Our citizens are enduring the slowest economic recovery since the Great Depression. Therefore job creation must be our top priority. Making it easy for small businesses to start, to grow and expand and add jobs is a must.
This means fewer restrictions on small business and job creators. We need less regulation and a more simplified and lower cost tax structure. The state’s Business & Occupation (B&O) Tax is wrong. It taxes businesses on the first dollar they take in. It is a gross revenue tax, rather than a “net profit” tax.
Let’s give businesses a chance to create jobs.
Look at this graph, showing the percentage of American citizens working, following two different recessions. The yellow line is our “current recovery”.
“What hasn’t recovered over that same period is the labor force participation rate, which today stands roughly where it did in 1977,” according to a WSJ report.
A January 8, 2014 article in The Olympia Report states: “The report puts total employment at 50,000 jobs below pre-recession levels and says the percentage of the state’s population who are actively looking for work has hit a 30-year low. Even the decreasing unemployment rate is almost completely attributable to people leaving the job market.”
Even though 2015 closed out with a supposedly “good” level of unemployment at 5%, it’s not as rosy as some might suggest. Investor’s Business Daily reports in Jan 2016:
“The U.S., by the way, is the only major global economy to report a decline in labor participation from 2000 to 2014, according to a 2015 Organization for Economic Co-operation and Development study. Even Spain and Greece saw increases, as did Britain.
The U.S. labor participation rate now stands at 62.6%., up only slightly from 62.4% in September, the lowest level in 38 years. And it’s still way below the pre-recession high of 66.2% in 2007.“
The solution, according to the article: “we hope the next president and Congress will cut taxes, lower regulations and shrink government — encouraging all of those people now on the sidelines to get back into the game.”
A Dec. 2014 WSJ report indicates:
A U.S. economy that suddenly looks healthy—50 straight months of job gains, best quarter of growth in 11 years—is falling short in a key area.
It isn’t luring back many of the millions who dropped out of the labor market during the down times. That failing nags at many economists.
A more buoyant economy and tightening labor market were supposed to draw in those now sitting on the margins. But the probability of a worker re-entering the labor force continues to slump. Over the past three months, an average of 6.8% of those outside the labor force either found a job or began looking for one. That means people are entering the labor force at the lowest pace in records kept since 1990, down from more than 8% in 2010.
So even as the labor market has strengthened, the chance that a jobless worker will ever return to the workforce has decreased.
Labor Force Participation Rate Remains at 38-Year Low
The percentage of Americans who participated in the nation’s labor force in October (2015)remained at a 38-year low, according to data released Friday by the Bureau of Labor Statistics (BLS).
The participation rate, the percent of the population who participated in the labor force by either having a job or actively seeking one in the past four weeks, remained steady at 62.4 percent in October. This metric has not been this low since October 1977—a span of 38 years.
There were 94,513,000 Americans 16 or older who did not participate in the labor force in October, which dropped from the 94,610,000 Americans who didn’t participate in September. These are individuals who did not have a job and did not actively seek one in the past four weeks.
Read more here.
In February (2015), 92,898,000 people did not participate in the labor force. These Americans did not have a job and were not actively trying to find one. When President Obama took office in January 2009, there were 80,529,000 Americans who were not participating in the office, which means that since then, 12,369,000 Americans have left the workforce.
The July 2015 issue of The Atlantic magazine had the graphic above, and said the following: “The last time the labor-participation rate was as low as June 2015 was almost 40 years ago.”
This graphic shows 9 metrics of our failed economic “recovery”.
One more sign that our economy is failing — this headline:
6 Million More Students With Bachelor’s Degrees Than Jobs Available for Them
Too Little Freedom. Taxes too High. Too much Government Control
What happens when citizens feel they have no chance of improving their lives? What happens when there is too much government regulation? What happens where you get to keep too little of your earnings?
Take a look at France. The rich and the young flee the country.
What makes America different?
Take a listen & consider!
Making labor more expensive (higher minimum wage), or adding higher costs including the Affordable Care Act, mandatory sick leave, and other government “mandates”, do not help job creators put our unemployed people back to work.
Below is a graphic of minimum wages by state. We need to make our state more competitive in the nation for job creators, so people can go back to work in our state. High minimum wages make us less competitive in the labor market, and jobs go elsewhere.
In 1998, Washington substantially raised it’s minimum wage, via Initiative 688. It caused the state to automatically raise it’s minimum wage each year by a cost of living adjustment.
Look at this 2014 chart of minimum wages around the nation. Sadly, Washington is the most “expensive” state in the nation at $9.47/hour. Green states are higher than the federal minimum which is $7.25/hour. Washington is 30.6% HIGHER than the blue states, which equal the federal minimum. There is an even greater disparity with the red states, (lower than the federal rate), or yellow states which have no minimum wage. Is it any wonder that Washington state businesses are moving jobs to blue, red, or yellow states?
One very sad result of this is that for our youth especially, those either without job skills or those with minimal job skills, their level of unemployment is among the highest in the nation. According to the Washington Policy Center, we have the sixth HIGHEST youth unemployment in the country at 29.5 percent. The national rate for youths age 16 – 19 is 22.9 percent. How sad.
As the Washington Policy Center has noted, “Since 2002, well before the recent recession, Washington consistently ranked among the top ten states with the highest teen unemployment. The single exception was 2007, when Washington briefly broke out of the top ten to rank 12th.”
This Washington Policy Center video highlights the problems our youth are having getting their first jobs and the impact, in part, of the high minimum wage.
Here is an excellent discussion by a former CEO who created tens of thousands of jobs nationwide.
The City of Seattle increased their minimum wage to $15 in late 2014, with a graduated increase beginning in January 2015. Here’s what’s happened to the job market since then.
You can read more here.
The Columbian’s Don Brunnell added to the discussion in March 2015.
The state’s minimum wage has been adjusted annually since 2001, based on a Seattle-area cost-of-living index. From 2008 through 2013, Washington’s minimum wage increased more than 14 percent.
Washington voters thought passing an initiative 14 years ago would make life better for the poor and low-income families, but has it?
Stanford economics professor Thomas MaCurdy says, in effect, “not so much.”
In late February, he wrote in the Wall Street Journal: “The results show the failure of minimum-wage hikes as an antipoverty policy.”
MaCurdy found that a higher minimum wage leads to higher prices, a burden that falls disproportionately on the low-income families it was intended to help.
He calls the minimum wage a “stealth tax” that hurts low-income families most. “My analysis concludes that more poor families were losers than winners from the 1996 hike in the minimum wage. Nearly one in five low-income families benefited, but all low-income families paid for the increase through higher prices.”
Even in our nation’s capitol, the news is not good on entry level jobs and a rising minimum wage. From this January 2016 report:
“Washington, D.C., is beginning to look like a cautionary example of what can happen when bastions of liberalism throw caution to the wind in raising the minimum wage.
As IBD recently reported, the nation’s capital is now losing about 700 jobs a year at restaurants, hotels and other leisure and hospitality sector venues. That’s a sharp reversal from the gain of 2,000 such jobs per year the city was enjoying before it hiked the minimum wage by 27%, first from $8.25 to $9.50 an hour in July 2014 and then to $10.50 in July 2015.
Now, as D.C. employers brace for yet-another minimum-wage hike to $11.50 set for this coming July, Wal-Mart has called off two of the city’s most-prized retail developments.
Oregon on the verge of enacting the $15 minimum wage.
In Feb. 2016, the Oregon legislature approved legislation significantly raising it’s minimum wage. This Bend editorial lays out why it’s a bad move.
Oakland’s Minimum Wage Is Up, Wal-Mart Is Out
This January 2016 story highlights the sad consequences of raising wages above the economic value these entry level jobs produce.
“The minimum wage in the city of Oakland played a factor, was one of the factors, they considered in closing the stores,” Oakland City Councilman Larry Reid told the San Francisco Chronicle.
The Oakland location, which ranked among the city’s top sales-tax producers, closed its doors Sunday evening following the corporate announcement. The store’s 400 employees will stay on moving inventory through mid-February, reported the San Francisco Chronicle.
Oakland Mayor Libby Schaaf, a Democrat, has been leading statewide efforts to raise the minimum wage to $15.
“This higher city minimum wage eliminated the jobs of the very workers advocates wanted to help,” said James Sherk, a research fellow in labor economics at The Heritage Foundation.
“The true minimum wage is $0.00 an hour,” Sherk said. “Companies do not have to hire workers, and they will not pay them more than the value they create.”
The San Francisco Chronicle says two Wal-Mart locations in Oakland’s neighboring city of San Leandro, where minimum wage is $10, will remain open.
The difference between these three locations is the Oakland Wal-Mart has over a 25 percent difference in labor costs for entry-level employees than the San Leandro locations, says Mark Perry, an American Enterprise Institute scholar and professor of economics and finance at the University of Michigan’s Flint campus.
“Given the reality that Wal-Mart operates on razor-thin profit margins (only 2.8 percent last quarter), a 25 percent difference in labor costs for entry-level workers can be the difference between a store that turns a profit and a store that barely breaks even, or loses money,” Perry wrote.
Here’s a Nov. 2015 headline:
Restaurant CEO Predicts Robots Will Replace Overpriced Labor
The melancholy truth that America’s leftists, and the young people they exploit for political support, stubbornly refuse to learn is that the true minimum wage is zero. When the cost of labor is increased beyond its true value by government fiat, employers learn to make do with fewer workers.
The story goes on to interview the CEO of Panera Bread.
Ron Shaich of Panera Bread, didn’t really phrase this as a warning during his most recent quarterly earnings call. As reported by Business Insider, it was more like a confident prediction. “Labor is going to go down,” he said. “And as digital utilization goes up – like the sun comes up in the morning – it is going to continue to go up.”
“Digital utilization – you are seeing it happen in Panera today,” Shaich continued. “As it happens, it’s going to benefit larger organizations like Panera, who already have the technology in place.”
Noted economist, Dr. Thomas Sowell stated the following about minimum wages in a September 2013 article published in Townhall “Minimum Wage Madness“.
A survey of American economists found that 90 percent of them regarded minimum wage laws as increasing the rate of unemployment among low-skilled workers. Inexperience is often the problem. Only about two percent of Americans over the age of 24 earned the minimum wage.
Advocates of minimum wage laws usually base their support of such laws on their estimate of how much a worker “needs” in order to have “a living wage” — or on some other criterion that pays little or no attention to the worker’s skill level, experience or general productivity. So it is hardly surprising that minimum wage laws set wages that price many a young worker out of a job.
And businesses respond, as predicted.
This Nov. 2016 story continues to lay out the business reality. From this news report:
“While McDonald’s is hailing this as an attempt to give customers “much more control over their lives,” the locations it will be rolling out first are telling. Five-hundred restaurants in Florida, New York and California have the automated machines, and the next targets are Chicago, Boston, San Francisco, Seattle and Washington, D.C.
New York, Florida, Seattle, Washington D.C., Boston, Los Angeles and San Francisco have already put into effect legislation that will raise the minimum wage, some to eventually reach the $15 mark. This means that almost every locale seeing these kiosks has decided against elementary economics and is about to find out exactly how that works for them.”
This Nov. 2016 news report shows the sad reality as automation continues replacing entry level jobs “outsourced” due to higher minimum wages.
Following a letter to the editor of the WSJ, here is an excellent blog response to raising the minimum wage. You can read the entire piece here.
But you miss the point when you ask me rhetorically how I “would like to live on just $7.25 an hour.”
Of course I wouldn’t like to live on just $7.25 per hour. Yet even less would I like to live on $0.00 per hour, which is the hourly income of people rendered unemployable by the minimum wage.
To test the logic of your premise that a government dictation of a higher minimum wage causes all workers to be paid at least that wage, with none of them losing jobs, let me ask you if you’d like to live on the hourly pay of a street beggar who currently earns from his panhandling about $3 per hour. Assuming that you’d not like to live on such paltry pay, would you supportminimum-handout legislation – legislation that prohibits people who give to beggars from giving to any beggar any amount less than, say, $10.10 each hour? Under such legislation, a person can give a beggar nothing, but everyone who chooses to give more than $0 to a beggar must give that beggar a minimum of $10.10 or risk being fined or caged by government.
Representative Liz Pike has offered a bill that would allow for a “training wage” for young people. The reduced minimum wage is limited to 680 hours. It would apply to both part -time and full-time workers. It provides employers an incentive to give young people a chance. It gives lower skilled workers an opportunity to get those needed work skills. I support the Liz Pike bill and hope she reintroduces it in the next session.
And for skilled adults, raising the minimum wage even higher will not help. Both Bill Gates and Warren Buffett agree — raising the minimum wage will cause job LOSSES.
Seattle recently passed a $15/hour minimum wage. It is the wrong thing to do if you want to create jobs, especially for our youth. “In an interview with CNN, Buffett noted the current minimum wage of $7.25 an hour is not a living wage, but that the tradeoff for raising it could be job losses. “You do lose some employment as you increase the minimum wage. If you didn’t, I would be for having it $15 an hour.”
Seattle’s experiment with a $15 minimum wage
The city of Seattle pressed forward with a $15 minimum wage (over time). It’s a “feel good” measure that has serious consequences. Local employers will be forced to pay DOUBLE the national average minimum wage. And one of the first consequences announced in early February:
Longtime Seattle manufacturer moving 100 jobs to Nevada
The company manufactures MSR camping stoves, Platypus hydration packs, SeaLine dry bags, and Therma-A-Rest sleeping pads — hundreds of products made by workers in Seattle. Those workers had a bombshell dropped on them Thursday.
The company based in Seattle’s SODO district along 1st Avenue South is moving 100 jobs later this year to a new plant it’s leasing near Reno, Nevada. That’s 20 percent of the work force. Some employees have been offered positions, but others will have to reapply.
“We had shock, we had fear, we had sadness and grief,” said shift supervisor Julie Sarchett.
A March 2015 report — just two weeks before the $15 minimum wage takes effect, reported the following:
Other job losses.
The Washington Policy Center reported the following, after Seattle raised their minimum wage the first of several steps on the way to $15.
“Ivar’s Salmon House is also raising prices. Ivar’s is also implementing a 17% service charge in lieu of tips. The Icon Grill in Seattle is taking a different strategy; they aren’t increasing prices, but instead eliminating three weeks of paid vacation. All employees will now only earn one week of paid vacation time; before Seattle’s new minimum wage law went into effect on April 1, some long-time employees of the restaurant received four weeks of paid vacation per year. Then there is Z Pizza—that business is closing in August, leaving 12 workers without jobs. And long-time Seattle manufacturer Cascade Designs will move 100 of its lowest-skilled manufacturing jobs from Seattle to Nevada.”
A business owner speaks out
A Portland-area restaurant owner recently explained in The Oregonian how a $15-per-hour minimum wage here would spell lower total wages and less opportunity for his employees.
Lee Spectator wrote:
“I start most of my new hires at minimum wage, then, based on their performance, give them a raise within their first 30 to 60 days. I give merit raises based on performance [and] annual performance reviews….With a $15 per hour minimum wage, that would go away. I would have no room to pay them any more, and they would have no incentive to work harder.”
There is a range of what I pay based on experience, position and longevity. It ranges from minimum wage to $13 per hour. How do I make your new wage equitable for everyone? Do I keep those same principles? If so, I would have my highest hourly employee making over $21 per hour. Or do I punish my higher-skilled, longer-tenured employees (10-plus years) and pay everyone $15, giving raises only when mandated by the state or federal government?
NY Times — a 2% profit margin for restaurants?
An August 2015 NY Times story on rising minimum wages reports the following:
When Daniel Patterson first started working as a chef in the early 1980s, he said, labor used to account for about a third of total costs, and owners could enjoy a 10 percent to 20 percent profit. Now, as a partner in five San Francisco Bay Area restaurants, Mr. Patterson says labor costs eat up about 40 percent to 45 percent of the budget. At the same time, rent costs are skyrocketing.
“Even a good restaurant doing a lot of business that’s popular on every level, is bringing 2 percent or 1.5 percent to the bottom line,” he said. “It’s like a not-for-profit.”
Bill Gates is worried that as wages get too expensive, you risk that automation will begin to squeeze our simple jobs that low-end workers depend on. “Within certain limits, it doesn’t cause job destruction, but if you really start pushing it, then you’re just making a huge tradeoff,” Gates said on the Morning Joe. But the notion that bumping wages will save taxpayers money hinges on routine jobs being available at the higher wages. Gates fears that pushing too hard on wages will encourage innovations that could soon result in even more workers sidelined from the workforce.
As if to prove Bill Gates point, here’s an Oct 2014 WSJ article. McDonalds will automate some jobs, to cut costs.
Starbucks CEO Howard Schultz recently warned an increase in the minimum wage could result in a reduction in the company’s famously generous employee benefits. Schultz argues minimum wages should take into consideration the “total compensation” an employee receives, which in the case of Starbucks employees includes full health coverage, free food, bus passes, 401K, education assistance, stock rewards, bonuses and more—even for part-time workers.
Here’s a March 2016 story on automation taking away jobs, especially in light of the $15 an hour minimum wage increase.
Minimum Wage, Maximum Automation
Fast Food Robots at a Franchise Near You
Hardee’s customers won’t have to deal with Hardee’s human employees much longer. The fast food franchise is experimenting with self-service kiosks at several of their restaurants, claiming, “The self-ordering kiosk gives the customer a fun, interactive and user-friendly way to control their order.”
From an Investors Business Daily piece in August 2015:
A Washington Post story this week says that restaurant chains are “already looking for ingenious ways to take humans out of the picture, threatening workers in an industry that employs 2.4 million wait staffers, nearly 3 million cooks and food preparers and many of the nation’s 3.3 million cashiers.”
And with 30% of a restaurant’s costs coming from paying humans, “burger-flipping robots … become that much more cost-competitive if the current federal minimum wage of $7.25 an hour is doubled,” notes Post reporter Lydia DePillis.
That’s economics 101, folks.
First robot-powered burger joint stops minimum wage argument cold! Look what this burger machine does!
This July 2016 news report shows the new economic reality.
In what could be a prototype of future fast food restaurants, a burger joint in San Francisco appears to be in the works that will feature a machine that can produce 400 made-to-order hamburgers an hour — the process is fully autonomous, meaning it can slice toppings, grill a patty, and assemble and bag the burger without any help from humans, Tech Insider reported.
The machine first debuted in 2012 by Momentum Machines, but little happened until January of this year, when the company applied for a building permit to convert a retail space into a restaurant, according to Hoodline.com.
Other “mandates” hurt as well.
Investor’s Business Daily reports that the ACA is causing a reduction in hours worked for lower wage, part time workers. This graphic tells the story since 2012. The red line is “non-managers in low wage industries”.
The Affordable Care Act employer mandate applies to workers who clock at least 30 hours per week. So if companies were seeking to minimize liability, we’d likely see a drop in the number of workers with hours just above that threshold relative to the number with hours just below it.
The White House test, as amended in early 2014: “Compute the ratio of persons working 31-34 hours per week to persons working 25-29 hours per week.”
30-Hour Dividing Line
The results, seen in the accompanying chart, are striking. After leveling off for a couple of years as the economy recovered from recession, the ratio began a sharp and sudden dive in 2013. In June of this year, there were 191,000 fewer workers with usual work schedules of 31 to 34 hours in their main jobs than at the end of 2012, a drop of 8%. Meanwhile, an additional 406,000 people usually worked 25 to 29 hours, up 12%. These figures average 12 months of data because the U.S. Census’ Current Population Survey (CPS) data are volatile from month to month.
The divergent shifts on either side of the 30-hour divide coincide almost perfectly with the initial measurement period for ObamaCare employer penalties that began in 2013. Potential liability is determined a year before the penalties are actually imposed, so employers began responding in a pretty big way in early 2013.
Obama administration: too much regulation harms job creation and income growth.
From the Wall St. Journal:
Liberals are slowly discovering that the regulatory state they helped create undermines job creation and income growth, in particular for the least skilled and educated workers. This epiphany is overdue, but progress is progress if a left-right reform coalition emerges for more open labor markets.
The particular target is occupational licensing mandates, whose damage has caught the attention of the White House. Last month the Treasury and President Obama’s Council of Economic Advisers put out a report that looked at employment data from the states and concluded that “licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across state lines.”
Now we’re getting somewhere. While one in 20 U.S. workers needed government permission to pursue their chosen occupation in the 1950s, more than one in four need it today. About two-thirds of this surge came as regulations in the states expanded into more industries, meaning that florists, chefs, barbers, cosmetologists and garbage men must now be regulated as if they were pilots or physicians.
The left-leaning Brookings Institution, for example, says they resulted “in up to 2.85 million fewer jobs nationwide” and cost consumers more than $200 billion in higher prices each year.
Welfare Is The Best-Paying Entry-Level Job In 34 States
Pretend you’re fresh out of high school and you’re looking for an entry-level job, just to get some work experience. Which job do you take? A burger-flinger at McDonalds? A greeter at Wal-Mart? Or a welfare recipient?
If you live in one of 34 states, you’d be wise to just sit back and let the government give you money because in those states, the average welfare recipient makes the equivalent of more than $10 per hour.
In Washington state, our welfare benefits pay the equivalent of $13.87/hour according to the article. We are #17 in the nation. Talk about a disincentive to work! How sad that in the name of “compassion”, we are incentivizing people to not get jobs skills and be productive members of society .
As the article states: “The most distressing aspect of the present economic conditions we find ourselves mired in, is the fact that we are allowing our young people to have their dreams and their very sense of hope stolen away from them.”
Workman’s Compensation Reform
According to a communication from Senator Ann Rivers titled “Jobs Now!”;
“The truth of the situation is that Washington returns fewer workers back to the job after an injury than any other state. In fact, we have the highest number of ‘time-loss’ days in the nation at 278 days, while our neighboring state of Oregon has on average only 65 ‘time-loss’ days”.
Clearly something is wrong.
State Senator Janea Holmquist Newbry highlighted workers’ compensation as one of the key issues legislators need to tackle.
- “The truth of the situation is that Washington returns fewer workers back to the job after an injury than any other state. In fact, we have the highest number of ‘time-loss’ days in the nation at 278 days, while our neighboring state of Oregon has on average only 65 ‘time-loss’ days”.
- “Nearly every stakeholder agrees that the current workers’ compensation system is too costly and in dire need of substantial reform, said Holmquist Newbry. “The system simply isn’t working and isn’t sustainable. The Legislature’s failure to adopt common-sense reform to our industrial-insurance system is yet another millstone around the neck of this sluggish, jobless recovery.”
Washington, she noted, has the highest pension rate in the country, referring to the lifetime disability payments made to injured workers. One out of 20 workplace injury claims ends in a pension, and injured workers in Washington are also off the job from an average of almost 300 days, three times the national average, according to The Olympia Report. (1-8-2014)
One reason workman’s comp insurance is so expensive to employers is that the benefits for the worker are among the richest in the nation. Here is a chart from the Washington Policy Center comparing a worker’s “benefits per $100 of wages” between several states with aerospace jobs.
And in December, our state’s Department of Labor and Industries announced that it was raising workers’ compensation rates by 2.7 percent this year.
Is it any wonder that Boeing is moving jobs to South Carolina and else where? In late April 2014, Boeing announced it is transferring 1,100 research engineering jobs out of Washington state and an additional 200 from Southern California to lower-pay locations. A Puget Sound Business Journal Dec. 2013 report: “Up to 1,200 Boeing technology research jobs will be leaving Washington state to points south, to new sites in Alabama, Missouri and South Carolina.”
We need to reverse this trend. Our state is losing good paying jobs to states with lower regulations, lower total workman’s compensation costs, lower and simpler taxes, and a more favorable overall environment for job creators.