But new research shows that raising the minimum wage for tipped employees does little to help poor or low-income families. The federal minimum wage for tipped workers isn’t really $2.13. It’s the same $7.25 as for other workers, but it’s paid by tipping customers as well as employers. Under federal law, employers must pay a cash wage of at least $2.13 and top it up to the regular $7.25 minimum wage if tips aren’t enough to make up the difference. Employers are on the hook to pay $2.13 even if tipped minimum wages earned per hour are much higher, as they often are.
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First, each 10% increase in the tipped minimum wage reduces the employment of tipped restaurant workers by 0.8%. That’s not a huge effect until we consider that recent proposals would increase the tipped minimum wage dramatically. For example, raising the $2.13 tipped minimum wage to the regular minimum of $7.25 could reduce tipped restaurant employment by more than 20% within a year or two.
Second, we examined the direct effect of increases in state tipped minimum wages on the likelihood that families were poor. Consistent with findings for general minimum wages, there is no clear evidence that increases in the tipped minimum wage reduced poverty or the incidence of low income.
Anthony Gill reveals some of the negative consequences of subsidies.
Mary Harrington busts the myth that climate change contributes to childhood obesity. A slice:
This is sensible stuff — but the study was reported as stating that climate change had caused reduced fitness in children. The study itself pointed to Covid lockdown measures, among many other factors, as having exacerbated an already-existing issue of poor fitness in children. But headlines suggested children are staying indoors because it’s too hot and that this is why they’re less fit than their parents.
You don’t have to be a scientist to know that reduced aerobic fitness in this generation of children long precedes measurably rising outdoor temperatures of the kind that could be attributed to climate change. Here’s a report from 2013 on the topic, for example, that describes aerobic fitness in children decreasing every decade from 1975 onward.
Nor do you have to be a scientist to come up with multiple factors that are plausibly contributing to this unhappy situation. Anyone with young children, or just rudimentary powers of observation, needs only a moment’s reflection to think of multiple ways in which 21st-century life militates against physically active childhood, compared to the world just a few decades ago. But we mustn’t let minor considerations like the patent absurdity of a claim, or its rampant misreading of an actual scientific paper, get in the way of a clickbait mass-media narrative on a much-hyped topic.
This is a consequence of the usual Chinese policy suspects. Unpredictable pandemic lockdowns continue to sweep the country under President Xi Jinping’s “dynamic zero-Covid” policy, with the resulting swings in consumer confidence and output. A crackdown on real-estate speculation is catching ordinary households in the crosshairs, and these consumers are seeing their accumulated savings and wealth evaporate as the property market in which they’d invested so heavily sinks. Property is the main source of savings for many Chinese families.
All of this makes China perhaps the only large economy currently experiencing a genuine disruption in economic demand. Most of the West is suffering the inflationary consequences of policy efforts to cure demand-side ills that didn’t exist, while governments hobbled the supply side with lockdowns, regulation and heavy taxation.
Cato’s Jim Dorn looks deeply into the Portman Report on China and the Fed. A slice:
However, the threat to U.S. national security and economic progress from the science and technology side does not easily transfer over to the Fed and monetary policy. The Portman Report, released in July 2022, does not offer compelling evidence that China is a threat to the Fed. Although there may be some cracks in the Fed’s information security system and compliance protocol, there is no crisis.
Fed Chair Powell, in his letter to Portman, makes a strong case that a free market in ideas—involving exchanges of scholars and the sharing of macroeconomic models—is beneficial to both the United States and China.
Radical and totalitarian movements ultimately seek to eradicate these social relationships because in their top-down politics of control, the vibrancy and strength of social freedom must be destroyed for the totalitarian blueprint to emerge. The best of post-1789 art and literature has been attuned to this reality. The anti-revolutionary and anti-utopian literature of the twentieth century, in particular, reveal to us the depths of the attempt of totalitarian movements to destroy those social relationships and the spirit of love (Boris Pasternak’s Doctor Zhivago is one of the finest examples of this).
Edmund Burke and the Perennial Battle, 1789-1797, is a nice selection of Burke’s last decade of writing. Daniel Klein and Dominic Pino have a commendable introduction that sets the tone and directs the readers on how to engage with Burke more fruitfully. And after reading through this slim volume of Burke’s writings, one can graduate to his fuller collected writings to dive more deeply into a perennial thinker.
GMU Econ alum Dominic Pino reports that “truck-chassis industrial policy isn’t going well.” Two slices:
American companies have been unable to purchase enough chassis to meet their needs partly because the federal government instituted a combination of tariffs and duties in 2021 that amount to an effective ban on importing truck chassis from China, where the world’s largest truck-chassis manufacturer is located. Domestic manufacturers were left to pick up the slack.
I wrote against these tariffs in November 2021. In that article, I said that domestic manufacturers were struggling to meet America’s chassis needs, and orders would only begin to be delivered in the second half of 2022.
Well, it’s the second half of 2022, and domestic chassis manufacturers are still behind.
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The “make them here instead” mantra popular with politicians hasn’t worked for truck chassis. Americans in need of chassis have simply been stuck without them in many cases, and it looks like many will continue to be without them for at least the next year and a half.
Industrial policy in action.
Writing in the Telegraph, Szu Ping Chan explains that “Xi’s zero-Covid policy sparks economic chaos in China.” Three slices:
Navigating the maze-like showroom that is an Ikea store has always been notoriously difficult. But last weekend, hundreds of shoppers in Shanghai found themselves barging their way past security guards just to get out of the doors at the Xuhui district outlet.
On social media it looked like a closing-down sale or Black Friday scrum. But these shoppers weren’t in search of a bargain Billy bookcase. They were simply trying to leave the store.
China’s draconian approach to tackling Covid-19 has previously left some shoppers trading their handbags for sleeping bags. In Shanghai, those unfortunate enough to fail in the escape from Ikea were trapped for hours behind the locked exit as authorities ordered swab tests for all customers, all because one shopper was in close contact with someone with the virus.
They’re not alone. Horror stories have emerged of people being locked in Uniqlo for 48 hours or being trapped in Disneyland as authorities mass-tested tens of thousands in the pursuit of Covid-zero. “I never thought that the longest queue in Disneyland would be for a nucleic acid test,” one disgruntled theme park-goer said last year on social media.
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An even bigger worry is the growing number of young people who cannot find a job. A world where policymakers keep switching economic activity on and off has caused uncertainty among businesses. Many can’t be sure how many staff they’ll need today, let alone in a year’s time.
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Uncertainty surrounding the market means nobody is building at the moment. And an increasing number of Chinese homebuyers are refusing to pay mortgages on properties they have bought because developers can no longer finish them.
Anthony LaMesa tweets: (HT Jay Bhattacharya)
I often think about this hotel housekeeper who got a €280 fine — an outrageously large fine — for mistakenly wearing a surgical mask instead of an FFP2 mask on an Italian bus. How many lives were saved by fining this hardworking woman who made an honest mistake?
