Minimum Wage - Robots Replacing Workers

The minimum wage laws in this country are daggers to the heart of opportunity for our poorest and least skilled citizens.  Those in favor argue that it helps the poor because they get paid more, and that there is no adverse impact on the economy, overall.  I disagree, but want to focus on the very people that the left proposes to help, the unskilled.  Take South Africa for instance.  The ministry of labor sets minimum wages in various employment areas.  But the labor unions in South Africa are closely allied with ruling ANC and they impose wage rates even on non-union sectors of the economy.  As a consequence, there is massive unemployment in South Africa amongst the largely unskilled work force, because they are not skilled enough to be affordable to businesses.

Another way that minimum wages hit the unskilled is through automation.  It is no coincidence that the world leader in viticulture technology is France, where there are high minimum wages.  The best robots for picking and sorting grapes are used there.  I have personally witnessed McDonald's experiments with outsourcing the person who takes my order to who knows what country.  No less an authority on technology than Bill Gates makes this same point, businesses will invest in technology to displace entry level workers as minimum wages rise.  We risk having no entry level positions to train up our young people if we continue to boost the minimum wage.   The minimum wage isn't intended for a work force of older workers with families to support.  They should be expected to have amassed skills that would allow them to command a higher wage.

Product on sale above, replaces French workers pictured below.

As a compassionate society, those who need help but only make the minimum wage are helped through programs like Earned Income Credit, food stamps and medicaid.  We should carefully craft these programs so that there is an incentive for the working poor to make more money.  In other words, benefits should be phased out gradually as income rises.  But to impose the burden of helping the working poor on employers is unfair and will only result in more automation and fewer such jobs.  Even if the economy overall benefits from the improved efficiency such automation brings, raising the minimum wage will only exacerbate income inequality.

Locally, Todd Gloria proposed raising San Diego's minimum wage to $14.50 an hour.  Given that neighboring cities would not be bound by the law, the loss of San Diego jobs to Poway for instance is inevitable should this proposal become law.  Businesses that can relocate outside city limits will reap a windfall by comparison.  It is hard to see how this can help our city.  Big corporations such as Petco and Websense have relocated jobs to Texas.  Why would San Diegans want to provide more incentives for job losses?

This is a major reason why I so vehemently oppose David Alvarez for mayor and support Kevin Faulconer.  Alvarez is on the record as supporting minimum wage increases.  If he is mayor, there will be no stopping organized labor from prevailing in making San Diego a hostile location to start businesses and create jobs.  I admit that I have a personal interest in this issue.  My son works at minimum wage as a UFCW 135 member and I don't want him to lose his job.  Do we really want a city with far less opportunity for the unskilled and entry level job seekers?  I don't and voted for Kevin Faulconer because of it.

When Pension Reform Goes Bipartisan

Eventually the mathematical results of under-funding ever more generous pension benefits for state and local employees becomes a problem for Democrats too.  Illinois legislators are expected to vote this week on pension reform that would pare back pension benefits in three important ways.

• Reducing cost of living increases.
• Increases retirement age.
• Capping the salary amount available for pension calculations.

There are few other means short of bankruptcy that can be used to reduce pension obligations.  However, Illinois has rejected attempts at pension reform before, so the path to success in the legislature is not certain.  Of course, the state employee unions are waiting to sue if a pension reform measure passes.  This is one of the most important long term issues for state and local government.  Without pension reform here in California and San Diego, the state and city governments will eventually have no money for basic services.  Rahm Emmanuel, not known for his tea party rhetoric, made the same point.

The [state] agreement also is expected to provide a template for Chicago Mayor Rahm Emanuel to follow for his city, which for years has paid far less into its retirement system than needed to keep it solvent. City payments to local pension funds are set to more than double to nearly $1.1 billion starting in 2015. Mr. Emanuel has warned that if changes aren't made, the city will face a combination of property-tax increases and cuts in services, equating the scheduled increase to the cost of having 4,300 police officers on the street.

It is important to note how a deal was reached among Illinois legislative leaders.

Labor officials excluded from the talks found out about the eventual Wednesday breakthrough from reporters. 

. . .   

“I think it’s going to be difficult,” said Sen. Linda Holmes, D-Aurora, a member of the pension conference committee and supporter of labor’s arguments in pension talks. “I’m uncomfortable they didn’t have a seat at the table when they’re the people who’ll be impacted by this.”

If Democratic politicians feel the need to exclude labor from pension reform talks, then the situation must certainly be dire.  Illinois is paying a 2% premium on its bonds while pension reform remains unresolved. (California and Michigan are paying about a half-percent premium, source: WSJ.)  

This is one of the key issues of our day, because the proper functioning of government is being put at risk by the expense of public employee pensions.  I support Kevin Faulconer for mayor of San Diego, primarily because I am convinced he can be trusted to continue the fight to reform pensions that was approved by voters under Proposition B.  Alvarez' response on this issue does not "inspire confidence" as a U-T editorial put it.  I would prefer to deal with our pension problems before they become a crisis like Illinois' and Chicago's.

What You Should Be Reading

• Victor Davis Hanson provides the most complete compendium of Obama-fail I have seen assembled in one column.  
• In the same vain, Charles Krauthammer outlines the utter lawlessness of this administration and its Democratic allies in the Congress.  The destruction of the rule of law under Obama is frightening, it troubles me greatly that this doesn't get more attention, we are on the path to dictatorship; our long history has made us believe we are immune, we are not.
• Local blogger KTCat reminds us of the real spirit of Thanksgiving in light of the President's request that we "talk about healthcare" at Thanksgiving dinner.  After the ACA fully crashes and burns, what will you do? Great question. 

California - Arizona and Tourism

Light blogging for the next few days, because we are heading to Arizona.  To launch this road trip here Swell performing a song that only recently became a favorite, "California, Arizona."

I am told that open carry is fairly common in Arizona, as well as some other cultural differences from my home town of San Diego.  That should provide fodder for a future post as well.

We are heading for the tourist resort town of Sedona.  Here in San Diego, the tourism dollars are apparently not flowing in as fast as our city fathers the hoteliers would like.

The city council has bought into this line of reasoning and approved the release of the Tourism Marketing District dollars even though a lawsuit challenging the legitimacy of the tax is pending.  The council vote was 8-1 in favor of releasing the money.  David Alvarez continued supporting Bob Filner's position that the money should not be released.  I also oppose the tax, but not for the reasons that Filner did, I just think the tax itself is illegal.

I would hope that the hospitality industry leaders would come to their senses over the current structure of the tax and propose a different process that doesn't leave them open to legal challenge, and indeed disengages them from city council politics.  If they don't, then the likes of Filner and Alvarez will continue to demand concessions demanded by labor unions in order for funds to be released to promote tourism.

I would like to see Kevin Faulconer propose an alternate way ahead, as well.

What You Should Be Reading

• Legal Insurrection because it is entertaining, and I was extensively quoted on the mayoral race, dang it.
• California rejects the President's plea to let people keep their insurance, because the fix is only temporary.  H/T LegalInsurrection.  

Update: Faulconer in Early Lead, Fletcher and Alvarez Neck and Neck

Honestly, I could have written that headline two days ago, but the early returns almost exactly match the late polling:

Faulconer 45% (Last poll 40%)
Fletcher    25% (Last poll 24%)
Alvarez    23% (Last poll 22%)

UPDATE with overnight results.

Faulconer: 43.6%
Fletcher:     24.3%
Alvarez:      25.6%

Looks like Alvarez takes second, but there are still 35,000 ballots to count. Headline is that Alvarez is the second place finisher.

End of Update.

I don't think this bodes well for Alvarez as he needs a very strong showing among Latinos to beat Fletcher.  However, given the close start it will be a long night.  I don't intend to stay up for it, because Faulconer is going to face a run off and that's what I needed to know.

Faulconer tweeted about his early lead:

KF 45 percent!! pic.twitter.com/jMxexPCZYU
— Faulconer for Mayor (@Faulconer4Mayor) November 20, 2013

San Diego Linkage Fees Do Nothing for Affordable Housing

The need for a Republican mayor to veto leftist nonsense was on display Monday, when the San Diego city council passed whopping increases in the "linkage fees" on new development that ranges from 377% to 744%.  The fees are supposed to help provide affordable housing when new development results in low paying jobs.  Don't ask me how creating jobs makes people less able to afford housing.  Example, Joe didn't have a job.  A developer creates a new business.  Joe gets a job.  Joe may still not be able to afford a swanky La Jolla condo, but he is certainly in better shape than when he didn't have a job.

At a time when our local economy is still not in great shape the Democrats on the city council don't seem to care.  Consider this quote from a Democrat mayoral candidate:

“If you don’t want to pay the fee ... don’t create low-paying jobs,” lectured Councilman David Alvarez.

Don't create jobs?  Is that really Alvarez' message?  With the minimum wage set to rise again, I would think that Democrats would be in favor of any new jobs.  But since the minimum wage also puts some people out of work, I guess the Democrats prefer folks on welfare.  Actions like increasing minimum wage and discouraging development are a great way to keep people on the bottom rung of the economy from getting jobs.  It was good to see Kevin Faulconer opposing this bill. 

Meanwhile, the fees do nothing to deliver affordable housing.  

. . . both sides agreed that the fee increase does little to fill a large affordable housing void in San Diego. The city has a waiting list of about 45,000 people for affordable housing, but has lost $34 million per year due to the elimination of redevelopment agencies and federal and state budget cuts. The current linkage fee generates about $2.2 million per year.

What makes housing unaffordable are a combination of bad federal and local policies.  Various federal policies caused a bubble in the housing market and the there are still efforts to prop up prices.  If we want the poor to be able to have housing, why make it more expensive?  At the local level, limits on density and new housing development limits the supply of housing, driving up prices by depressing the stock of available housing.  City government will never have enough money to supply affordable housing, only the private sector can do so, and only with a profit motive.

What You Should Be Reading

• Dean unmasks the Corporatism that has come to define modern leftism.  That the Occupy crowd doesn't see that the Democrats are the main enablers of corporate thievery is a tribute to the failure of their critical thinking classes in college.  
• Speaking of health insurance, Suck it up millennials, health insurers are using you to pay old folk's medical bills while you live in your Mom's basement, but still managed to vote for Obama who arrange the whole deal.
• KT posts a not-so-pretty picture and a link to the debt bomb that Millenials in Chicago will inherit from decades of Democrat rule.

Unions, Democrats, Shipbuilding and the Mayor's Race

An interesting development in the San Diego mayoral race is the way labor unions are splitting their endorsements between the two main Democrats in the race, Alvarez and Fletcher.  Fletcher features endorsements largely from government affiliated employees unions such as these (not all inclusive, from his website):

• San Diego City Firefighters/IAFF Local 145
• San Diego Police Officers Association
• San Diego Lifeguards Association/Teamsters, Local 911
• San Diego County Probation Officers Association
• San Diego Deputy City Attorneys
• Peace Officers Research Association
• San Diego Municipal Employees Association

Governor Jerry Brown has also endorsed Fletcher, which doesn't surprise me because he seems beholden to the public sector unions.

Meanwhile Alvarez is more heavily favored by the private sector unions.  The San Diego-Imperial County Counties Labor Council has endorsed Alvarez.  Our home has received multiple phone calls from UCFW 135 asking for support for Alvarez.  The county Democrats also endorsed Alvarez, perhaps not trusting Fletcher, the former Republican?

In terms of substantive issues, the dispute over land use in Barrio Logan that pits some residents against shipbuilding interests.  The City Council adopted a community plan on September 17 opposed by shipbuilding interests who say it will eventually kill jobs in San Diego.  Alvarez has supported and Faulconer opposed the plan.  Why do shipbuilding interests oppose the plan? According to Andrew Keatts at VOSD:

Really, what’s in dispute within the plan is its attempt to separate industrial and residential areas by creating a commercial buffer in a small area northeast of the shipyard. Homes are explicitly banned from being built in that area – meaning no waterfront condos.
That area’s currently occupied by an array of industrial companies, many of which service the shipyard in one way or another. One of those companies, for instance, is Cal Marine Cleaning, which does mechanical cleaning for the three major shipbuilding companies, BAE Systems, Continental Maritime of San Diego and General Dynamics NASSCO.

Keatts goes on to say that there is a "slippery slope" argument, that eventually the buffer zone will be turned into housing, which will in turn lead to a demand to remove all industrial activity from Barrio Logan.  What is also obvious is that killing off support industries is a way to strangle the shipbuilding and repair industry.  It seems obvious that the plan is a threat to the industrial ecosystem of the area, which of course hurts jobs creation.  From the U-T:

Shipyard leaders have expressed concern that the new plan could drive up suppliers’ costs, make San Diego less competitive and possibly prompt the Navy to contract ship building elsewhere.

Although Alvarez and Faulconer, as city council members, have garnered the most attention on this issue, Fletcher has endorsed a more restrictive plan than even Alvarez endorsed.  Democrats could once be counted upon to at least favor economic plans that helped unionized industries, like shipbuilding.  What has changed?  The Democratic coalition has become more and more a coalition of environmentalists, government employees and beneficiaries.  Of necessity, that makes the Democratic party the enemy of free enterprise.  (Fletcher pictured at right a "Protect Our Jobs" rally, courtesy KPBS.)

Looking for shipbuilder and fellow blogger Dean to weigh in.


What You Should Be Reading

• The train wreck of the ACA websites' debacle, but the news has seemingly been everywhere, so I don't believe you missed it.  Of course, Dean has his own snarky take on the whole fiasco. Of course, we are also seeing massive spinning about the savings some folks are seeing, but W.C. Varones shows how the media lies about that too. DooDooEcon publishes a nice little map showing winners and mostly losers by state.
• Don't believe that the government's tech woes will be solved by whiz kids from Silicon Valley.  Veteran program managers of global systems will tell you that forcing the system to operate correctly only when data is available from all sources is a poor practice.  But the political decision to prevent revelations on the amount of subsidies people are getting drove technology in the wrong direction.  See Reuters for an accessible explanation.  This is not about technology, but politics overwhelming good program management.