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Montana’s Lagging Ways

11-12 Tapping Capitalism V5comp slides

Take a look at the link that’s right above this post. It’s a pdf of three state comparison slides that we’ve been using to demonstrate the real problem Montana has with economic development. What it shows is that, while Montana consistently ranks middle of the road in economic and demographic comparisons nationally, we’re at the bottom of the pack when compared to the states around us.
If we want to fund legitimate government needs we need economic growth and jobs. If we want people to be happy and reach their potential we need to give them the opportunity for earned success. We’re lagging our neighbors in virtually all of these measures because of policies that have been put in place that may have been well-meaning at the time but that remove options and retard growth in the long term. We’re now reaping the ‘rewards’ of those policies through low wages and high unemployment compared to our neighbors.
The problems are many and the solutions are difficult. But they just grow and get more difficult the longer we wait. Here are a few things the legislature and governor should do yesterday to return Montana’s competitiveness and allow our citizens to pursue happiness and reach for their potential:

[list type=”check”]

  • Labor Reform: Become a right to work state, become an ‘at will’ state, and bring the minimum wage back to federal levels
  • Budget Reform: Reform our state budgeting process so that we spend based on priorities rather than politics
  • Legal Reform: Reform our liability system to decide based on rule of law rather than preferred outcomes of specific cases. This is the biggest single impediment to businesses and job creators coming into the state. If they can’t estimate their future liability risks they’ll move on to someplace where they can
  • Pension and Pay Reform: Most state employees are not overpaid, but too many have migrated into higher pay bands over the past ten years while lower paid workers have been left behind. Our pension system is $10 billion underfunded. Without true reform we won’t be able to keep the promises we’ve made to our public employees.
  • Land Use: The federal government owns about 30% of Montana’s lands and is increasingly trying to regulate the rest. We should decide what happens in Montana and we are capable of regulating responsible development, whether it’s in agriculture, resources, or recreation.
  • Health Care: Obamacare will raise health care costs and decrease access to quality care. We need to implement consumer-driven reforms that allow patients and doctors to make responsible decisions rather than being dictated to from Washington.
  • Education Reform: Our education funding system is a mess and our rules don’t allow parents, teachers, and students to innovate and ensure each student gets the best possible education. We need choices and new thinking, not just more money thrown at the problem.
  • Government Transparency and Accountability: Taxpayers have a right to know how their dollars are being spent and what’s being done in their names. We need the state to post spending, actual spending not just projected budgets, so that each Montanan can be a citizen watchdog and a responsible part of the process. Senator Taylor Brown has a bill to do just that. Take a look at it and tell your legislators and the governor what you think.

[/list]

That’s a pretty good start and what MPI will be working on to make Montana competitive again, but mostly to provide each of us the opportunities that free people deserve.

 

Teen Unemployment and The Minimum Wage Study (2012)

Click here for full study (PDF – 4MB)

By Glenn Oppel, MPI Policy Director

As the Great Recession persists, unemployment remains a key concern in Montana and the nation as a whole. Although the jobs situation in Montana is somewhat better than the national average, the unemployment rate for working-age teens (16-19) is historically very high. Moreover, fewer and fewer teens are actually entering the workforce.

Figures provided by the U.S. Census Bureau demonstrate that teen employment prospects are dismal:

• Between 2006 and 2011, the teenage unemployment rate in Montana almost doubled from 10.2% to 19.4%. The highest rate for that period was 24% in 2010.

• Montana teens with less than a high school education have seen their unemployment rate double from 10.4% in 2006 to 20.8% in 2011.

• The average hours worked per week for Montana teens fell from 12.1 to 8 hours – a decrease
of 34%.

• The percentage of Montana teenagers who have a job declined from 48.2% in 2006 to 36.6%
in 2011.

• From 2006 to 2011, teen employment share in all industries dropped from 6.3% to 4.2%; in leisure and hospitality from 18.9% to 13.9%; in retail trade from 10.2% to 5.2%; and for all other services from 4% to 1.6%.

A recent analysis of state-specific employment effects of the minimum wage finds that increases in the federal and state minimum wage rates have accelerated this trend. According to simulations run as part of this analysis, increases in the minimum wage from the base of $5.15 in 2006 to $7.35 in 2011 cost Montana teenagers 1,178 jobs . Teen jobless rates could get even worse as Montana’s minimum wage is adjusted annually to the Consumer Price Index (CPI) despite job market realities or unemployment trends. Montana’s 2012 minimum wage rate is currently $7.65 and will increase to $7.80 in 2013 if the CPI continues to hover at close to two percent.

Minimum wage proponents may see annual increases as “raises” to poorer workers. What they fail to realize is that minimum wage increases serve as a tax on employers that would otherwise employ more low or unskilled workers if not for higher labor costs. This is especially true for working-age teens as our issue brief will show. Policymakers in Washington, DC and Helena should consider the disproportionate impact that minimum wage increases have on our youth as they struggle to find their first job.

Press Release: Mandatory Wage Hikes Accelerate Montana Teen Unemployment

Press Release
8/3/2012
For Immediate Release
Contact:
Glenn Oppel
Montana Policy Institute
406-443-4205
Summary:
The Montana Policy Institute announces the release of updated research data on the unemployment effects of minimum wage increases on working-age teens in Montana. The unemployment rate for working-age teens has nearly doubled since 2006 and fewer are actually entering the workforce. Controlling for the job-killing effects of the recession, the research estimates that nearly 1,200 jobs were lost because of state minimum wage increases from 2005 to 2011. Unemployment rates for teens are likely to rise in coming years as the recession persists and the state minimum wage increases annually.
FOR IMMEDIATE RELEASE

Mandatory Wage Hikes Accelerate Montana Teen Unemployment

Contact:

Glenn Oppel, Policy Director

Montana Policy Institute

(406) 443-4205

Helena – A recently released study indicates that the state’s nearly 50% minimum wage hike since 2005 has resulted in about 1,200 fewer teen jobs, even after taking into account impacts of the recession.

The Montana Policy Institute released those findings in a study examining the effects of higher labor costs on low skilled workers in the state. The study controls for job losses due to the recession and finds that, as the minimum wage increases, employers are less likely to hire teen workers with fewer skills or lower education levels.

“Simple economics dictates that when the cost of something goes up, people will buy less of it,” according to Carl Graham, CEO of the Montana Policy Institute. “Mandatory increases in our state’s minimum wage hurt the very people, those who are just starting out or starting over, that we’re trying to help by reducing the overall number of jobs available.”

Teen employment in Montana is at historical highs. Census Bureau data shows an almost doubling from 10.2 percent in 2006 to 19.4 percent in 2011. Average weekly hours fell 34 percent, from 12.1 to 8 hours,during that same period. Not surprisingly, the percentage ofMontana teenagers employed also declined, from 48.2 percent in 2006 to 36.6 percent in 2011.

Montana’s minimum wage is currently $7.65 per hour, 12th highest in the nation, and one of just 10 that is indexed to inflation. Another increase to $7.80 is likely to go into effect in January, further increasing the costs of employing low skilled workers.

“The Montana Legislature does have options that will encourage employers to put teens to work by getting closer to the market wage,” emphasized Graham. “Ideally, they can repeal the expected state minimum wage of $7.80 starting in 2013 and default to the federal minimum of $7.25. If that’s not possible, they should at least suspend the inflation index that imposes annual increases even during periods of high unemployment.”

The full study is available at www.montanapolicy.org.

 

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328 Words

 

The Montana Policy Institute is an independent, nonprofit policy research center based in Bozeman.  It provides analysis and information to encourage individual freedom, personal responsiblity, and free markets in Montana.

Montana Policy Institute
67 W Kagy Blvd, Ste. B
Bozeman, MT 59715
406-219-0508
MPI is a Montana tax exempt corporation operated exclusively for the public benefit.  No substantial part of the activities of the Institute are used for the carrying on of propaganda or otherwise attempting to influence legislation, promote any political campaign, or on behalf of or in opposition to any candidate for public office.

The Flaw of Unintended Consequences

By: Carl Graham, President, Montana Policy Institute

Epiphanies are rare, especially those of the mass variety. More people are opening their eyes, though, to the fact that actions, even well-meaning ones, do have consequences; most of them unintended, and many of them bad. So begins our climb back up to the shining city on the hill.

What Frederic Bastiat called “The seen versus the unseen” is being seen by more and more people. Our tendency towards feel-good short term policy solutions has resulted in unsustainable and, more importantly, unfair and even immoral costs that are often borne by those we’re trying to help. We could fill a book with examples, but here are just a few.

Take the minimum wage…please. It’s basic economics that if you increase the price of something people will buy less of it. That applies to labor as much as it does to, oh I don’t know, let’s say grapefruit. Except that since most grapefruit are interchangeable the decreased demand applies to all of them equally. Not so with the minimum wage. People at the lower end of the wage scale are predominantly young, less educated, unskilled, and minorities. If you arbitrarily raise the cost of hiring them, it’s just simple logic that fewer will be hired since not all of them can add as much value to a product or service as the minimum wage that’s set. So we’ve seen teen unemployment rise to about 27% overall and to almost 50% among blacks. We’re basically telling these young people that their labor is worth nothing if it’s not worth some government-mandated cost of hiring them. That’s a tragic waste and lost opportunity. And it’s flat immoral to tell someone they have zero value to society if they can’t contribute at some arbitrarily set level. I have a hard time believing that’s what minimum wage proponents intended, but that’s the consequence.

Speaking of government mandates, the U.S. Constitution names three federal crimes: treason, piracy, and counterfeiting. Everything else is left to the states. And yet there are about 4,500 federal crimes spread out among some 27,000 pages of federal code. If all we had to keep track of were the Constitutional three plus state laws we’d probably be fine. Except what would lawmakers in D.C. have to do if they didn’t make laws, or more accurately, make outlaws out of all of us? It’s been estimated that the average professional commits as many as three crimes a day without even knowing it.(1) According to a recent Wall Street Journal article, federal prosecutions have gone from fewer than 200 per million U.S. adults in 1980 to nearly 400 in 2009.(2) The sheer mass of federal code has unintentionally made criminals out of all of us since we can’t possibly know everything they tell us to do and not do in our everyday lives. Unintended? Maybe. Consequential? Ask someone who’s in prison for violating a law they didn’t know existed.

How about housing regulations? Codes, zoning, and other mandates add about 25% to the cost of a new home.(3) No matter how well intentioned, increasing costs by a fourth will hardly result in affordable housing or high-paying construction jobs. We see the uniform architecture and well-ordered streets. What we don’t see are people priced out of the market and workers unable to feed their families.

And finally, the mother of all unintended consequences: health care “reform.” Here’s just one example. The National Federation of Independent Businesses reports that 57% of small businesses may drop employee health care coverage because of the new law.(4) Despite repeated promises that “you can keep your current coverage if you like it,” your coverage doesn’t have to keep you. Turns out it’s cheaper for both employers and employees to move workers to federally subsidized exchanges and have taxpayers foot the bill. I’m not so sure that was unintended, but it’s definitely a consequence.

What’s unseen is more important than what’s seen because it’s often felt by those least able to influence policy, and its effects last much longer than the immediate gratification of doling out favors at somebody else’s expense. So epiphanies are good; especially those that encourage people to make rational decisions based on all costs and all benefits, both seen and unseen.

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For Immediate Release

704Words

 

Carl Graham is president of the Montana Policy Institute, a nonprofit policy research and education center based in Bozeman.

He can be reached at:

67 W. Kagy Blvd., Ste. B

Bozeman, MT 59715

(406) 219-0508

cgraham@montanapolicy.org

 

Notes: (for ed. use)

(1) http://www.amazon.com/Three-Felonies-Day-Target-Innocent/dp/1594032556

(2) Wall Street Journal, “More are Ensnared By Criminal Laws,” p. A1, 7/23/2011

(3) National Association of Home Builders, “High Regulatory Costs for New Homes Another Obstacle to Housing Recovery, Study Finds,” http://www.nbnnews.com/nbn/textonly/2011-07-25/front+page/index.html

(4) Wall Street Journal, “The Flight to the Exchanges,” p. A12, 7/25/2011

MT Workers: Your labor has no value to us

According to a report by our illustrious and always accurate Montana Watchdog sister publication, Montana’s minimum wage is set to go up ten cents to $7.35 an hour in January 2011. What that means is that if you don’t have $7.35/hour plus, say another 20% in taxes and benefits or so worth of productivity in you, then you’re not worthy of being employed according to state law.

Working at a gas station, on a farm, convenience store, fast food restaurant (at least in Eastern Montana) and whatever you’re doing doesn’t add around $9.00 an hour to the value of whatever whatever you’re doing? You don’t deserve a job. Go on welfare. We’d rather support you than encourage you or let you build the skills for higher paying jobs.

Are you a student who just wants a part time gig for beer money or, heaven forbid, tuition if your Pell grant didn’t come through? Tough luck. Go back to your dorm and study until you’re smarter or the economy picks up.

Is there a machine or, better yet, an Asian who can do your job for less than $7.35 an hour plus benefits and taxes? We won’t let you waste your valuable time being productive, achieving anything, or just filling your time not robbing banks. We’d much rather you get unemployment and move back into the folks’ basement.

This is the inanity of a minimum wage. Low hourly-rate jobs are traditionally filled by the unskilled or the temporary labor force, or more likely the temporarily unskilled. Very few people stay at minimum wage more than a year as their work skills develop and they become worth more to their employers. But in the meantime, untold numbers of people who want a second or part time or entry level job are denied the opportunity as employers are forced to mechanize, outsource, or just forego growth because the minimum labor cost is higher than the marginal revenue of hiring someone. And we’re doing this during the largest economic downturn since the Great Depression?

Labor is subject to basic economic principles just like anything else. If the price goes up, less of it will be bought. With unemployment at historic levels and showing no signs of relief, why in the world would we tell people their labor is not worthy of us just to prop up the wage levels of a lucky few who get their foot in the door?