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Yesterday, the governors of California and New York signed legislation to raise their states’ minimum wage over the next few years to $15 an hour throughout California and for much of New York. Similar proposals are percolating in other state and local governments, and Democratic presidential candidate Bernie Sanders has called for a national minimum wage of $15/hour.

Predictably, critics of raising the minimum wage are arguing that the higher wage floor will hurt employment for low-skill workers, the very people the wage floor is intended to help. A worker will be employed only if the value of his output is greater than the cost of employing him—a cost that includes wages, employer payroll taxes (e.g., Social Security, Medicare, unemployment insurance), training and outfitting costs, the new health care mandate and other benefits, etc. According to these opponents, the higher wage floor will reduce employment for low-skill workers and encourage employers to find non-labor ways to accomplish low-skill tasks (e.g., ATM machines, self-serve gas pumps, vending machines, automated phone answering systems).

Wage-increase supporters dismiss this concern, claiming there’s no proof that a higher wage floor hurts employment. A very large body of empirical research indicates otherwise, however, with the negative effects falling mainly on workers below age 24 (which isn’t surprising, as 77% of workers earning the federal minimum wage are below age 24, and they have few demonstrated work skills). Wage-increase supporters can argue the research isn’t unanimous, but given the one-sidedness of the extensive empirical evidence, that argument sounds a bit like climate change denial—if not creation science.

More thoughtful wage-increase supporters have begun offering a different argument: Yes, they concede, raising the minimum wage can hurt low-skill employment. But that harm is a worthwhile tradeoff for better wages for the remaining low-skill work: some workers may lose their jobs or some work hours, but others will get a raise.

This argument is important and interesting—in a Marie Antoinette* sort of way.

Consider this snippet from a recent Washington Post “Wonkblog” post, “The $15 Minimum Wage Sweeping the Nation Might Kill Jobs—And That’s Okay”:

“Why shouldn’t we in fact accept job loss?” asks New School economics and urban policy professor David Howell, who’s about to publish a white paper on the subject. “What’s so bad about getting rid of crappy jobs, forcing employers to upgrade, and having a serious program to compensate anyone who is in the slightest way harmed by that?”

“The problem with having a criterion of ‘no job loss’ is that it guarantees that the minimum wage will always be at a level so low that it won’t come close to achieving [a] living wage standard,” Howell says.

… “It could be that [low-skill workers] spend more time unemployed, but their income is higher overall,” says David Cooper, an economist with the Economic Policy Institute. “If you were to tell me I could work fewer hours, and make as much or more than I could have previously, that would be okay.”

Cooper still thinks there’s a lot more research to be done to understand how higher minimum wages affect the bottom of the labor market. He does think the risk of job loss is worth factoring into the decision of where to set the wage floor. But he also agrees that it’s worth forging into those uncharted waters to see what might await.

This thinking raises two questions: who decides what a “crappy” job is, and who decides what particular tradeoff between less employment and a higher wage floor is “okay”? Howell says the decider is “we,” but it’s unclear who “we” is and what qualifies him/her to make that decision for all workers and employers. Cooper says the decider should be he, but what entitles Cooper to make that decision for everyone?

Howell and (apparently) Cooper think such decisions are justified because they’d ensure that every worker earns a “living wage.” Beyond the obvious problem that “a living wage” is a nonsensical term—a living is provided by income, not rate of income—there likely are plenty of workers who would trade their labor for less than whatever Howell and Cooper stipulate is an acceptable wage: pre-teens who will babysit for Mall money, teenagers who want to buy their first car, college students who want an internship, first-time workers who are willing to “pay their dues” in pursuit of higher ambitions, young workers who have low living costs, people who want to work for some high-minded cause, family members who want to make a little money while helping an entrepreneurial relative, seniors who want some extra cash (and responsibility), and so forth.

Howell and Cooper would reply that such workers should be assisted by social programs to help “anyone who is in the slightest way harmed by” their stipulated wage floor. But student who want opportunity-providing internships, or first-time workers who want to build and demonstrate work skills, or relatives who want to lend a hand in the family business in return for a little money, or seniors who want a little extra cash don’t want a handout and some vocational training—they want a job.

One of the great things about free labor markets is that, because employment is voluntary, each worker can set his own wage floor. That’s why few workers—especially full-time workers—work for the minimum wage: they demand higher compensation, though they each makes his or her own tradeoff between wage demands and employment.

Of course, some workers do work for the minimum wage, and many of them think that wage is lousy. But what’s even lousier is not being able to work for the minimum wage, and not being able to gain the work experience that would help them move on to better-paying jobs. That’s why it’s hard to accept the idea that workers would be better off if they were prohibited from deciding those tradeoffs for themselves, and instead have Cooper or “we” decide it for all of them.

And that’s why this argument sounds an awful lot like “Let them eat cake”: Howell and Cooper believe they–or politicians–should stipulate the minimum that each and every worker should receive for their labor–even if some of those workers would have accepted less, and even if some (and perhaps many) of those workers getting nothing. Though Howell and Cooper undoubtedly are motivated by noble intentions, it’s hard to see how their idea is all that noble.

* In fairness to Marie Antoinette, the “Let them eat cake!” tale is almost certainly apocryphal.

Amid the proliferation of drones many states have passed or considered legislation regulating unmanned aircraft. Yet, if the latest Federal Aviation Administration (FAA) Reauthorization bill is passed as written, states will no longer able to pass drone regulations and the FAA will be the country’s sole drone regulator. Such a proposal is a federal preemption of state authority that won’t allow states to handle issues best addressed at the local level.

Section 2142 (a) of the almost 300-page FAA appropriations bill reads:

FEDERAL PREEMPTION.—No State or political subdivision of a State may enact or enforce any law, regulation, or other provision having the force and effect of law relating to the design, manufacture, testing, licensing, registration, certification, operation, or maintenance of an unmanned aircraft system, including airspace, altitude, flight paths, equipment or technology requirements, purpose of operations, and pilot, operator, and observer qualifications, training, and certification.

The bill does allow for states to deal with issues that arise from drone use that concern “nuisance, voyeurism, harassment, reckless endangerment, wrongful death, personal injury, property damage,” but the text above leaves little doubt about which entity will be overseeing the bulk of drone regulation.

Writing in The Wall Street Journal, Troy Rule, a professor at Arizona State University’s Sandra Day O’Connor College of Law, highlights a number of potential problems associated with Sec. 2142:

many other aspects of civilian drone regulation involve questions that only states and local governments are equipped to address. For example, during what hours of the day should drone-assisted pizza deliveries be permitted in dense urban neighborhoods? Under what conditions should real-estate photographers in a beachfront community be permitted to use drones to capture aerial views of homes being listed for sale? Or how close to a suburban high school’s football stadium should drone flying be allowed on game nights?

Centralized federal agencies are incapable of tailoring drone-use restrictions to fit the unique characteristics and preferences of every local jurisdiction. Given the obvious advantages of involving states and municipalities in the regulation of drones, why is Congress seriously considering statutory language that would effectively prohibit local drone-use restrictions?

Rule is not alone in expressing concerns about Sec. 2142. Perhaps unsurprisingly, the National Conference of State Legislatures and the National Association of State Aviation Officials view the proposed legislation as a needless preemption of state powers:

Section 2142 of The Federal Aviation Administration Reauthorization Act of 2016 (S. 2658) is an overly broad and unjustified pre-emption of state authority. Section 2142 goes well beyond a basic assertion of the FAA’s authority to regulate the safety of the national airspace system. Furthermore, it infringes on traditional state and local powers to protect the basic rights of citizens and address gaps in federal regulations related to unmanned aerial systems (UAS).

As Rule points out in a forthcoming paper on drone regulation, the FAA views itself as the regulator of “every inch of airspace”:

the reality is that Congress has not expressly defined “airspace of the United States” or “navigable airspace.” Therefore, the FAA has conveniently opted to interpret the terms to encompass every inch of airspace above U.S. land, all the way to the ground.

Officials at the FAA have made clear that the agency is the preeminent authority when it comes to regulating airspace. On a FAA website dedicated to “busting myths” about drones the regulator states unambiguously that “The FAA is responsible for the safety of U.S. airspace from the ground up.”

FAA drone regulations are clearly attractive to companies such as Amazon, which one day may use drones for delivery. But despite the appeal of a single nationwide drone regulator there are advantages to the laboratories of democracy regulating drones. Rule highlights that such an approach has worked for land use and cars:

There is no federal land use administration equivalent to the FAA through which citizens in every city in the country must seek real estate development approvals. Nor is there a federal automobile driving administration that manages traffic flows and sets speed limits for every road in all fifty states. The nation’s federalist system wisely allows for state and local officials, which tend to have greater geographic proximity to and information about the probably local impacts these sorts of activities, to be the primary regulators of them. Like land development and automobile driving, civilian drone activity’s impacts can vary greatly by location so it could benefit from such localized governance as well. Entrusting regulatory authority to subnational governments in these areas also creates “laboratories of democracy”, which can be particularly valuable tools for accelerating policy innovation in industries that involve new and rapidly-changing technologies.

For more from Cato on the FAA (including my colleague Chris Edwards’ repeated calls for the agency to be privatized) click here.  

As a fan of the Georgetown University Hoyas, I’ve been pretty pessimistic about the state of college hoops over the last few years. In pursuit of the potentially huge bucks associated with college football, conferences have been realigning and schools without football have been left behind. And while some private universities have come out ahead in these gridiron games, private schools generally can’t compete with public institutions in football. They don’t have the state-subsidized scale needed to gather huge student bodies, nor do they “represent” their states, both of which help fill football stadiums and bring eyeballs to television sets. So I have feared doom for private schools left out of the “Power Five” conferences, especially those in the “new” Big East.

Then Villanova won the NCAA championship. And I had to ask: Has my trepidation and depression been misplaced?

Maybe it has. While the revenue potential of college hoops is significantly smaller than it is for football, the costs are also much lower. There are far fewer players and coaches, the equipment is less costly, and you don’t need nearly as big a band. That means you don’t need as much TV money, or as many posteriors in seats, as you do for football. And if you don’t have football, as some Big East players recently pointed out, hoops is the school’s flagship sport, and the basketball players are the biggest campus stars. That may be a recruiting edge.

Or maybe Villanova’s championship is just long odds that played out, as opposed to a sign the odds are not that bad. Indeed, the Big East overall has struggled a bit in the Tourney since the conference’s reinvention three years ago. It was also lucky that it formed at the same time Fox Sports was putting together a new sports channel – FS1 – and needed programming to fill the hours. Fox offered the Big East a princely (for basketball) sum of about $4.2 million per school per year over a 12 year period. But so far the ratings have been pretty paltry: the first two conference championships had only about 702,000 and 414,000 viewers, respectively, and even though this year’s was on the full Fox network, it only attracted 1.4 million viewers. In contrast, this year’s Big Ten championship game drew 3.2 million eyeballs.

Part of the problem is no doubt that Fox – and especially FS1 – is new to college hoops, and some potential viewers don’t know where to look. But probably a bigger problem is that Big East schools are relatively small, and elicit little if any state pride.

Of course, before anyone starts shedding buckets-o-tears for any college competing in D-1 sports, remember that (1) no one forces schools to participate, and (2) they all benefit, ridiculously, from government “help.” There are no real victims save taxpayers.

That said, what is the outlook for the Big East? Certainly better than I thought it to be a few years ago. But the obstacles still seem sizeable, and I know I won’t be a believer until the Hoyas win at least, um, three more national championships.

That could take a while.

There’s no agreement on the most important variable for state tax competitiveness.

I’m sympathetic to the final option, in part because of my disdain for the income tax. And if an income tax is imposed, I prefer a simple and fair flat tax.

With that in mind, here’s a fascinating infographic I received via email. I don’t know if Reboot Illinois is left wing, right wing, or apolitical, but they did a very good job. I particularly like the map showing zero-income tax states (gray), flat tax states (red), and states with so-called progressive tax schemes (blue).

For what it’s worth, Illinois taxpayers should fight as hard as possible to preserve the state’s flat tax. If the politicians get the power to discriminate among income classes, it will just be a matter of time before all taxpayers are hit by higher rates.

Now let’s shift to the spending side of the fiscal ledger.

Like any good libertarian, I generally focus on the size of government. I compare France with Hong Kong and that tells me that big is bad and small is good.

But regardless of whether a government is large or small, it’s desirable if it spends money efficiently and generates some benefit. I shared, for instance, a fascinating study on “public sector efficiency” from the European Central Bank and was not surprised to see that nations with smaller public sectors got much more bang for the buck (with Singapore easily winning the prize for the most efficient government).

So I was very interested to see that WalletHub put together a report showing each state’s “return on investment” based on how effectively it uses tax monies to achieve desirable outcomes for education, health, safety, economy, and infrastructure, and pollution.

I’m not completely comfortable with the methodology (is it a state government’s fault if the population is more obese and therefore less healthy, for instance, and what about adjusting for demographic factors such as age and race?), but I nonetheless think the study is both useful and interesting.

Here are the best and worst states.

One thing that should stand out is that the best states are dominated by zero-income tax states and flat tax states.

The worst states, by contrast, tend to have punitive tax systems (Alaska is a bit of an outlier because it collects - and squanders - a lot of revenue from oil).

P.S. WalletHub put together some fascinating data on which cities get a good return on investment (i.e., bang for the back) for spending on police and education.

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