$15/hr Min Wage No Cure for Poverty Trap

Still more evidence of the power of the government welfare poverty trap:

Seattle’s $15 minimum wage law is supposed to lift workers out of poverty and move them off public assistance. But there may be a hitch in the plan.

Evidence is surfacing that some workers are asking their bosses for fewer hours as their wages rise – in a bid to keep overall income down so they don’t lose public subsidies for things like food, child care and rent.

Full Life Care, a home nursing nonprofit, told KIRO-TV in Seattle that several workers want to work less.

“If they cut down their hours to stay on those subsidies because the $15 per hour minimum wage didn’t actually help get them out of poverty, all you’ve done is put a burden on the business and given false hope to a lot of people,” said Jason Rantz, host of the Jason Rantz show on 97.3 KIRO-FM. (emphasis added)

The Welfare State creates strong incentives favoring government dependency over work. When confronted with these incentives, the rational choice for many people is to choose continued government dependency, or risk making themselves actually worse off by accepting higher wages or more hours.

Government welfare programs were never intended to “lift people out of poverty.” They were designed to create government dependency, and in turn that dependency translates into more power in the hands of government.

What NC’s Tax Free Weekend Can Teach Us

Tax-free weekend is fast approaching! If you’re in dire need of pencils, the weekend of August 3-5 holds much promise for you. Fear not, though, more than pencils will be free from our state and local sales tax, which ranges from 6.75 to 7.25 percent depending on the county in which you reside. Clothing, computers, and even some sports equipment will be exempt, among other selective items pertaining to “back to school” needs.

The media always seems to be excited when North Carolina’s weekend without a sales tax comes around. Story after story encourages parents and consumers in general to take advantage of the wondrous event. And, don’t get me wrong; it is a good event. I’ll probably be out there with everyone else, buying pencils for my final semester of college.

This coming tax-free weekend got me thinking, though. What underlying economic reality emerges during the blissful weekend? People become rather excited about the notion of purchasing goods in the marketplace while not being coerced by the government to pay a pesky sales tax. That is a cause for some excitement. It seems that, in today’s era of big government, every activity (even some inactivity, sadly) is liable to be taxed. While most of us realize that the government’s taxing power is a legitimate function, that legitimate function has been used to the max, taking away too much of our money with increased frequency and intensity. With that in mind, there should be no confusion as to why people become excited about a tax-free weekend.

But, perhaps we can take away an even larger, more significant truth from our state’s tax-free weekend. What does the event imply about the relationship between consumer participation in the economy and taxes? It seems to suggest that people are incentivized to enter the marketplace and spend their money when the tax burden (even a seemingly small burden of 6.75 percent) is removed. Imagine that! People will typically spend more money while engaging in economic activity when they know they will not be taxed. Politicians should take note.

People really don’t like taxes. And when those taxes are nullified, even for a weekend, consumers respond, spurning greater economic participation and, if stretched over the long run, economic growth.

Our great nation and state remain mired in difficult economic times. Perhaps our elected officials should consider the reaction of consumers during a tax-free weekend to find solutions to our economic malaise. Taxes have the tendency to discourage economic activity, whereas reducing or eliminating taxes have the power to do just the opposite.

So, when you are out buying pencils for your young scholar or scholars during this coming tax-free weekend, think about the incentives and disincentives taxes (or, lack thereof) have on economic growth and prosperity.

NOTE: The original post only mentioned the state-imposed segment of the sales tax of 4.75, however the sales tax holiday applies to both the state and local sales taxes.

Upset About UNC Tuition Hikes? Here’s a Free Economics Lesson

Here is a free economics lesson for these college students protesting proposed tuition hikes.

The price of a good or service (such as tuition and fees for college) is set where supply equals demand. When that price is allowed to be set in a free, competitive market, the price will bring into harmony these factors.

But when government interferes with the function of the price system, we get shortages, excess inventory and – as in this case – skyrocketing prices. Much like our government-managed health care industry, the market for a college education is highly distorted by government subsidies to the schools, direct student aid, and cheap government loans.

These factors artificially inflate demand, and create a sizable wedge between what the consumers (students) pay for the product and the income taken in by the producers of that product (the universities). The inevitable result is skyrocketing prices completely out of line with true consumer demand. These rising prices arise in large part because universities can “invest” in greater and greater amount of inputs that create little value to the consumer (i.e. duplicative and little-sought after degree programs or “research centers”).

But when part of that revenue stream (ie. state subsidy) takes a small dip, the universities scramble to hike the price because they don’t feel any real need cut back on inefficient expenses, knowing that the subsidies will once again rise and that other government programs like direct student aid and cheap federal loans will keep flowing in the near future, because politicians must “do something” about the rising cost of tuition. The whole process plays itself out in a never-ending upward spiral of tuition while the quality of the product declines.

The protesters would be much more effective if they first understood the root causes of skyrocketing tuition.

New Law Gives NC Breweries a Boost

In a piece of welcome news, Governor Perdue signed into law a piece of legislation that gives breweries in the state increased access to customers.

HB 796, which passed the legislature in the late November special session, allows all licensed breweries in North Carolina to sell beer and offer on-site tastings. Previous law restricted these events and sales to breweries producing less than 25,000 barrels per year. There is speculation that the legislative action is designed to attract beer producers Sierra Nevada and New Belgium to the state.

The bill is expected to boost the state’s already thriving craft brew industry. There are currently dozens of small breweries in the state, and Asheville, NC was named “Beer City USA” in 2010.

The deregulation provisions were included in a bill that also altered funding for Cherokee County Schools and allows high school students to take non-credit courses at community colleges. The law takes effect immediately with Perdue’s signature.

Let us hope that legislators continue to create jobs this way: deregulation, not corporate welfare deals. This quote from a recent News and Observer article on the issue gave an interesting perspective from a North Carolina entrepreneur on how increased competition will increase benefits for consumers and improve his industry in the state:

Oscar Wong is the founder of Asheville’s Highland Brewing Co., the state’s largest brewery, producing 23,000 barrels a year. He acknowledges the new midsize breweries would cut into his market share.

“As far as competition for us, it may kick our (butt) a little bit, but it’s the American way,” he said.

But Wong, a member of the local Chamber of Commerce, felt conflicted because it would benefit his community.

“As they say, pioneers get shot at more,” he said. “We’ll just have to keep up and do our thing.”