minimum wage jobs due to teenagers’ “greater job potential.” Consequently, under 20% of minimum wage earners are actually from impoverished households. Therefore, raising the minimum rate would hurt young workers’ future job potentials more than it would reduce poverty (Shane, 2012).

Finally, data from the CBO suggests that raising the rate would be ineffective. To highlight the findings, an increase in the federal minimum wage to $10.10 an hour would cause a loss of 500,000 jobs. Of the 45 million people currently considered impoverished under law, just 900,000 (2%) would see their earnings increase enough to escape poverty (of course, we must “net out” the 500,000 newly unemployed, so it’s really only a 400,000 person improvement). Furthermore, while total earnings for minimum wage workers would increase by $31 billion annually, only 19% would actually go to impoverished households. 30% of the increased earnings would go to families making over 3 times the poverty limit, for reasons already discussed (2014). Clearly, the results aren’t optimistic.

Therefore, we must use different tactics to help the poor. One possible solution, according to The Economist, is to increase the Earned Income Tax Credit. By doing so, we’d be ensuring that help goes only to lower income families (unlike raising the minimum wage), and it does so without losing jobs or harming businesses (2006).

Of course, I’m not against increasing workers’ pay. Nor am I advocating to abolish the minimum wage. But I am against most government regulations and believe that consumers have more power than we exercise. Keep the rate at $7.25 nationally, with some higher state rates. But let businesses be free to decide whether or not to increase their own employees’ compensations above those levels (a few already have; a quick Internet search shows that Gap, Ben & Jerry’s, and Ikea, among others, already have self-imposed minimum wages above the mandated floor). Then, we as consumers must support those companies with our money. That’s the beauty of the free market; businesses cater to consumers’ desires. If consumers demand higher hourly wages, and back up demands with our spending, businesses will willingly oblige, all without government intervention.

Higher Education Funding

By Greg Harvey, Treasurer

Published in November 20, 2014 issue of The Voice

Let’s state the obvious: college isn’t cheap, and it’s getting more expensive. Total student debt in the United States is at record levels. Truly, something needs to be done. However, before we start offering free, government-paid tuition to all students, let’s review a few reasons for the costs and see if there are any less dramatic approaches we can take.

There are a number of reasons why student debt is exploding. The most major, of course, is rising tuition costs at universities. However, that doesn’t tell the whole story. According to the higher education think-tank Minding the Campus, there are more students than ever attending out-of-state colleges and paying more for their education than in-state students. In addition, as much as 40% of the increases have been from room and board. Collectively, these account for much of the student debt increase.

Right away, there is a simple, though unpopular, solution: more students can stay in-state and commute when possible. Commuting costs half that of living at an in-state institution and a third of living at an out-of-state one. Speaking as a senior who’s commuted my whole career, I can attest that, while commuting isn’t fun, the lower tuition makes up for it. This is a simple solution that requires no government intervention; instead, it depends on students making better choices.

Similarly, the subjects students choose can be just as important as where they attend. According to The Economist, much of college’s ROI depends on one’s major. Those who study technical fields like engineering do much better than those in the arts. It’s just the way it is. Therefore, another easy fix for students to lower bills is to compare the costs and benefits of particular majors before choosing.

Another major reason for increased tuition costs is, not surprisingly, governmental regulation. As Arthur Kirk, Jr., president of Saint Lao University, states, his college has hired a plethora of staff to meet regulatory requirements and spends thousands of hours annually completing federal compliance forms. If we made universities more public, these costs wouldn’t go away; instead, making higher education free would eliminate the incentives colleges have to manage costs.

Now I must address the points in last week’s article. First, forgiving all current student loans is infeasible. There’s over $1 trillion in such debt outstanding; simply writing it off would cause massive losses to the federal government and private lenders. While the idea sounds good, it would be catastrophic in reality.

 Finally, completely subsidizing higher education is impossible in the United States. Think of it this way: the Federal Government runs a massive deficit each year and states struggle to balance their budgets. Governments don’t have a lot of money available to pay for tuitions. Cutting other spending to make room in the budget sounds good, but other programs can’t make money like colleges do. Is it really fair to cut funding for roads or pensions to pay for higher education, when colleges can raise revenue?

Therefore, we’d have to raise taxes, likely on the rich. However, higher earners are more likely to be college graduates. Therefore, raising taxes would actually cause students to pay for their education over a lifetime instead of a defined period. If you run numbers, you’ll find that even small tax increases on the wealthy would cause them to pay vastly more than under a normal student loan. In other words, if we try to make college free, it’ll actually become more expensive for those who succeed.

In conclusion, student debt is a problem, but the solution isn’t massive government reform. Rather, we need to make better choices about the schools we attend and what we study. Will higher education ever be free? No, and it’s pointless to think so. But if each student worked harder at reducing their own college bills, we’d see immediate decreases in personal debt, and it’s the only guaranteed way we can achieve that.

On the Medical Device Tax

by Zach Moore

A part of the "First Word, Last Word" column on the The Voice
Originally published on 10/31/13 and available here: http://www.buvoice.com/opinion/2013/10/31/first-word-last-word.html

(Advisor's note: this submission was required to be "about 500 words", but the subsequent rebuttal from a writer of The Voice totaled 637 words)

Since the beginning of Barack Obama’s presidency, an image has been painted for the American people of a universal, problem-free health care system that offers affordable or even “free” care. Based on the president’s rhetoric, one would believe that there is a magic money tree placed in the north lawn of the White House that miraculously drops leaves of one hundred dollar bills right into the pockets of Obamacare. Although this sounds excellent and the president somehow has fooled many Americans into believing this fairy tale, it is far from the case. An American who thinks based on logic understands the sad truth and reality, which is that President Obama has drafted a piece of legislation that is destroying the economy. Where does $60.1 billion of funding for the Affordable Care Act come from over the next decade? Sorry, not from the money tree the president is hiding from us all, but from the all too familiar 2.3% medical device tax.

Pacemakers: About to be way more $$$

Before jumping into the medical device disaster that the president has pursued, I believe it is important for readers to understand the importance this industry has in health care. Pacemakers, chemotherapy and defibrillators, just to name a few, are products that the medical device industry is responsible for. In order to produce and sell these products, research and development is key. A 2.3% tax on all revenues now significantly threatens the ability of this industry to devote money to innovate new products that could save lives.

Although many understand the effects on price and demand based on tax rates, it is obvious that the president does not. It is common sense for one to know what happens when tax rates increase on the revenues of a company: The price of goods go up in order to counter act the lost revenue. Therefore, what the president said would be more affordable, actually becomes less affordable. The price of medical devices goes up, therefore, making health care less affordable than it was before. What happens when these prices increase? Sales decrease, leading to a downward spiral of demand and lost revenues for one of the largest employers in the U.S.

Currently, according to the Wall Street Journal, the medical device industry employs 400,000 U.S workers directly, and another two million through supply and distribution. A 2.3% tax on this industry threatens many of these employees’ jobs. By cutting revenues by $6.7 billion annually, companies simply will not have the ability to maintain the size of their workforce. This is seen already, as, according to the Wall Street Journal, medical device companies have cut their workforce by 10% in order to brace for the impact.

This frivolous tax is something that the people of this country can not continue to ignore, nor can we as American’s continue to fall victim to the blinding image of something the president portrays as being free. Funding $60.1 billion comes from somewhere, and in this case it comes from thousands of lost jobs, increased costs for consumers, and irretrievable innovation that could have potentially saved lives.

Society and Murder

by Grant Murrow
published by The Voice on October 17, 2013
in response to "Taking Control of Gun Control", published by The Voice on September 26, 2013

Many things have occurred in America in the past 20 years that should cause every American to question where our country is heading in terms of culture, and how we behave as a society. Several very important occurrences that should incite curiosity are mass shootings and massacres. April of 1999: two students at Columbine high school open fire and kill 12 classmates.  April 2007: student Seung-Hui Cho shot and killed 32 people and wounded 15 others at Virginia Tech in Blacksburg, Virginia.  January of 2011: Jared Lee Loughner opened fire killing six and injuring 12 others including the now recovered Congresswoman Gabrielle Giffords in Tucson, Arizona.

All three of these events remain firmly engrained in the minds of those there to witnessed them, and each caused a stir in its own right. After each of these shootings, national arguments were sparked over the controversy that is “Assault Weapons” and how their regulation along with other firearms regulation could help stem the tide of such events from occurring. Something that may surprise you, however, is that only one of the four shooters involved in these deadly events used what the media refers to as an assault weapon during their spree.

That person was Dylan Klebold of the Columbine shootings and he was in possession of a TEC-9 semi-automatic machine gun, with three 30 round magazines (which he used the least out of his three weapons). Otherwise, every shooter used weapons that do not fall under the “Assault Weapon” category. Both Cho and Laughner used pistols, and the other Columbine shooter Eric Harris used a 12 gauge double barrel shotgun, all of which were purchased legally or taken wrongly from someone who had legally purchased them.

While “Assault Weapons” remain an issue of heated discussion, many people overlook the actual number of murders committed with these weapons. According to the FBI statistics for the years of 2007-11, less than 1180 out of 46,320 total gun murders were committed with rifles or long guns throughout the United States, which includes the firearms that fall under the now infamous term “Assault Rifles.” Also, according to the Department of Justice, only 2% of state and 3% of federal inmates were armed with the newly branded “Assault Weapons.” So comparing our firearm murder rates to other countries’ rates doesn’t exactly bring the true issue to light. In fact, examining our gun violence points to a very different trend, one in which “Assault Weapons” are not the main culprits.

So if it’s not the availability of firearms, what could it be that causes people to commit these murder sprees? Is it trends in society towards violence? Lack of mental healthcare availability? Or are these shooters overly glamourized and given too much attention by the media after committing these atrocities? Perhaps it’s all of the above.

According to the National Institute for Mental Health, only about 50% of adults with a serious mental issue receive treatment, and the largest group to have these illnesses falls between the ages of 18-25. Combine that with classic trending violence in American movies, TV shows, games, etc., the amount of attention given to the shooters whom commit these atrocities, and the availability of firearms and you have a deadly combination. But people seem committed to removing only one, rather than spending the time and money needed to correct and prevent mentally sick persons from both obtaining firearms and putting them on the road to recovery.

With only a few years and a small investment of money, and who knows? One day events like these can be a distant, but not forgotten memory.

Minimum Wage Brings Unexpected Increases

by Grant Murrow

originally published by The Voice on March 14, 2013
http://www.buvoice.com/opinion/2013/3/14/minumum-wage-brings-unexpected-increases.html

During his State of the Union address in February, President Obama announced his plan to raise the federal minimum wage from $7.25 per hour to $9 per hour. He claims that this raise would lead to a “raise in the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets.” However, this is not the case.

His claim of having more money in your pocket may be true in cases of employees of conglomerate employers, such as Wal-Mart or Target, but smaller businesses cannot afford to pay that much to their employees. If a company can save on labor, they will. Cutting into profits of a business by forcing a raise in wages will eventually cause them to raise their own prices in an effort to soften the impact. If it does not come in a raise in prices, it will likely come in a form that hurts the company’s employees such as, reduced hours, reduction of fringe benefits, installing machinery to take the place of workers, and even more detrimental-the higher likelihood of hiring illegal immigrants. All of which, in turn, hurt the American economy and people.

It may also lead to an increase in general unemployment. For example, the minimum wage in the state of Washington is linked to inflation, which is currently $9.19, and the unemployment rate is 7.6%. This reflects the fact that an increased minimum wage will not help employment decrease, and may even have the opposite effect in some cases. Also, as a secondary result of unemployment, crime in the areas with higher unemployment will undoubtedly rise. However, the people most affected by an increase in minimum wages are teenagers and young adults.

The people who minimum wage most affects are teenagers, the unskilled, minorities, those involved in low wage industries, and those not unionized. According to the Bureau of Labor Statistics and the United States Census report, 18.063 million young Americans, 66% of Americans over the age of 18 whom do not have a degree, 32.28% of Americans whom are minorities, 3.6 million workers who are involved in low wage labor, and 95.8% of Americans ages 16 to 24 who are not unionized would all be affected by this increase. Clearly, this would alter the life styles of a lot of people in a very negative way. All of the groups previously listed could have to deal with reduced work hours, benefit cuts, and ultimately layoffs. Thus putting a negative mark on the economy as a whole, and put people like us at the bottom of the ladder.

An increase to minimum wage and dropping profits would leave less money to go around. People like the students here at Bloomsburg University are prime targets for these losses, as we haven’t yet had a chance to enter the job market and gain experience. So what can be done to save jobs for people like us who don’t yet have our degree? Firstly, after a formal bill or law is announced, write to our congressmen. Tell them your opinion on the matter and ask them to act on your behalf in congress. Secondly, make yourself indispensable at your job. Take the time to learn your job and become the best you can at it, and make sure that your boss sees your potential. Lastly, study, and study hard. Your degree may be the difference between feeling the effects of the minimum wage increase or getting ahead.

A Jobless Economy: Obama's Polices are Damaging

by Zach Moore

originally published by The Voice on February 21, 2013
http://www.buvoice.com/opinion/2013/2/20/a-jobless-economy-obamas-policies-are-damaging.html

While graduation from higher education is supposed to be a colossal leap to an affluent future, a sluggish labor market awaits the average college student’s resume. With unemployment soaring nation-wide, there is an alarming level of unemployment of college graduates ages 25 and younger. According to the Department of Labor Statistics, 53 percent college graduates are unemployed or underemployed, and the diminutive amount of employed graduates is earning a median salary of a mere $27,000. This figure is a depreciated $3,000 less than students who earned a degree before the year 2007.

 

Moreover, out of the college graduates under the age of 25 who were working in 2011, 37.8 percent were working in a job that did not require a college degree, according to bls.gov. As these statistics develop, it is seen that there has been a serious decline over the last four years in which students have spent working extremely hard to ensure a prosperous future. Note that in 2007, around the time that Bloomsburg seniors were beginning the journey of a college education, the unemployment rate of recent college graduates was 5.7 percent. Through this, the question of who is to blame arises.

 

Over the last four years, President Obama has made a tremendous dent in the economy in which we reside. Students have been victims to the president’s detrimental policies already. This is seen through many aspects of a young American’s life, an example being tuition rates, which have gone up 25 percent under the president, according to bls.gov. All this while a landmark one trillion total student debt has accumulated. Through this we see that not only has President Obama made it increasingly harder for college students to find a job, but once they do accomplish this near impossible task, they will have a larger debt than any other graduates in history. If this is not bad enough, once graduates begin to dig themselves out of this bottomless pit of debt, they will have a very hard time doing so because of the falling median income under President Obama.

 

It is very simple for the eye to see a distinct downfall marked by the start of Barack Obama’s presidency. When President George W. Bush left office, the unemployment rate of young American’s 25 and younger was an astonishing 5.4 percent as reported on bls.gov. Sadly, four years later we see an unemployment rate of the same group of American’s hovering just below nine percent. These disturbing figures are a direct reflection of President Obama’s damaging economic policies. Until the president stops implementing policies that hurt American businesses, employers will continue to not hire. Even if they do choose to employ a graduate, an exponentially smaller figure of capital will be put into your pocket.

 

President Obama has raised taxes on employers to the highest in recent history. The results of this are obvious: when employers have less money, they are no longer investing, no longer hiring, and most importantly no longer growing fiscally. Until President Obama does more to create economic growth, such as financially encouraging employers to hire young, educated Americans, underemployment and unemployment will continue to rise.

 

The “investment” of higher education will continue to diminish as President Obama’s disastrous economic policies continue, and the true value of a degree will no longer exist. Please examine this simple equation of economics: high unemployment, combined with record setting landmarks of student debt, equals a slow and distraught economy, which our generation is now pioneering. If we, the young Americans, the future of the United States, cannot prosper, who possibly can?