Monthly Archives: June 2014

High minimum wages hurt the poor; try a negative tax

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It is generally thought (correctly I suspect) that welfare is a poor way to help the poor as it robs them of the dignity of work. Something like welfare is needed to keep the poor from starving, and the ideal alternative to welfare seems to be a minimal job — that is one that is easy enough for a minimally skilled worker to do it, and high-paying enough so that this worker is able to support a family of 4. Such jobs are hard to produce, and hard to sell to those currently getting welfare — that is those getting paid the same amount for no work at all. I’d like to propose something better, a negative tax along with the removal of our minimum wage.

I suspect that our current system of minimum wage hurts the desperate poor and middle class at least as much as it helps the working poor. One problem with it is that it flattens the wage structure, hurting the ego and incentive of those who work harder or with higher skills. The minimum wage encourages lax work, and reduces the incentive of workers to improve. A higher talented or more experienced worker should make more than an unskilled beginner, but with the current minimum wages they hardly do. Our high minimum wage also hurts the desperate poor by cutting the lower rungs off of the employment ladder. Poor, unskilled, young folks are not hired because it will take a while before they’re productive enough to justify the minimum wage. And anyway, why should the minimum wage number assume that every worker lives independently (or should) and that every job deserves to support a family of four. Most unskilled workers are neither independent nor are they supporting a family of four. Most unskilled workers are not independent, nor are they the sole support of a family.

I suspect that people push for high minimum wages as a way to help without giving themselves. The cost is borne by the company, and companies are seen as evil, faceless oppressors. They prefer not to notice that the a high minimum wage creates high unemployment in central cities and other low skill areas, like Detroit before bankruptcy, and Puerto Rico today. In Detroit before bankruptcy, the living wage was set so high that companies could not compete and went bankrupt or fled. The ones that stayed hired so selectively that the unskilled were basically unemployable. Even the city couldn’t pay its wages and bills.

A high minimum wage increases the need for welfare, as some workers will be unemployable — because of disability, because of lack of skill, or from an ingrained desire to not work. The punishments a community can mete out are limited, and sooner or later some communities stop working and stop learning as they see no advantage.

The difficulties of taking care of the genuinely needy and disabled while the lazy and unskilled has gotten even some communist to reconsider wealth as a motivator. The Chinese have come to realize that workers work better at all levels if there is a financial reward to experience and skill at all levels. But that still leaves the question of who should pay to help those in need and how.  Currently the welfare system only helps the disabled and the “looking” unemployed, but I suspect they should do more replacing some of the burden that our minimum wage laws places on the employers of unskilled labor. But I suspect the payment formula should be such that the worker ends up richer for every additional hour of work. That is, each dollar earned by a welfare recipient should result in less than one dollar reduction in welfare payment. Welfare would thus be set up as a negative tax that would continue to all levels of salary and need so that there is no sudden jump when the worker suddenly starts having to pay taxes. The current and proposed tax / welfare structure is shown below:

Currently someone's welfare check decreases by $1 for each dollar earned. I propose a system of negative tax (less than 100%) so each dollar earned puts a good fraction in his/her pocket.

Currently (black) someone’s welfare check decreases by $1 for each dollar earned, then he enters a stage of no tax — one keeps all he earns, and then a graduated tax. I propose a system of negative tax (red) so each dollar earned adds real income.

The system I propose (red line) would treat identically someone who is  incapacitated as someone who decided not to work, or to work at a job that paid $0/hr (e.g. working for a church). In the current system treats them differently, but there seems to be so much law and case-work and phony doctor reports involved in getting around it all that it hardly seems worth it. I’d use money as the sole motivator (all theoretical, and it may not work, but hang with me for now).

In the proposed system, a person who does not work would get some minimal income based on family need (there is still some need for case workers). If they are employed the employer would not have to pay minimum wage (or there would be a low minimum wage — $3/hr) but the employer would have to report the income and deduct, for every dollar earned some fraction in tax — 40¢ say. The net result would be that the amount of government subsidy received by the worker (disabled or not) would decrease by, for 40¢ for every dollar earned. At some salary the worker would discover that he/she was paying net tax and no longer receiving anything from the state. With this system, there is always an incentive to work more hours or develop more skills. If the minimum wage were removed too, there would be no penalty to hiring a completely unskilled worker.

At this point you may ask where the extra money will come from. In the long run, I hope the benefit comes from the reduced welfare rolls, but in the short-term, let me suggest tariffs. Tariffs can raise income and promote on-shore production. Up until 1900 or so, they were the main source of revenue for the USA. As an experiment, to see if this system works, it could be applied to enterprise zones, e.g. in Detroit.

R. E. Buxbaum, June 27, 2014. I worked out the math for this while daydreaming in an economics lecture. It strikes me as bizarre, by the way, that one can contract labor for barter, pay a pizza for two hours labor, but you can’t contract labor for less than the minimum cash-rate $7.45/hr. You can go to jail by paying less than this in cash, but not in food. In Canada they have something even more bizarre: equal wages for equal skills — a cook and a manager must earn the same, independent of how well the cook cooks or how needed the work is. No wonder violent crime is higher in Canada.

17+ years of no climate change

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Much of the data underlying climate change is bad, as best I can tell, and quite a lot of the animosity surrounding climate legislation comes from the failure to acknowledge this. Our (US) government likes to show the climate increasing at 4-6°C/century, or .05°C/year, but this is based on bad data of average global temperatures, truncated conveniently to 1880, and the incorrect assumption that trends always continue — a bad idea for stock investing too. We really don’t have any good world-wide temperature going back any further the 1990s, something the Canadian ice service acknowledges (see chart below) but we do not. Worse yet, we adjust our data to correct for supposed errors.

Theory vs experiment in climate change data

Theory vs experiment in climate change data; 17 years with no change.

High quality observations begin only about 10 years ago, and since then we have seen 17+ years of no significant climate change, not the .05°C per year predicted. Our models predicted an ice-free Arctic by 2013, but we had one of the coldest winters of the century. Clearly the models are wrong. Heat can’t hide, and in particular it can’t hide in the upper atmosphere where the heat is supposed to be congregating. The predictive models were not chaotic, and weather is, but instead show regular, slow temperature rises based on predictions of past experimental data.

In Canada and Australia, the climate experts are nice enough to put confidence bars on the extrapolated data before publishing it. Some researchers are also nice enough to provide data going back further, to late Roman times when the weather was really warm, or 20,000 years ago, when we had an ice age (it’s unlikely that the ice age ended because of automobile traffic).

Canada's version of Ice coverage data. The grey part is the error bar. Canada is nice enough to admit they know relatively little of what the climate was like in the 70s and 80s. We do not.

Canada’s version of Ice coverage data. The grey part is the error bar. Canada is nice enough to admit they don’t know what it was like in the 70s and 80s. We do not.

So what’s so wrong about stopping US coal use, even if it does not cause global warming. For one, it’s bad diplomatically — it weakens us and strengthens countries that hate us (like Iran), and countries like China that burn lots of coal and really pollute the air. It also diverts the US from real air pollution and land use discussions. If you want less air pollution, perhaps nuclear is the way to go. Finally, there you have to ask, even if we could adjust the earth’s temperature at will, who would get control of the thermostat? Who would decide if this summer should be warm or cold, or who should get rains, or sun. With great power comes great headaches.

Robert Buxbaum, June 21, 2014

My solution to the world’s problems: better people

Most of the problems of the world are caused by people. Look at war, it’s caused by people; look at pollution, people; look at overeating, or welfare, or gun violence. You name it, the problem is people. My simple solution, then: better people. Immigration is a simple solution for a county that can do it selectively (take in the best, leave the rest); it’s worked for the US and it doesn’t have to beggar the third world. Education is another way to help, but we’re not quite sure what sort of education makes people better. “An uneducated man may steel from a boxcar, an educated one may steal the whole railroad.” Theodore Roosevelt is supposed to have quipped.

Those who claim they are uncommonly moral and good at teaching it have barely any proof that they are. American schools produce financially successful people, but not particularly moral ones; Europe’s approach is different, but there’s no indication they’ve done better at moral education. We look to the 18th century, or the Greeks, but they were no more moral than us, as best I can tell. The Taliban, the communists, or similar fundamentalists claim moral superiority over the west, but from my perspective, they look even worse. 

I notice that people learn morality from one another — that is each person acts like his neighbor. I also note that people tend to act better when they are involved, and feel part of whatever country, city or group they are in. Targeted immigration might bring in better people–honest, hard working, non-violent — and these people might help improve and motivate the locals. And even if we don’t improve by interaction, perhaps lazy Americans will ride on the backs of the hard-working immigrants. But it strikes me that the disconnect between world problems of high unemployment, world hunger, and lots of open, US jobs is a moral problem that could be solved by targeted love. Allowing some increased mobility from country to country and job to job (plus better preaching?). If you can move you are more-likely to find a job or place where you feel fulfilled, and you are likely to do better and more there. Even the countries and jobs that are left might benefit by being rid of their malcontents. And we don’t have to take everyone.

From "Hispanic-hope."

From “Hispanic-hope.”, an interesting combination of Bible-study and immigration morality.

Living in America is desirable for most people from most countries. Far more people want to live here than we can accept. As a result, we are in a position to target the bright, honest, hard-working Peoples from virtually any country. These folks are helpful to industry and to the US tax base as these immigrants tend to work out — or get deported. In the short-term they might displace Americans or depress salaries, but even that is not certain. There is no fixed slate of US jobs nor a fixed amount of work need. Yesterday’s job taker is tomorrow’s job creator. Our country is built on immigrants, and has not suffered from it. We should not take those who hate the US, or those who hate freedom, or have no skills, criminals and the sick. Nor should we give citizenship immediately. But that still leaves plenty who we’d want, and who want to be here. Th. Roosevelt said, “you can not take in too many of the right people, and even one of the wrong type is too many.” I suspect this is true.

I suspect we’d have 90+% odds picking good people from a crowd. The Immigration system does a good job now, and the great colleges have done better for years. The past is usually a great indicator. If someone is well, and has worked for years, or has been here in school; if they’ve managed to stay productive and out of trouble, he/she is a good candidate. A first step would be a work permit, and in a few years they can apply for permanent residence or citizenship. Many of the most successful people in America are either immigrants or descendents of immigrants. The founders of Google and Facebook; the builders and the shakers. These people have the ‘get-up and go.’ You can tell because they’ve gotten up and gone.

Dr. Robert Buxbaum, June 16, 2014. I’m a child of an immigrant, went to public school, got a PhD at Princeton, have built my own company, and have (so far) avoided arrest, imprisonment or serious scandal. With the help of my Canadian-immigrant wife, I’ve produced three Buxbaum clones, my biggest contribution to improving the US and the world.

American education how do we succeed?

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As the product of a top American college, Princeton University, I see that my education lacks in languages and history compared to Europeans. I can claim to know a little Latin and a little Greek, like they do, but I’m referring to Manuel Ramos and Stanos Platsis, two short people, one of Spanish descent, the other of Greek.

Americans hate math.

Americans hate math.

It was recently reported that one fourth of college-educated Americans did not know that the earth spun on an axis, a degree of science ignorance that would be inconceivable in any other country. Strange to say, despite these lacks, the US does quite well commercially, militarily, and scientifically. US productivity is the world’s highest. Our GNP and GNP per capita too is higher than virtually any other country (we got the grossest national product). How do we do it with so little education?

One part of US success is clearly imported talent, Immigration. We import Nobel chemists, Russian dancers, and German rocket scientists but we don’t import that many. They help our per-capita GNP, but the majority of our immigrants are more in the wretched refuse category. Even these appear to do better here than the colleagues they left behind. Otto von Bismark once joked that, “God protects children, drunks, and the United States of America.” But I’d like to suggest that our success is based on advantages our outlook our education provides for our more creative citizens.

Most of our successful businesses are not started by the A students, but by the C student who is able to use the little he (or she) knows. Consider the simple question of whether the earth goes round the sun. It’s an important fact, but only relevant if you can use it, as Sherlock Holmes points out. I suspect that few Europeans could use the knowledge that the earth spins (try to think of some applications; at the end of this essay I’ll provide some).

Benjamin Jowett. His students included the heads of 6 colleges and the head of Eaton

Benjamin Jowett, Master of Balliol College, Oxford.

A classic poem about European education describes Benjamin Jowett, shown at right. It goes: “The first come I, my name is Jowett. There is no knowledge, but that I know it. I am master of this college. What I don’t know isn’t knowledge.” Benjamin Jowett was Master of Balliol College, Oxford. By the time he died in 1893, his ex-student pallbearers included the heads of 6 colleges, and the head of Eaton. Most English heads of state and industry were his students directly or second-hand. All learned a passing knowledge of Greek, Latin, Plato, law, science, theology, classics, math, rhetoric, logic, and grammar. Only people so educated were deemed suited to run banks or manage backward nations like India or Rhodesia. It worked for a while but showed its limitations, e.g. in the Boer Wars.

In France and continental Europe the education system is similar to England’s under Jowett. There is a fixed set of knowledge and a fixed rate to learn it. Government and industry jobs go largely to those who’ve demonstrated their ability to give the fixed, correct answers to tests on this knowledge. In schools across France, the same page is turned virtually simultaneously in the every school– no student is left behind, but none jump ahead either. As new knowledge is integrated, the approved text books are updated and the correct answers are adjusted. Until then, the answers in the book are God’s truth, and those who master it can comfort themselves to have mastered the truth. The only people hurt are the very few dummies who see a new truth a year before the test acknowledges it. “College is a place where pebbles are polished but diamonds are dimmed.” The European system appears to benefit the many, providing useful skills (and useless tidbits) but it is oppressive to many others with forward-thinking, imaginative minds. The system appears to work best in areas that barely change year-to-year like French grammar, geometry, law, and the map of Europe. It does not work so well in music, computers, or the art of war. For these students, schooling is “another brick in the wall. For these students, the schools should teach more of how to get along without a teacher.

The American approach to education leans towards independence of thought, for good or bad. American graduates can live without the teacher, but leave school knowing no language but English, hardly and maths or science, hardly any grammar, and we can hardly find another country on a map. Teachers will take incorrect answers as correct as a way to build self-esteem, so students leave with the view that there is no such thing as truth. This model works well in music, engineering, and science where change is fast, creativity is king, and nature itself is a teacher. American graduate-schools are preeminent in these areas. In reading, history and math our graduates might well be described as galumphing ignorants.

Every now and again the US tries to correct this, by the way, and join the rest of the world. The “no child left behind” movement was a Republican-led effort to teach reading and math on the French model. It never caught on. Drugs are another approach to making American students less obstreperous, but they too work only temporarily. Despite these best efforts, American graduates leave school ignorant, but not stupid; respectful of those who can do things, and suspicious of those with lengthy degrees. We survive as managers of the most complex operations with our bumptious optimism and distain for hierarchy. As viewed from abroad, our method is to greet colleagues in a loud, cheerful voice, appoint a subordinate to “get things done,” and then get in the way until lunchtime.

In any moment of decision, the best thing you can do is the right thing, the next bet thing is the wrong thing, and the worst thing you can do is nothing. An American attitude that sometimes blows up, but works surprisingly well at times.

Often the inability to act is worse than acting wrong.

The American-educated boss will do some damage by his ignorance but it is no more than  comes from group-think: non-truths passed as truths. America stopped burning witches far sooner than Europe, and never burned Jews. America dropped nobles quicker, and transitioned to electric lights and motor cars quicker, perhaps because we put less weight on what nobles and universities did.

European scholars accepted that nobility gave one a better handle on leadership, and this held them back. Since religion was part of education, they accepted that state should have an established religion: Anglican, in England, Catholicism in France; scientific atheism now. They learned and accepted that divorce was unnecessary and that homosexuality should be punished by prison or worse. As late as the early 60s, Turing, the brilliant mathematician and computer scientist, was chemically castrated as a way to cure his homosexuality. In America our “Yankee ingenuity,” as we call it, had a tendency to blow up, too (prohibition, McCarthyism, and disco), but the problems resolved relatively soon. “Ready, fire, aim” is a European description of the American method. It’s not great, but works after a fashion.

The best option, I think, is to work together with those from “across the pond.” It worked well for us in WWI, WWII, and the American Revolution, where we benefitted from the training of Baron Von Steuben, for example. Heading into the world cup of football (fifa soccer) this week, we’re expected to lose badly due to our lack of stars, and general inability to pass, dribble, or strategize. Still, we’ve got enthusiasm, and we’ve got a German coach. The world’s bookies give us 0.05% odds, but our chances are 10 times that, I’d say: 5%. God protects our galumphing side of corn-fed ignorants when, as in the Revolution, it’s attached to German coaching.

Some practical aspects of the earth spinning: geosynchronous satellites (they only work because the earth spins), weather prediction (the spin of hurricanes is because the earth spins), cyclone lifting. It amazes me that people ever thought everything went around the earth, by the way; Mercury and Venus never appear overhead. If authorities could have been so wrong about this for so long, what might they be wrong about today?

Dr. Robert Buxbaum, June 10, 2014 I’ve also written about ADHD on Lincoln’s Gettysburg Address, on Theodore Roosevelt, and how he survived a gun shot.