Do Minimum Wages Reduce Job Opportunities for Blacks?

NBER working paper by David Neumark & Jyotsana Kala.

"Abstract

We provide a comprehensive analysis of the effects of minimum wages on blacks, and on the relative impacts on blacks vs. whites. We study not only teenagers – the focus of much of the minimum wage-employment literature – but also other low-skill groups. We focus primarily on employment, which has been the prime concern with the minimum wage research literature. We find evidence that job loss effects from higher minimum wages are much more evident for blacks, and in contrast not very detectable for whites, and are often large enough to generate adverse effects on earnings. We supplement this work with additional analysis that distinguishes between effects of an individual’s race and the race composition of where they live. The extensive residential segregation by race in the United States raises the question of whether the more adverse effects of minimum wages on blacks are attributable to more adverse effects on black individuals, or more adverse effects on neighborhoods with large black populations. We find relatively little evidence of heterogeneity in effects across areas defined by the share black among residents."

The G.I. Bill after World War II had little success in increasing the representation of lower- and middle-income students at elite colleges

See THE G.I. BILL, STANDARDIZED TESTING, AND SOCIOECONOMIC ORIGINS OF THE U.S. EDUCATIONAL ELITE OVER A CENTURY by Ran Abramitzky, Jennifer K. Kowalski, Santiago Pérez and Joseph Price. NBER working paper. 

"Abstract

We compile, transcribe, and standardize historical records for 2.5 million students at 65 elite (private and public) U.S. colleges. By combining these data with more recent survey and administrative data, we assemble the largest dataset on the socioeconomic backgrounds of students at American colleges spanning the last 100 years. We document the following: First, despite a large increase in the share of lower-income students in the overall college-going population, the representation of these students at elite private or public colleges has remained at similarly low levels throughout the last century. Second, the representation of upper-income students at elite colleges decreased after World War II, but this group has regained its high representation since the 1980s. Third, while there has been no increase in the economic diversity of elite private and public colleges, these colleges have become more racially and geographically diverse. Fourth, two major policy changes in the history of American higher education, namely the G.I. Bill after World War II and the introduction of standardized tests for admissions, had little success in increasing the representation of lower- and middle-income students at elite colleges."

Say Goodbye to Hollywood’s Progressive Prosecutor

Angelenos had four years of George Gascón’s ‘restorative justice.’ Now they want the real kind

By Will Swaim Mr. Swaim is president of the California Policy Center and a co-host of National Review’s “Radio Free California” podcast. Excerpts:

"Elected in November 2020, after the George Floyd summer, Mr. Gascón immediately delivered a menu of “restorative justice” policies. He told his nearly 1,000 prosecutors—the largest district attorney’s staff in the nation—there would be no more sentencing enhancements, no more use of the death penalty, no more cash bail. He ordered them to seek diversion programs rather than prison time wherever possible and to end the prosecution of minors in adult courts. He established the Conviction Integrity Unit, the entire purpose of which is to scour past convictions in search of what Mr. Gascón considers excessive sentences."

"His philosophical preferences translated into rising crime. The city’s homicide rate is now nearly twice the rest of the state. But data fail to describe adequately the personal terror Angelenos experience every day. A year into Mr. Gascón’s tenure, his office approved probation for a gang member with a catalog of past convictions. Back on the streets, the man kidnapped a woman in a local motel and then shot to death two police officers attempting to rescue her. He was finally shot and killed by another officer. Families of the gangster and the slain police officers blame Mr. Gascón."

"In 2018 a homeless woman murdered a retired probation officer and his elderly parents in their home. During sentencing in April, Mr. Gascón blocked his staff from seeking the maximum penalty of 75 years to life, ordering them instead to seek life with the possibility of parole after just 20 years. Despite the family’s protests, Mr. Gascón prevailed."

"After Hamas’s attack on Israel 13 months ago, anti-Israel encampments appeared on university campuses throughout Los Angeles County. Efforts to clear them turned the antisemitic protests into antipolice riots, but Mr. Gascón said little and charged no one in the violence. In June, 150 pro-Hamas protesters blocked the entrance to L.A.’s Adas Torah synagogue. When members of the congregation insisted on entering, the blockade turned into a public beating of Jews. Mayor Karen Bass condemned the attacks, as did President Biden and Gov. Gavin Newsom.

Mr. Gascón said—and did—nothing. Jewish staff in his office declared they no longer feel safe there. “I hate going to work and entering a building where I feel my boss will treat me differently simply because I’m Jewish,” veteran prosecutor Brian Schirn said.

Numerous employees have alleged that Mr. Gascón retaliated against them for doing their jobs. In 2021 Deputy District Attorney Jon Hatami filed suit, claiming Mr. Gascón had sidelined him after he sought, won and defended the death sentence of a man convicted in the torture and murder of his girlfriend’s 8-year-old son. Prosecutor Shea Sanna alleges Mr. Gascón ordered him to suppress evidence that a man convicted of sexually assaulting a 10-year-old girl had declared himself a woman to gain favorable prison treatment. Mr. Sanna told Fox News Digital that Mr. Gascón responded by suspending him without pay and attacking his credibility, “all so I would obey him; so I would stay quiet; so I wouldn’t speak up on behalf of those most affected by his misguided political policies.”"

"voters realized their mistake and acted accordingly. They are in good company. On the same day voters in Alameda County recalled District Attorney Pamela Price, Mr. Gascón’s policy doppelgänger. Voters in Oakland, the Alameda County city that rivals L.A. for dramatic violence, tossed out their progressive mayor. San Francisco’s progressive mayor lost to a liberal Democrat who made the city’s rampant crime his campaign hook."

"70% of Californians voted to pass Proposition 36, a ballot measure that unwinds most of the progressive reforms initiated 10 years ago by Proposition 47. That 2014 ballot measure proposed resolving California’s crime problems by downgrading many felonies to misdemeanors. Its deceptive ballot title, the Safe Neighborhoods and Schools Act, was the brainchild of California’s attorney general at the time, Kamala Harris." 

Trump’s Tariffs Would Smother His Economic Successes

A minimum 10% levy on all goods would hike domestic prices, reduce wages and invite foreign retaliation

By Phil Gramm and Donald J. Boudreaux. Excerpts:

"The decline in economic growth caused by tariffs—along with reduced wages and income-tax collections—would at least partially offset any additional customs revenues. Implementing the tariffs would also likely trigger a trade war"

"After Mr. Trump’s regulatory and tax relief boosted real economic growth from 1.8% in 2016 to a 13-year high of 3% in 2018, tariffs stunted growth. That was as the Congressional Budget Office predicted, with growth slowing to 2.6% in 2019, the first full year of the tariffs. Employment in manufacturing continued falling as a percentage of total employment at the same rate as the previous decade. Before the tariffs were imposed, manufacturing jobs were 8.5% of total employment. The figure fell to 8.4% by the end of 2019 and 8.1% today. Manufacturing output, after rising 2.5% during the first three quarters of 2018, fell when the tariffs fully kicked in. By the end of 2019, the inflation-adjusted value of manufacturing output was 6.2% lower than when the tariffs were imposed."

"An across-the-board tariff would stimulate U.S. production of goods that we now import more cheaply. To produce these goods at home, American workers and capital would be drawn away from producing other goods and services that we produce more efficiently. Productivity, wages and the return on capital would fall as we produce things at home that we could buy more cheaply abroad. This would simultaneously reduce production in industries for which our labor productivity and capital returns are higher. Moreover, because half of our imports are component parts used by U.S. producers, tariffs would further increase our production costs and reduce our competitiveness at home and abroad. 

The retaliation by our trading partners would compound tariffs’ costs by reducing U.S. exports in the industries where wages and capital returns are highest."

"the Smoot-Hawley tariff, which reduced the volume of world trade by approximately 14"

"A half-century ago nearly 25% of American workers were employed in manufacturing, down from the all-time high of 39% in 1943. This percentage continues to fall because of technological advances, not trade. Modern technological prowess allows American industry to produce nearly 2.5 times as much manufacturing output as in 1974 with a fraction of the labor force."

"10% across-the-board tariffs would shave a full percentage point off U.S. GDP growth. An additional 0.8% of GDP would be lost from the 60% duty on Chinese imports, raising the yearly cost per household of the tariffs to almost $4,000."

"a consistent theoretical and empirical finding in economics is that domestic consumers and domestic firms bear the burden of a tariff, not the foreign country"

"The burden of the tariff would be regressive, too, considering lower-income households spend a larger share of their income on consumer goods."

"the tariffs Mr. Trump has proposed would impose disproportionately large losses on these households. Those in the bottom income quintile would find their purchasing power reduced by 4.2%, while households in the middle-income quintile would lose 2.7%. Highest-quintile households would lose less than 1%."

"Inflation-adjusted average hourly compensation a half-century ago was only about half of what it is today. Two-thirds of American households now have real incomes that in 1967 would have put them in the top quintile of earners."

How the Supreme Court Helped Democrats

Their losses would have been greater without rulings that protected campaign spending as political free speech

WSJ editorial. 

"Democrats took a pounding last week, but it could have been worse. The party was spared from an even bigger rout by their huge advantage in campaign spending, and for that they can thank their billionaire donors—and the Supreme Court they love to hate.

Kamala Harris raised more than $1 billion and spent more than $900 million, while the Trump campaign raised around $380 million and spent more than $350 million. In swing states Democrats had the edge in campaign spending across the board.

The margin was closest in Pennsylvania, where Democrats spent $109 million to Republicans’ $102 million. In Michigan Democrats spent $81 million to Republicans’ $18 million. In Wisconsin it was $49 million to $15 million, according to AdImpact. Mr. Trump won those states, but more narrowly than his advantage on the issues and the national turn to the right suggest he might have.

So-called independent expenditures outside the campaigns also broke records. Independent spending in all 2024 federal races was some $4.5 billion and flowed through Super Pacs allied with campaign operations, according to OpenSecrets. The Super Pacs in turn were often funded by 501(c)4s and other nonprofit groups, the “dark money” bogeymen of Sen. Sheldon Whitehouse’s nightmares. In key Senate races in Wisconsin, Michigan, Pennsylvania, Montana, Arizona and others, independent spending by both sides ran into the tens of millions.

Looking at all federal campaign spending, Democrats beat out Republicans with some $4.5 billion in political ads compared with the GOP’s $3.5 billion. That included ad spending for presidential, congressional and down-ballot races including campaigns and independent spending. Democratic independent groups spent $2.4 billion while Republican independent groups spent $2.2 billion, according to AdImpact.

The great irony is that none of this would have been possible without Supreme Court decisions that have opened the door to more money in elections. McConnell v. FEC in 2003 cracked open the door by allowing political parties to coordinate with candidates and make unlimited independent expenditures. Citizens United v. FEC in 2010 allowed corporations and unions to spend money in elections. The D.C. Circuit’s decision in SpeechNow v. FEC in 2010 unleashed independent spending by Super Pacs.

The Court ruled that the First Amendment protects political speech, and spending on campaigns is a form of speech. If not for these rulings, which Democrats denounce every other day, Republicans would have bigger majorities in Congress. Funny how you don’t hear cries for “campaign finance reform” this year.

What other gifts might the current Supreme Court majority bestow upon Democrats? With Mr. Trump coming back to the White House, the left may learn to love the major questions doctrine, which requires clear direction from Congress on consequential regulations from the executive branch. Democrats raged against that ruling and the Supreme Court’s 6-2 decision striking down Chevron deference in Loper Bright Enterprises v. Raimondo, which will also restrain Mr. Trump’s regulators.

Democrats will never admit it, but the Bush-Trump Justices will spare them from even greater political defeats."

See The GOP Gains in Progressive State Houses: Voters rebuke leftwing lurches in Minnesota, Michigan and Vermont. WSJ editorial.

"The rightward swing by voters last week looks like it will hand control of the U.S. House to Republicans, as the final votes are being counted. Less noticed by the Trump-centric press are GOP gains in even progressive state houses. 

No governorships changed partisan control, but Republicans broke Democratic monopolies in Michigan and Minnesota with gains in their statehouses. These were rebukes to left-wing policy overreach.

After Democrats won a trifecta in Minnesota in 2022, Gov. Tim Walz used his slim legislative majorities to advance a far-left cultural agenda, raise taxes and redistribute income. Democrats made the state a “trans refuge” for children seeking gender-affirming treatments and removed nearly all restrictions on abortion.

They also imposed a 1% surcharge on investment income over $1 million and established a new family and medical leave entitlement financed by a 0.88 percentage point payroll tax. This raised the top marginal tax rate to 10.85% on investment income and 10.73% on wages, among the highest in the country.

Democrats in Minnesota lost three seats in the state House, resulting in a 67-67 party split. This means Democrats can’t raise taxes willy-nilly to fix a looming budget deficit.

A similar backlash played out in Michigan where Democrats won a trifecta in 2022 for the first time in nearly 40 years. They then repealed the state’s right-to-work law that gave workers a choice of belonging to a union. They quintupled the average size of a “working families tax credit” and imposed a 100% “clean electricity” mandate.

Voters weren’t fans of this one-party Democratic rule. Republicans flipped the state House by knocking off several incumbents despite being outspent in the races by nearly four-to-one. The GOP picked up a seat in the Upper Peninsula that Democrats had held for more than 70 years.

While expanding government, liberal populists have discouraged private business growth. Minnesota and Michigan have been losing jobs in manufacturing and other private industries for two years. Almost all of the new jobs added in both states since Democrats seized control in January 2023 have been in government, healthcare and social assistance.

Leftwing economic populism also took a hit in Vermont, the home of Bernie Sanders socialism. Republicans flipped 17 seats in the House and six in the state Senate—the most in at least three decades—to end the Democrats’ supermajority. Republicans beat one Democratic Senator who had served in the Legislature for more than 30 years.

Credit goes to GOP Gov. Phil Scott, who campaigned against Democrats who overrode his vetoes of bills to raise property taxes and impose a 0.44% payroll tax to fund child care. They also imposed a quasi-cap-and-trade program on suppliers of home heating oil to fund climate welfare and a 100% renewable electricity mandate by 2035.

Mr. Sanders is telling Democrats they lost because the national party wasn’t leftwing enough on economics. He won’t find support for that claim nationwide or even in Vermont."

Medicare Advantage Is Saving Taxpayers Money

By John C. Goodman.

"A new study finds that the migration of people from traditional Medicare to the Medicare Advantage program over the last decade has saved the federal government $144 billion.

The study arrives at a time when critics have stepped up their claims that Medicare Advantage (MA) plans are over-billing Medicare and causing a waste of taxpayer money.

The study was conducted by Elevance, a private insurer with an obvious financial interest in the topic. However, the researchers make their data sources apparent and their results are available for scrutiny by others.

The Elevance study builds on a finding by other, more limited investigations: What happens in the MA system indirectly affects what happens to patients in traditional Medicare. In a typical MA plan, doctors are encouraged to practice integrated, coordinated care—sharing medical records and following agreed-upon treatment plans, for example. This results in more efficient care. Yet these very same doctors also treat traditional Medicare patients. So, methods they employ to practice cost-effective care for one set of patients are more likely to be repeated in the treatment of other patients.

Other studies have found that where there is a large presence of MA patients in an area, there tend to be spillover effects. Protocols used by MA plans tend to be become more widespread—affecting all Medicare patients.

The Elevance study measures this effect nationwide. It is a first-time comparison of spending on MA patients and traditional Medicare patients in the same counties, across the entire country. The finding: larger enrollment in MA plans leads to lower spending on all Medicare patients. Specifically, a 10% increase in market share by MA plans leads to an average decrease in spending on all Medicare beneficiaries of between $105 and $127 per person, per year.

Savings for Seniors

More than half of all seniors in Medicare get their health insurance from a private MA plan. Because these plans typically provide comprehensive coverage, enrollees avoid paying for “medigap” insurance that other seniors acquire to plug the holes in traditional Medicare.

That’s one reason why the average senior in an MA plan is saving $2,541 a year in out-of-pocket costs. Participants also get extra benefits that traditional Medicare enrollees don’t get, including dental, eye, and hearing care.

Since the program was originally a bipartisan creation, you would think that politicians in both parties would openly brag about the program and claim credit for it. Yet in recent years, many on the left have become increasingly hostile.

The Biden administration has slashed payments to MA plans over the past two years, causing some MA plans to leave the market altogether and others to reduce the benefits they offer. The administration has also been a ruthless regulator. Based on a “secret shopper” report, the administration fined one company $190 million for falling to answer a phone call in less than 8 seconds!

Are MA plans overpaid?

The Medicare Payment Advisory Commission (MedPAC) claims that MA plans are paid 20% more than Medicare pays for patients with similar health conditions in traditional Medicare. They admit that MA patients get more benefits than regular Medicare patients But, they argue that giving MA enrollees benefits that traditional Medicare enrollees don’t get is not a good use of taxpayer money.

One problem with MedPAC’s analysis is that traditional Medicare enrollees are not a homogeneous population. Some are also in employer plans. Some are also in Medicaid. They have different levels of out-of-pocket exposure. In failing to thoroughly adjust for these differences, MedPAC did not make a true apples-to-apples comparison between Medicare spending on enrollees in traditional Medicare and on MA enrollees.

A more rigorous study by Milliman corrected for these problems and found that the government saves money when people leave traditional Medicare and enroll in a Medicare Advantage plan. The savings equal $576 per enrollee per year. This is consistent with the Elevance results, independent of spillover effects.

Upcoding

One reason why the Medicare Advantage program works so much better than the (Obamacare) exchange is individualized risk adjustment. That means that MA plans get paid based on the health condition of their enrollees. If a patient is very sick, the government will pay the plan more. These payments are designed to make the healthy and the sick equally attractive to an insurer.

As a result, MA plans have a financial incentive to find and report every health condition that generates a more generous payment from Medicare. “Upcoding” occurs when the plans report conditions that might not be reported by doctors practicing in traditional Medicare.

Critics claim that MA companies are overly zealous—perhaps even reporting phantom conditions. This is one of the suspicions behind the claim that MA plans are overpaid.

An investigation by The Wall Street Journal (in collaboration with Medicare) found that in a single year, Medicare paid insurers $50 billion for diseases no doctor ever treated.

However, doctors and hospitals treating traditional Medicare patients also have a financial incentive to overbill Medicare. According to the Centers for Medicare and Medicaid Services, there are a higher percent of coding errors in traditional Medicare and they cost taxpayers twice as much money ($31.2 billion versus $16.6 billion in 2023).

Efficiency

The Better Medicare Alliance (an industry-funded organization), reports that MA plans deliver 13% lower inpatient hospitalization costs, 49% lower acute care hospital stays, and a 43% lower rate of avoidable hospitalizations. This is despite the fact that MA enrollees have lower incomes, less education and are more likely to be from a minority population.

The comparison is even better for people enrolled in both Medicare and Medicaid—thought to be the most vulnerable population. Among this group, being in an MA plan means a 14.2% lower likelihood of a hospital stay, a 72.6% higher likelihood of receiving a colorectal cancer screening, and a 52.5% higher likelihood of having a breast cancer screening.

The Medicare Advantage program has shown that competition in the marketplace is superior to government-run health insurance—in raising quality and lowering costs."