October’s jobs and economic numbers do not warrant much celebration

Commentary by James Shott

President Barack Obama’s last chance before the election to show that Democrat policies are producing favorable economic and job conditions has ended, and October’s economic numbers contain some positive news, but not a lot.

Among the better news, the most often cited unemployment rate dropped slightly, and average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents.

President Obama and the Democrats are thrilled that the U-3 unemployment rate dropped a bit in October to 4.9 percent, the same level at which it stood in June, July and August before rising to 5.0 percent in September. Unemployment of 4.9 percent is a respectable rate, so long as other factors do not provide contradictory facts. But, alas, they do.

The U-3 rate is one of six different looks at alternative measures of labor underutilization in the country, and counts those in the labor force who are working as well as those who have lost their job, but are actively looking for another one.

The weakness of the U-3 is, however, that there are a tremendous number of Americans of working age who are not working or looking for a job any longer because they became discouraged at being unable to find a job, and have dropped out of the labor force, although they would gladly go back to work if the business climate improved and the economy produced a job for them. The U-6 rate reflects the unemployment rate with these folks included in the calculation, and stood at 9.5 percent at the end of October. The U-6 rate is far more reflective of the actual health of the employment environment than the more frequently cited U-3 rate, and 9.5 percent is not good.

Thus far in 2016, employment growth has averaged 181,000 per month, compared with an average monthly increase of 229,000 in 2015. Neither level has been enough to help those millions of discouraged workers who have given up looking for work, as demonstrated by the U-6 unemployment number.

In October, 1.7 million persons were marginally attached to the labor force. While total nonfarm payroll employment rose by 161,000 in October, 487,000 discouraged workers dropped out of the workforce; three times as many people quit the workforce because they couldn’t find a job as were hired for a new job. That explains the small improvent in the U-3 rate.

“The sectors witnessing the strongest boost in hiring over the past year included education, health and professional and business services in October,” write Nick Timiraos and Josh Zumbrun on The Wall Street Journal blog. “The sectors with the weakest performance included manufacturing and mining.” Service sector jobs thrive while manufacturing sector jobs continue to suffer. And, since the last recession began in December of 2007, the number of new full-time positions and the number of new part-time positions are nearly equal.

Neither of these are good signs. Most people want full-time jobs, but they are in short supply, and that means lower earnings as a part-timer, or having to work multiple jobs to make ends meet. And in terms of worker earnings, manufacturing jobs most often pay better wages than service jobs.

The Labor Force Participation Rate was at 62.8 percent at the end of October, muddling along at levels not seen since the late 1970s.

A participation rate of 62.8 percent means that of every 1,000 people of working age that are actively in the labor force or have dropped out but are willing and want to work, only 628 have a job, a little less than two out of three. That translates to 94.5 million Americans of working age that are not working. The highest the participation rate has been in 2016 is 63.0 percent and the lowest is 62.6. Until after the recession began near the end of 2007, the participation rate hovered around 66.0, and nothing President Obama has done in eight years has reversed the steady slide and the leveling out in the 62 percent range.

After seven years in office the Obama economy had produced an average real GDP growth rate of a weak 1.55 percent, ranking Obama as fourth from the bottom of previous Presidents of the United States. In October 2016, GDP registered a growth rate of 2.9 percent, by far the best this year. However, by comparison, U.S. real GDP growth averaged 3.79 percent from 1790 to 2000. The Obama administration’s over-regulation and poor tax policies hampered business activity, hence job production.

As voters go to the polls to complete the process of choosing Obama’s successor, a major question is whether they will vote to elect Hillary Clinton and stay on the present failed course for four or perhaps eight more years of economic weakness, millions of Americans out of work, weak GDP, and jobs forced overseas by foolish tax and regulatory policy.

Or, will they vote for a change by electing Donald Trump, who at least very well understands business and how economic policies like those of Obama and Clinton harm the very people they are elected to serve. Let us hope for the latter, and provide America the chance for better things in the future.

Cross-posted from Observations

Presidential campaign has not focused much on important issues

Commentary by James Shott

The presidential campaign has not adequately addressed the issues and problems facing the United States, but the next president has a mountain of problems needing attention.

Looking at polls from major news organizations – CBS News/New York Times; ABC News/Washington Post; NBC News/Wall Street Journal – from May through October of this year, the economy/jobs is the leading issue in all polls, followed by the combination of terrorism, national security and immigration. Tam Warner Minton, writing on The Huffington Post blog, suggests that the Supreme Court is the most important of the issues.

All of these issues are important, but two of them – The economy/jobs; and the U.S. Supreme Court – are already affecting the country.

The thing to remember when evaluating the way Donald Trump and Hillary Clinton approach these problems is that one of them loves and lives for big and bigger government, while the other plainly prefers the private sector.

Looking at the economy and job creation, Trump has actually created jobs through his hotels, golf courses and casinos; while Clinton’s decades in the public sector leaves her with no real experience in this important sphere.

Her approach to jobs and the economy will rely on increased regulation, reducing taxes on the middle class and making the rich pay more. The National Center for Policy Analysis (NCPA) analyzed the Clinton plan and said, “As currently presented, the Clinton tax proposals would increase taxes on high-income earners, reduce the exceptions to the corporate income tax, and increase estate taxes, in an effort to raise more revenue and bring greater equity to the current U.S. tax system. According to our NCPA-DCGE model, the plan would generate $615 billion in revenue over 10 years, with most of that increase coming from the federal personal income tax. The cost to the economy would be a net loss of 211,000 jobs by 2026, and a reduction in real GDP of 0.9 percent.”

Clinton has criticized Trump’s tax cutting policy, deriding it as “Trumped-up trickle-down,” a cute phrase, but a horribly ignorant economic reality. The NCPA explains why this idea will out perform Clinton’s: “Rather, insofar as tax cuts raise after-tax profits, they induce taxpayers to expand investment and, in so doing, wages, and jobs. Insofar as they raise after-tax wages, they induce taxpayers to enter the labor force and work longer hours. This is not the result of money “trickling down” from one person to another but of the reduction of disincentives to invest and work that are inherent to any tax code,” and especially one that punishes people with money to invest in job-creating economic activity.

Where the U.S. Supreme Court is concerned, it can cause great harm to the nation if Justices stray from their Constitutional limits, and they often do.

In response to a question in a presidential debate, Clinton said: “If I have the opportunity to make any Supreme Court appointments, I’m going to look broadly and widely for people who represent the diversity of our country, who bring some common-sense, real-world experience.”

This answer displays a shocking lack of understanding of the job of the Supreme Court, and the purpose and meaning of the U.S. Constitution. The Court’s duty and function have nothing to do with ideas of diversity, or the supposed benefits of real-world experience. Its job is essentially to resolve legal disputes, being sure always to uphold the principles of the Constitution.

The Constitution is alive, but it is not a “living document,” the meaning of which would change with the winds of societal preferences. The Founders based the Constitution upon important principles that were intended for the ages. They understood that at some future point there may be a true need for modification, and they created a mechanism for doing so. That mechanism is not simply a majority of Supreme Court Justices wanting to make a change; it is a clear and difficult process, difficult by design to prevent foolish modifications to satisfy some momentary desire.

There are essentially two approaches to how justices interpret the Constitution: conservatism/originalism, which honors and adheres to the actual language and original intent of the Constitution; and liberalism, which is a willingness to interpret the language for some social or political end, which results in making law from the bench instead of in the Congress, as the Constitution requires.

Packing the Court with Justices who do not honor the original meaning of the Constitution in order to achieve some narrow ideological objective is a form of subversion, and Hillary Clinton is married to that goal.

Donald Trump, on the other hand, understands the great wrong of that goal, and has vowed to nominate judicial conservatives/originalists to fill Court vacancies.

The left likes for things to be easy: easy border control and easy citizenship; easy changing of the Constitution; easy to vote through early voting and without a picture ID; and easy to live off of government support, rather than facing the rigors of a job, among them.

Such laxness and failure to uphold traditional standards makes it much easier to turn America to liberalism/socialism through subversive measures than trying to persuade people to accept it. We must resist these efforts.

Cross-posted from Observations

Lipstick on a pig: Administration putting a spin on the U.S. economy

Commentary by James Shott

It is natural for politicians to put things in the most favorable light, and the worse the general situation, the greater the need to do so. That serves as an appropriate introduction to the White House’s June economic analysis, which is summarized thusly: “The economy added 287,000 jobs in June, as labor force participation rose and the broadest measure of labor market slack fell.” As far as that statement goes, it is true.

That new jobs number is a decent number – the best jobs figure since October – and miles ahead of May’s revised number of only 11,000 new jobs. But it is not an outstanding number, and is only one of several really significant numbers.

Back in December 2009, six months after the end of the recession and 11 months into Barack Obama’s first term, economist Paul Krugman said that 300,000 new jobs each month were necessary to make up the job losses of the recession over the next five years, so the June figure falls short of that number. In the weak Obama recovery new job production has only met or exceeded 300,000 six times in 89 months. The last was in November of 2014 at 331,000.

Whether the 287,000 number holds up after revision we won’t know until August. May’s preliminary number was revised down by more than two-thirds to a mere 11,000; therefore August may show a downward revision, an upward revision, or a number that is pretty close to the preliminary figure.

Other relevant numbers from the Bureau of Labor Statistics (BLS) data set for June include an increase in the U-3 unemployment rate, the one President Obama prefers to cite, from 4.7 to 4.9 percent. Despite the increase, the U-3 rate still looks good because it discounts all those marginally attached to the labor force that involuntarily work part-time instead of full-time, or have given up looking for work because they cannot find a job. Those workers are included in the U-6 rate, which more accurately represents reality, and stood at 9.6 percent in June, and improved one-tenth of a percent since May, as some of the previously disaffected workers started seeking employment again.

Even so, the Labor Force Participation rate was still at the late-70s level of 62.7 percent. From 66.0 percent in December of 2007 when the recession began, the trend in the participation rate has been steadily downward and has been below 63 percent since March of 2014. The labor force is made up of those age 16 and older that are working, looking for a job, and not in prison or in the military, and totaled 94,517,000 people last month. That means that 56,228,000 working age Americans are not working, and not in the military or in prison.

In June, 1.8 million persons were marginally attached to the labor force. These are individuals who wanted to work, were available for work, and had looked for a job sometime in the prior 12 months, but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Another 5.8 million individuals prefer full-time employment, but are working part time because their hours had been cut back or because they haven’t been able to find a full-time job.

The BLS reported, “Among the major worker groups, the unemployment rates [U-3] for adult women (4.5 percent) and Whites (4.4 percent) rose in June. The rates for adult men (4.5 percent), teenagers (16.0 percent), Blacks (8.6 percent), Asians (3.5 percent), and Hispanics  (5.8 percent) showed little or no change.”

The 9.6 percent U-6 rate tells one part of the story, but the actual harm of the administration’s policies that keep the economy from cranking up are another story.

“Today’s jobs number can’t hide the ongoing struggles facing the country’s main jobs producers – small businesses – which are overwhelmed by over-taxation, over-regulation, and a lack of access to credit,” said Jobs Creators Network (JCN) president Alfredo Ortiz. “And it shouldn’t distract us from an underwhelming labor force participation rate—still the lowest figure since the 1970s.”

National Federation of Independent Business president and CEO Juanita Duggan commented, “Each month our survey shows that small business owners are trying to hire qualified workers,” and, “The job openings are there, but owners are not going to invest in new employment when labor costs are becoming insurmountable, and the political climate is wildly uncertain.”

All the way back in November of 2010 President Obama was already claiming a “new normal” for the economy: “What is a danger is that we stay stuck in a new normal where unemployment rates stay high,” he said on CBS “60 Minutes.”

Today, with a real unemployment close to 10 percent, Obama may be viewed as a pretty good prophet. However, rather than seeing the future, he engineered it, and the term “new normal” is much less a reality than an excuse. As the JCN’s Ortiz noted, high taxes, rampant and intrusive regulation and limited credit do not a good recovery make.

America deserves better. November’s election provides the opportunity to elect as president someone who understands job creation.

Cross-posted from Observations

Besides benefitting pandering pols, why have a $15 minimum wage?

Commentary by James Shott

Democrat presidential candidate Bernie Sanders literally screamed through a bullhorn at a campaign event in support of raising the federal minimum wage from $7.25 an hour to $15. “I’ve been pleased to march and struggle with all workers in this country who are fighting for $15 an hour and a union,” he told the crowd. “We are the wealthiest country in the history of the world, people should not have to work for starvation wages.”

The City of Seattle, Washington last year raised its minimum wage to $15 to take effect this month, San Francisco and Los Angeles, California followed suit shortly thereafter, and last week the California State Legislature passed a measure to raise the state’s minimum wage in steps to $15 by 2022, and Governor Jerry Brown pledged to sign it.

Politicians frequently advocate for higher minimum wages, which attracts a lot of positive attention from low wage earners. Campaign speeches focus on how hard it is to live on minimum wage, as if a large proportion of the workforce earns the minimum and that large numbers earning at that level are trying to support a family, and all of these people really are being enslaved by greedy businesses. Facts, predictably, tell a different story.

At the end of 2014 the number of Americans 16 and older earning hourly wages was 77.2 million. Of those, just under 3 million earned the minimum wage, about 4 percent. Among all workers that year, hourly and salaried, those earning at or below the minimum was just 2 percent, and only 1.04 million minimum wage workers held full-time jobs. Of the entire full-time workforce, only 0.7 percent earned at or below the minimum wage.

Who are these 3 million minimum wage hourly workers? Nearly half – 48.2 percent – are between 16 and 24 years of age, and 2.6 percent are 65 or older. More than half work in food preparation and related “hospitality” industries, 31.4 percent are high school graduates, 23.1 percent did not earn the high school diploma, and only 9.1 percent have a college degree.

Most of them are second or third earners in their household; the average family income of a minimum-wage worker exceeds $50,000 a year. Furthermore, most minimum wage workers graduate to higher wages quickly as their skills and experience increase, usually getting a raise in less than a year.

People generally make minimum wage when they get an after-school job, or to help out while they are going to college. They make minimum wage for jobs that require little skill, and are often supplemented by tips. People make higher wages when they gain experience or hold jobs requiring higher levels of skill. Professionals and technically trained workers make more than fast food workers, checkout clerks and grocery baggers, as it should be.

Those who run businesses have to decide how much they can afford to pay for the different types of jobs in their business. Wages are based upon the importance of each job to the business, the experience and skill of individual workers, the number of people available for each job, and the overall cost of labor and other expenses, balanced by business income.

When government edicts artificially increase labor costs, businesses must offset the increase by cutting costs, increasing income, or a combination. Every minimum wage increase of $1 an hour costs a business about $2,500 per employee per year in wages and payroll costs. Other employees making a little more than the minimum will either require a raise, or deserve one, dramatically increasing the labor costs. Something has to change to offset that expense.

Businesses likely will reduce staff, particularly cutting positions where several workers have the same job. Maybe they employ robots or other machines to do certain tasks. Have you been to a restaurant that has a touch-screen device on each table? You can order and reorder some items and pay your bill with a machine.

There now is a robot burger maker that can turn out up to 360 burgers per hour. It can grind, stamp and grill made-to-order patties. It can cut and layer the lettuce, onions, pickles, tomatoes, etc., put them on a bun, and even wrap them up to go. This device would replace three full-time kitchen staff and ultimately cost the business less.

Higher labor costs mean that prices of many items will necessarily go up, some significantly. Even as minimum wage workers get more money, they and everyone else will see their cost of living increase, gobbling up a good bit of the higher wage.


Few Americans earning the minimum wage really “need” a higher wage to survive. Analyzing the coming increase in Alberta, Canada to $15 per hour, Robert P. Murphy and Charles Lammam of the Fraser Institute concluded, “In short, the minimum wage is neither an efficient nor effective strategy for helping the working poor.”

Minimum wage earners need to work their way to higher pay through education, training and gaining experience, like Americans have done for decades. A federally mandated minimum is, and always has been, a colossal mistake. It will reduce jobs among the very people it is supposed to help.

Cross-Posted from Observations

Commentary by James Shott

The American concept of personal freedom takes a back seat in West Virginia and other states that do not protect their citizens’ ability to get some jobs without being forced to join or pay fees to a labor union. For state governments or the federal government to allow such conditions for going to work to exist is as antithetical to the idea of individual freedom that our nation was built on as it gets.

Half of the 50 states have already embraced worker freedom and passed right-to-work laws. These laws have a positive impact on the economies and job picture for those states, and are creating jobs. And now West Virginia is poised to become the 26th state where workers are free to choose whether or not to join a union.

The state House of Delegates and Senate have both passed right-to-work legislation. The Mountain State’s Democrat Governor Earl Ray Tomblin, has vowed to veto the bill, but the Republican majorities in both houses can override that veto.

Advocates of right-to-work in the state legislature say they are not opposed to unions, per se, but do oppose state laws dictating that unions receive taxpayer and worker funds.

West Virginia and 25 other states believe that people should be free of pressure to join a union to get a job and believe that such mechanisms are deterrents to business development and job creation, and thus are harmful to the economy of states.

Characterized as pro-worker, pro-growth, pro-freedom and pro-job, abolishing forced unionization and the prevailing wage rule in the state are predicted to improve the state’s business climate, increase job opportunities for West Virginians, and help overcome the economic damage to the state’s economy brought on by the Obama administration’s war on coal.

The rub arises when a union has negotiated a contract for workers in a business, and some workers do not want to join the union. The union argues that it isn’t fair for non-union workers to benefit from union negotiations, and the union is correct about that. So then non-union workers are assessed a fee to compensate the union for their benefits.

But then that isn’t exactly fair, either, as non-union workers have nothing to say about how the union uses their money.

The solution is simple: Those workers who want to join the union should be able to do so, and to benefit from the union negotiated work conditions and wages, and those who choose not to join should not be required either to join, or to pay money to the union, and therefore would negotiate their own deal with the employer.

Labor unions evolved from workers wanting better conditions, having endured conditions that were generally unfair and even dangerous for many years. Over the years after workers became organized, however, federal and state governments put laws and rules into effect that provided protections for workers, taking on the primary role that labor organizations had been providing.

With their prime function now essentially covered by laws and regulations, labor unions had to change their focus in order to survive. They have become active and influential political organizations, using member dues and non-union worker fees for political purposes. And too often, the demands they make to attract membership frequently involve things that no sensible business would do on its own, such as demanding work rules that are inefficient and designed to increase union jobs, rather than increase efficiency and productivity. They often demand pay practices that ignore individual worker performance, basing pay on considerations other than the worker’s abilities. And they routinely protect the job of all members regardless of their performance, or the health of the business.

Despite their actions on behalf of their members, which frequently are harmful to the businesses in which their members work, union membership has declined sharply from its peak in the mid-1950s, when one in three workers belonged to a union. The decline began to accelerate in 1980, according to Economy Watch online, and today union membership is a mere 11.1 percent.

That figure includes public-sector workers, who among all workers have the least justification for union representation, given that their employers are the governments that enforce labor law. Public workers are 5 times more likely to belong to a union than their private-sector counterparts, with a union membership rate of 35.2 percent, while the private employee rate is just 6.7 percent.

Many of the demands of unions on businesses, while good for union members, make profitability more difficult for businesses, artificially raising wages and labor costs, thereby increasing the price of goods and services for everyone, including union families. 

Rather than being an adversary of management, unions could become partners, focusing on providing a better trained and more productive workforce, assisting business in succeeding, and creating jobs through natural economic methods, rather than blackmailing employers into actions that benefit only one side of the labor/management equation.

Under this scenario unions could succeed on their own merits rather than depending upon government force and political intrigue for their survival.

Cross-posted from Observations

New Jersey Continues to Lead in America's Race to the Bottom

In addition to the massive unfunded liabilities New Jerseyans face for their lavish government employee retirement programs New Jerseyans are now faced with the prospect of a bankrupt Atlantic City.

A testament to the evil incompetence that Crony Capitalism leads to. All of America should pay heed to the results of this government run economic development effort.

As a business financial planner For the past 30 years I have watched the rise of crony capitalism as government increasingly controlled economic development efforts; the results are the decline and decay we see and feel all around us today.

To the degree possible we need to get government out of the markets. America works best when Governments role is regulating the 'field' the markets,  evenly. Not manipulating the markets and picking the winners and losers behind closed doors. That is a tenant of fascism.  

We need to reach the young minds, todays teens and 20 somethings, where their interests are, technology and games. Help me reach out and spread the truth of Christian history and the battles and perils of fighting fascism throughout the ages. After all at the core,  it was fascists that ruled Rome and murdered Jesus. (the term fascism actually comes from ancient Roman times, the Fasces, the Roman symbol of collectivism and power. )

Join me on

VideoOnix.com    http://www.VideoOnix.com   

It is fun tech, Spacey even, and lots of info on the new business financing laws too.  If you think the bankers are a big part of the problem, the new series of laws will help put them in their place.

That is if Americans rally around freedom, otherwise we are toast.

By the way, the new investment laws called the JOBS ACT of 2012 create a lot of new opportunities for small investors too, opportunities to invest in startups.  Very big changes that everyone should know about.

One last thought, you might like this old adage I like to use

'Doing something, does something.'

Press On!

Washington State and Seattle set the nation’s highest minimum wage

Commentary by James Shott

   Since 1998, Washington State has led the nation in both local and statewide minimum wage levels, which attracted the attention of Labor Secretary Tom Perez who praised the state for having “the highest minimum wage in the country for the last 15 years.” But the full picture is much less rosy than Secretary Perez would have us believe.

   In an article on Forbes.com the Freedom Foundation’s Maxfeld Nelson put things in perspective. “Although the state’s overall job growth has remained strong since adoption of the high minimum wage, growth in industries with a prevalence of low-wage workers has slowed,” he reports. Citing Bureau of Labor Statistics and Census Bureau data he writes that while Washington State’s share of the nation’s population increased by 5.7 percent from 1998 to 2014, and its share of total U.S. jobs increased by 6.3 percent, the state’s share of U.S. hotel and restaurant jobs, which could have been expected to rise commensurately, fell by 5.7 percent. Those industries are where thousands of people the higher minimum wage was supposed to help were once employed.

   In fact, while Washington’s teen unemployment rate had roughly paralleled national trends prior to the 1998 minimum wage hike, every year since then it has been substantially higher, and at one point reached 34 percent above the national rate.

   Not content with the state’s $9.47 minimum wage, SeaTac, a small city that depends heavily on businesses benefitting from its airport, decided to raise its minimum to $15 an hour in a close vote in a 2013 election. “Although the narrow drafting of the ordinance and ongoing litigation have limited the law’s scope to a mere handful of businesses and employees,” Mr. Nelson writes, “it is still having consequences. A parking company has added a ‘living-wage surcharge’ to its rates. One hotel closed its restaurant and laid off 17 employees. Employees at another hotel reported losing an array of benefits, with one stating that the $15 minimum wage ‘sounds good, but it’s not good.’”

   And now Seattle has hopped on board that bandwagon with a phased-in minimum wage, raising the minimum to $11 an hour April 1, and the rate hike will be fully implemented by 2025. Some businesses, however, are on a sped-up schedule, like Ritu Shah Burnham’s Z Pizza restaurant.

   Even though she has only 12 employees, her business is classified as part of a “large business franchise,” putting her on the fast track to raising the minimum. “I’ve let one person go since April 1, I’ve cut hours since April 1. I’ve taken them myself because I don’t pay myself,” she told a local TV station. “I’ve also raised my prices a little bit; there’s no other way to do it.”

   One of her employees was initially excited at the advertised benefits of getting a raise and having a better life. “If that’s the truth,” he told the TV outlet, “I don’t think that’s very apparent. People like me are finding themselves in a tougher situation than ever.” He will only get to enjoy the higher pay until August, when Ms. Burnham has determined she must close her business. “I have no idea where they’re going to find jobs, because if I’m cutting hours, I imagine everyone is across the board,” she said.

   Jake Spear, the director of 15 Now Seattle, a wage hike advocate group, was unmoved at the plight of these 12 employees. It’s just one restaurant, after all. “Restaurants open and close all the time, for various reasons,” he said.

   Back during the flower child era of the 1960s and 70s, the operative slogan was, “If it feels good, do it!” That slogan has more recently been co-opted by pandering politicians, labor union leaders, and others more interested in the immediate rewards of increased numbers of fawning, adoring voters and thankful union members than with the reality of lost jobs, higher consumer prices, and struggling businesses. They have another favorite slogan, as well: “Damn the torpedoes! Full speed ahead!”

   The fallacy in the minimum wage debate is that so many people – liberal feel-gooders, people new to the workforce, people in the most basic jobs and/or with the lowest skill levels, along with pandering politicians and union bosses – don’t understand the significance of varying wage levels. It eludes them that wages must be earned, not merely given like a gift, and that higher wages require more training, knowledge, skill and experience from workers than lower wages do. There is more involved in earning a high wage than just getting hired and showing up for work. You have to contribute something positive to the business you are fortunate enough to work for, and the greater your contribution, the more you are able to earn.

   A mandated high minimum wage contributes to the entitlement mentality, where people expect to exist without having to contribute very much to their own well-being. This is not a positive development for a society that was built by generations of Americans who were hard working and self-reliant.

   Detroit and Baltimore are graphic examples of the failure of liberal policies, and now we see Washington State and Seattle heading down that same path.

Cross-posted from Observations

The First Step in Correcting 80 Years of Discrimination Against “Regular Joe” Investors - Free Market America on the comeback trail.

Tectonic Changes in US

Investor Regulations

Part One of Two

Breaking the Hold of the Corrupted Banking System.

This past week was the beginning of a sea change in the small business financial markets.  1070 days after it became law the SEC finalized Title IV of The JOBS ACT of 2012. Though it got little attention from the press the new law is expected to have a significant impact on both private investors and on of how small businesses access capital, a very positive impact that could benefit the vast majority of Americans.

At times it’s been called Reg. A+ and sometimes called IPO-Lite  the new law dramatically changes investor limitations enacted nearly 80 years ago at the beginning of the Great Depression.  The new investor regulations overcome some of the limits and impediments that one of the original exemptions to the primary securities laws, referred to as "Regulation A", faced. 

Ben and Jerry's Ice Cream Company was an Exception

With the notable exception of the business Ben and Jerry’s Ice Cream which did use Regulation A to go public the regulation has rarely been used by business'. This was due to restrictions in both the amount of money that could be raised and the cumbersome requirement that issuers such as Ben and Jerry's faced when using the exemption, in particular,  individual state filings and approvals to raise money in each of the states.  

The new regulations overcome these impediments and enable companies to issue securities throughout the country with just the SEC’s approval and the amount of money that can be raised in a single year has been increased from $5 million dollars under the old rules to $50 Million dollars (this limit can be increased by the SEC as it deems warranted).

The potential value of the original regulation A to ‘regular ol' Joe’ investors was that you are not required to be an accredited investor to participate in these offerings. This differs from most early stage offerings where it is required that investors are accredited. Since Reg A was rarely used the ol' Joe had few opportunities to benefit. In practice most businesses seeking growth capital over the past 80 years were pushed into or chose the Private Equity markets where ol' Joe investors were not eligible to participate. Thus, these high return and often times tax favored opportunities were reserved for Americas more privileged "Banker Class'. 

In this writers view it is this discriminating law that in large part has led to the bifurcation of our society into the “banker class” and the regular ol' people.  It has done great damage to our society and this step taken last week by the SEC is hopefully the first step to help rectify that. Looking ahead the next step is for the SEC to release the regulations on Title III of the Jobs Act, which will be covered in more detail in part two of this article. Suffice to say here that Title III will enable Regular ol' Joe investors to participate in the private equity markets also through crowdfunding. 

The regulations for Title III is anticipated to be released by the SEC this fall. Remember it has been over a thousand days since the law was passed and the SEC released regulations on the first two sections Title I and Title II years ago these sections established the rules for  Equity Crowdfunding and lifted the prohibition on “General Solicitation”. Since then Crowdfunding has led to the cost efficiencies of Equity Crowdfunding in particularly benefiting the commercial real estate capital markets. 

These are very complex issues and I suggest that whether you are an investor or a company seeking growth capital you are advised to seek competent financial and legal council before investing or embarking on a fundraising effort for your company. 

In the next article we'll review the details of the yet to be finalized Title III including the potential benefits that may come for the regular ol' folks. It is time long overdue for the destructive class bifurcation that these arcane securities laws have helped to cause in America. These laws are at the heart of the Divided state of America today.

Final note: At the core of crowdfunding of all types is getting the word out to the masses, I specialize in PR and Marketing associated with all forms of Crowdfunding. For more information you are welcome to subscribe to our newsletter found on the contact page of our website.   www.VideoOnix.com

What’s more important, a minimum wage hike, or fixing the economy?

Commentary by James Shott

An analysis by the Congressional Budget Office (CBO), a nonpartisan arm of Congress, shows that both sides in the debate over whether to raise the federal minimum wage from $7.25 an hour to $9.00, $10.10, or even $15 an hour have relevant points to make.

Advocates believe that the wage hike would lift nearly a million people out of poverty, increase productivity, reduce turnover and give those receiving the raise more money to spend, and that would translate to businesses recording higher sales, and an overall improvement in economic activity.

A $10.10 minimum wage, the CBO says, means 900,000 fewer people in poverty, and job losses will comprise only 0.3 percent of jobs affected by the wage hike.

The hike would boost wages for most low-wage workers, as about 16.5 million workers who make less than $10.10 an hour would see higher earnings once the higher minimum is fully implemented, which Democrats in the House and Senate have been calling for. And then, those making slightly more than the new minimum wage may feel they need a raise too, and employers would be virtually compelled to give them one in what the CBO calls a "ripple effect."

Let’s review: Advocates believe we should raise the minimum wage because the more low-wage workers make, the more they'll have to spend, and the better that will be for businesses selling products and services. People move out of poverty and spend more and consequently businesses prosper from greater sales. Our economic problems magically dissolve. Does it get any better than this?

Unfortunately for the advocates, good decision-making requires looking at all the factors, not just the ones that support a particular position.

Opponents point out that higher wages lead to higher prices, and lost jobs, and wages need to be related to the work involved and its value to the company, not artificially determined by Washington bureaucrats.

An essential factor that needs to be considered is what happens inside businesses when their labor costs increase? They must make adjustments in other expense areas, increase productivity or increase prices to maintain profitability and stay in business.

The other side of the CBO job loss estimate is that while only 0.3 percent of minimum wage workers will lose their jobs with the proposed wage hike to $10.10 an hour, and that sounds like a small effect, the number of actual people comprising that 0.3 percent is 500,000. So 900,000 will be lifted out of poverty, but more than half that number will lose their jobs. Thus, the picture painted by the CBO is somewhat less rosy than the advocates believe.

A study for the National Center for Policy Analysis by Richard B. McKenzie, explains that there are other forms of compensation to consider, nonmonetary benefits that may be as much as 30 percent over and above wages of all workers, a substantial percentage of the total compensation employees receive. Faced with higher labor costs, employers may make adjustments to these nonmonetary benefits to balance things. These benefits include relaxed work demands, workplace atmosphere, schedule flexibility, job security, and hours of work. Employers may also have to cut jobs, curb summer hiring, opt not to replace workers who leave; lower their profitability and/or raise prices to customers.

Despite what you may hear, read or think, most employers want the best employees they can get; the most productive, best trained, and most devoted workers they can find. They are willing to pay them to keep competitors from luring them away, however, there are financial limits to what businesses can pay without making other changes.

They may reduce jobs or cut worker hours, increase demands on existing employees and impose a stricter work atmosphere to increase productivity, replace workers with machines, or look for cheaper materials from overseas where labor costs are lower, affecting American suppliers.

The US economy is suffering, as evidenced by, among other indicators, the labor force participation rate, which shows that only 63.2 percent of Americans age 16 or older are participating in the labor force, the rate having fallen over the last several years to 1977 levels.

We need an atmosphere that encourages businesses to create jobs, not artificially raise the wages of the least skilled, least experienced people in the labor force, particularly when doing so will cost 500,000 jobs, and further depress the participation rate.

Among the many stunning failures of the Obama administration is its proclivity to pander to small constituencies to gain political support, all the while ignoring the broader problems facing the nation.

When an administration chooses to implement narrowly focused policies conceived for political gain, you get what the Obama administration has produced: an almost non-existent recovery from the recent recession, millions of Americans who can’t find a job, millions more who are too discouraged to keep looking and have dropped out of the labor force, and still millions more Americans on food stamps and other forms of welfare.

The Obama administration and Congressional Democrats have shown conclusively that the serious problems of the nation are far less important to them than winning the next election.

Cross-posted from Observations

What do minimum wage demographics say about raising the wage?

There has been a lot of uproar in the media lately about raising the minimum wage so that those people earning it would earn a “living wage.” But what do demographics about those earning the minimum wage tell us?

According to the Current Population Survey (CPS), which is a joint effort of the Bureau of Labor Statistics and the Census Bureau, 3.7 million workers reported earning the minimum wage of $7.25 or less per hour. Now 3.7 million is a lot of people, but when looking at the entire workforce, it’s a small portion – only 2.9 percent. Slightly more than half of them are aged 16 to 24, and 62 percent of that group are students.

Nearly 80 percent of those earning the minimum wage work part-time jobs and belong to families that earn nearly triple the poverty level for a family of four at $65,900 a year, while only 22 percent live at or below the poverty line. Three percent have finished college and obtained a degree, and 5 percent are married.

Many of those aged 25 and older work in jobs where they also earn tips, like restaurant workers, so their total pay most nearly always exceeds the minimum wage. While most do not live in middle- and upper-income families, they also are not living in poverty, having an average family income of $42,500, just less than double the $22,350 poverty line level for a family of four.

Advocates of raising the minimum wage – and many minimum wage earners who respond to the hype those advocates produce – complain that you can’t raise a family or even live a decent life on the minimum wage, so therefore it should be raised to provide a “living wage.”

When you realize that only 3 of every 100 workers earn the minimum wage, the problem doesn’t seem as dire as the advocates for a wage hike want you to believe. And when you look at the kinds of work that minimum wage earners perform, and who minimum wage earners are, it seems even less dire. These jobs require little education or training, and are overwhelmingly held by young people living at home.

Based upon the demographics, there’s no economic reason for a higher minimum wage.

You won’t find trained and educated people like electricians, mechanics, carpenters, plumbers, nurses, pilots or teachers, or lawyers, doctors, CPAs, engineers, and others who have gotten an extensive education and additional training making minimum wage, or anything near it.

But more importantly, the number of minimum wage employees who really need a “living wage” because of family or unusual personal needs is very small, and there are better ways to help them.

Assuming all minimum wage employees worked 20 hours a week, a $2 increase in the minimum wage would cost employers $2,080 a year for each employee, plus increased payroll taxes. For all 3.7 million workers, the increase would cost $7.7 billion a year, plus increased payroll taxes. Those working more than 20 hours a week adds even more costs.

Additional costs arise when those making between the old and new minimums get increases to get them to the new minimum, and when those making close to the new minimum get increases to keep them proportionately higher than the new minimum. The costs would be substantially higher than $7.7 billion. And guess who bears that cost? Employers? No.

Consumers will pay higher prices, producing reduced sales, and those higher prices will also affect those who just got a raise.

A Heritage Foundation research report released last February notes that while many advocates of higher minimum wages suggest a higher wage “to help low-income single parents attempting to survive on just a minimum-wage job … just 4 percent of minimum-wage workers – or 148,000 – are single parents working full-time, compared to 5.6 percent of all U.S. workers.”

To add billions in increased consumer costs to benefit a relative few doesn’t make sense. They need to become qualified for better paying jobs, and if that is difficult or impossible for them, and if government is going to provide welfare, those people should receive help.

“Contrary to what many assume,” the Heritage report notes, “low wages are not [the] primary problem [of the poor], because most poor Americans do not work for the minimum wage. The problem is that most poor Americans do not work at all.”

The faction promoting a higher minimum wage consists primarily of two types of people: those who do not understand or don’t care about the most basic concepts of business economics, and politicians who benefit from pandering to minimum wage earners.

Current government policies are designed for purposes other than to help people escape poverty; therefore government needs to start encouraging job creation so that people in poverty have better opportunities to take control of their own lives and work their way out of poverty.

Returning America to the land of opportunity it used to be, where people were able to go as far in life as they were able, should be President Obama’s major goal.

Progressivism transforms “welfare to work” to “welfare to not work”

 Millions of Americans get some kind of financial support from the federal government. Some of them have earned it (Social Security and retirement recipients), some of them really need it (the poor and disabled), some need it temporarily (like those who can’t find a job in the non-recovering economy) and some don’t really need it, but get it anyway.

The widely reported number of Americans in poverty is 46.2 million, about 15 percent of the population. July’s Household Survey revealed that 11.5 million were unemployed; 2.4 million will work but aren’t actively looking; and 8.2 million wanted full-time work but could only a find part-time job. And the Civilian Labor Force Participation rate was a very low 63.4 percent.

Yet CBS News reported that a survey of 2,000 employers showed one-third of them said lots of jobs go unfilled for three months or more. Many of the roughly three million unfilled jobs are in skilled trades and pay good wages, making one wonder about the current “everybody needs a college education” mania that now grips the country.

Another reason that good jobs go unfilled is that the federal government’s assistance programs make it easy to not work, and frequently pay more than some jobs.

The Cato Institute’s Michael Tanner, writing in the Los Angeles Times (Online) notes that, “Contrary to stereotypes, there is no evidence that people on welfare are lazy. Indeed, surveys of welfare recipients consistently show their desire for a job.” Yet the “U.S. Department of Health and Human Services says less than 42 percent of adult welfare recipients participate in work activities nationwide,” he continued. “Why the contradiction?”

“Perhaps it’s because, while poor people are not lazy, they are not stupid either,” he writes. “If you pay people more not to work than they can earn at a job, many won’t work.”

In looking at federal assistance programs, Mr. Tanner noted that most reports on welfare focus on only a single program, the cash benefit program, Temporary Assistance for Needy Families. But he explained that “focusing on this single program leaves the impression that welfare benefits are quite low, providing a bare, subsistence-level income.” However, most get assistance from more than one of the federal government’s 126 separate programs for low-income people, 72 of which provide either cash or in-kind benefits to individuals.

In order to analyze how the federal assistance programs affect recipients, the Cato Institute created a hypothetical family consisting of a mother with two children, ages 1 and 4, and then calculated the combined total of seven of the most common benefits that the family could receive in all 50 states.

In Washington, D.C., and Hawaii, Vermont, Connecticut, Massachusetts, New York, New Jersey, Rhode Island, Maryland, New Hampshire and California, that group of seven programs provide benefits worth more than $35,000 a year. The value of the package in a medium-level welfare state is $28,500.

Since welfare benefits are not taxed, to put the benefits issue in perspective the Cato study calculated how much pretax income the family would need to earn in order to provide the same amount as a 40-hour-per-week job. This calculation took federal and state income taxes, earned income tax credits and the child tax credit into account.

The study found that welfare pays more than an $8-an-hour job in 33 states and the District of Columbia, and that in 12 states and the District of Columbia welfare pays more than a $15-an-hour job. And, in Hawaii, Massachusetts, Connecticut, New York, New Jersey, Rhode Island, Vermont and Washington, D.C., welfare pays more than a $20-an-hour job.

Comparing the results with specific jobs, the Cato study found that in California and 38 other states, it pays more than the starting wage for a secretary and in the three most generous states, welfare benefits exceed the entry-level salary for a computer programmer.

While not every welfare recipient gets these seven benefits, many do, and some receive even more than the package used by the Cato study. “Still,” Mr. Tanner concludes, “what is undeniable is that for many recipients in the most generous states — particularly those classified as long-term recipients — welfare pays substantially more than an entry-level job.”

Welfare is supposed to be a temporary thing for most recipients, not a career. Yet in many cases able-bodied men and women do not look for work because they can do better on welfare.

Such a system discourages people from taking responsibility for themselves and their families. It creates a large faction of government dependents; a status that deprives people of self-respect and the pride of accomplishment that results when one succeeds in life because of their own efforts.

Even a low wage job is better than welfare, as it often is only a first step to better jobs. U.S. Census figures show that only 2.6 percent of full-time workers are poor, while 23.9 percent of adults who do not work are poor.

This country became what it once was not by millions depending upon government to feed and clothe them, but by Americans making themselves successful through determination and hard work. That is the goal our welfare system must have.