Only a Bare Minimum at Minimum
by Travis Pantin
Wed, 23 Jan 2008 at 8:38 PM
What portion of the American workforce earns the federal minimum wage or less?
A George Mason University economics professor, Russell Roberts, asks his students this question every year. They almost always give the same answer: about 20%. However, according to the Bureau of Labor Statistics, the correct answer is a mere 2.2%.
"Pretty amazing, isn't it. Over 97% of hourly workers make more than the law requires," Mr. Roberts writes. "Because this is only for workers who are paid hourly, the actual proportion is probably much lower than 2.2%."
One possible explanation for this phenomenon is that 32 of America's states require paying more than $5.15 an hour. However, in the 18 states where it is legal to pay $5.15 an hour, at least 96% of all hourly workers earn more than $5.15.
"State minimum wage statutes can't explain why so many employees earn more than the legal minimum," Mr. Roberts writes.
Why would employers pay more than the legal minimum? "The answer is simple: competition among employers to attract workers," Mr. Roberts writes.
The Fed as Custodian of Weath
Washington economist Yves Smith expresses doubt over whether the Federal Reserve should be moving in response to impending stock market crashes, as it did on Tuesday with a dramatic 0.75% interest rate cut.
"Find me anywhere in the Fed's charter or subsequent legislation that makes it the custodian of national wealth, which seems the role it has now decided to assume," he writes.
What bothers Mr. Smith is that yesterday's move amounts to a de facto declaration that the Fed is taking responsibility for lowering risk in the stock markets. He worries that the Fed could be creating moral hazard by showing that it is willing to bail out investors.
"Stocks have been seen as one of the very best places to put money for well over a decade. Enthusiasts like to remind they nay-sayers that buying on market declines has proven to be a great strategy. The Fed seems to have become an enabler of the notion that equities are a lower risk asset class than they really are," Mr. Smith writes.
"The Fed seems to have become an enabler of the notion that equities are a lower risk asset class than they really are."
The 'Warm Glow' of Corporate Philanthropy
A University of Chicago law professor, Anup Malani, posted on the University of Chicago Law Blog a recording of a talk that he gave recently on the subject of corporate philanthropy.
In his abstract, Mr. Malani says that most people view corporate philanthropy as either "managerial waste or profiteering." According to Mr. Malani, both views are correct — but incomplete.
Mr. Malani sees corporate philanthropy as a corporation's "entry into the market for private financing of public goods, also called the production of 'warm glow.'" Previously, the "warm glow" market was dominated by charities and the government.
"The feature that distinguishes corporate production of warm glow from other goods is that the corporation's shareholders and workers are also its consumers," Mr. Malani writes.
Mr. Malani says corporations have a competitive advantage over charities, because consumers can purchase "warm glow" from corporations through several means, including ownership, employment, and product purchase.
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