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President Joe Biden signed two executive orders Friday in the State Dining Room of the White House. One would raise the minimum wage for federal contractors to $15 per hour. (Photo: Alex Wong/Getty Images)
President Joe Biden’s policies, announced in the first days of his administration, potentially could kill millions of jobs, according to estimates from both government and private studies.
Since taking office Jan. 20, Biden has announced a slew of policies, including executive actions to immediately take effect and legislative proposals.
By his third day in office, Biden took three major actions that “will devastate our economy at a time when we’re already on the brink of recession,” said Alfredo Ortiz, president of the Job Creators Network, a small-business advocacy group.
Ortiz was referring to Biden’s canceling of the Keystone XL pipeline, rejoining the Paris climate accord, and an executive order requiring a $15 an hour minimum wage for federal contractors.
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“America’s job creators can lead America’s recovery, but we can’t afford the Biden administration’s left-wing agenda,” Ortiz told The Daily Signal in a statement. “The American people want pro-growth policies and a return to prosperity, not socialism and a deep, long-lasting recession.”
Here’s a look at the impact four of Biden’s policies could have on jobs and the economy.
1. The Keystone XL Pipeline and 11,000 Jobs
In October, TC Energy announced that in 2021, the Keystone XL pipeline would mean 11,000 American jobs.
But, on his first day in office, Biden signed an executive order to block further construction of the pipeline.
The $8 billion pipeline was set to transport hundreds of thousands of barrels of crude oil per day from western Canada to the U.S. Midwest and Gulf Coast. President Barack Obama blocked the project in 2015, but in 2017, President Donald Trump approved it. However, it has been delayed after environmental groups sued.
For Biden, the decision was a clash between two major constituencies, organized labor and the environmental lobby.
“The six contractors will be directly responsible for hiring more than 7,000 union workers in 2021, with special emphasis placed on hiring locally first and giving priority to qualified local and Indigenous-owned businesses,” the Keystone XL press release from October said. “When combined with additional 2021 contracts to be announced later, the total number of American union workers constructing Keystone XL in 2021 will exceed 8,000 and $900 million in gross wages. In total, Keystone XL is expected to employ more than 11,000 Americans in 2021, creating more than $1.6 billion in gross wages.”
In August, the United Association of Union Plumbers and Pipefitters endorsed Biden in the 2020 presidential race. However, just days before Biden’s inauguration, the union expressed disappointment.
“In revoking this permit, the Biden administration has chosen to listen to the voices of fringe activists instead of union members and the American consumer on Day 1,” union President Mark McManus said in a statement. He added:
Let me be very clear: When built with union labor by the men and women of the United Association, pipelines like Keystone XL remain the safest and most efficient modes of energy transportation in the world.
Sadly, the Biden Administration has now put thousands of union workers out of work. For the average American family, it means energy costs will go up and communities will no longer see the local investments that come with pipeline construction.
A Keystone XL spokesman could not be reached Friday after a phone inquiry for this report.
But “green” jobs can fill the void, White House press secretary Jen Psaki insisted on Thursday.
“The message of the president and the White House would be that he is committed. His record will show, shows the American people that he’s committed to clean-energy jobs—to jobs that are not only good, high-paying jobs, union jobs, but ones that are also good for our environment,” Psaki said of Biden. “He thinks it’s possible to do both.”
2. $15 Minimum Wage and 3.7 Million Jobs
Biden supports legislation to increase the federal minimum wage from $7.25 per hour to $15 per hour. Biden can—and intends to—take executive action during his first 100 days to require federal contractors to pay $15 per hour and also bring more federal employees up to that rate.
“President Biden is today directing his administration to start the work that would allow him to issue an Executive Order within the first 100 days that requires federal contractors to pay a $15 minimum wage and provide emergency paid leave to workers,” a White House statement on Friday said.
The statement adds, “The Executive Order directs the Office of Personnel Management to develop recommendations to pay more federal employees at least $15 per hour.”
It would require an act of Congress for such an increase to affect all employers and employees across the country.
One problem is that wages vary across the country, said Rachel Greszler, a research fellow in economics, the budget, and entitlements at The Heritage Foundation.
“Fifteen dollars per hour is not the same in D.C. as in other parts of the country,” Greszler told The Daily Signal.
For instance, Greszler said, $15 per hour is median income in Mississippi now, though the median income is much higher in Washington, D.C., or New York.
More than doubling the minimum wage would mark an unprecedented increase in the federally mandated wage floor, she said.
A July 2019 Congressional Budget Office analysis estimated millions of job losses if the federal minimum wage were hiked to $15 per hour over a five-year period. That estimate came at a time when the U.S. economy was much stronger.
“According to CBO’s median estimate, under the $15 option, 1.3 million workers who would otherwise be employed would be jobless in an average week in 2025. (That would equal a 0.8 percent reduction in the number of employed workers),” the CBO’s 2019 estimate said. “CBO estimates that there is about a two-thirds chance that the change in employment would lie between about zero and a reduction of 3.7 million workers.”
The CBO analysis went onto say a $15 wage would, “Boost workers’ earnings through higher wages, though some of those higher earnings would be offset by higher rates of joblessness.”
The CBO also says it would:
- “Reduce business income and raise prices as higher labor costs were absorbed by business owners and then passed on to consumers.”
- “Reduce the nation’s output slightly through the reduction in employment and a corresponding decline in the nation’s stock of capital.”
“On the basis of those effects and CBO’s estimate of the median effect on employment, the $15 option would reduce total real (inflation-adjusted) family income in 2025 by $9 billion, or 0.1 percent,” the CBO says.
However, the economic impact isn’t limited to jobs, said Ryan Young, a senior fellow at the Washington, D.C.-based Competitive Enterprise Institute.
“The biggest trade-off and negative effect would not be job loss, but non-wage pay decrease,” Young told The Daily Signal. “Employers would cut tuition payments, benefits, and it would mean more work for the employees if positions aren’t filled.”
Young added that the economic impact could be harsh, but noted that the average for state minimum-wage laws nationally is “in the neighborhood” of $12 per hour. So, the proposed increase itself for many states would not be more than double.
3. Paris Climate Accord and 3.1 Million Jobs
On his first day in office, Biden rejoined the Paris climate accord that Obama entered into in 2015. In 2017, Trump withdrew from the pact, which includes 174 countries.
According to a report from The Heritage Foundation, the energy regulations accepted by the Obama administration as part of the accord could kill 400,000 American jobs by 2035.
“Based on regulations and emissions-reduction targets set by the Obama administration, Heritage economists estimate that by 2035 there will be: an annual average loss of nearly 400,000 jobs, a total income loss of more than $20,000 for a family of four, and an aggregate [gross domestic product] loss of over $2.5 trillion—all for a few tenths of a degree Celsius in abated warming,” the April 2016 Heritage report said.
A May 2017 report estimated the terms of the climate agreement could cause 440,000 jobs lost by 2025 and 3.1 million by 2040. The study done by the National Economic Research Associates Economic Consulting was funded by the U.S. Chamber of Commerce and the American Council for Capital Formation.
“A restriction in carbon emissions means that the total cost of fossil fuel increases, leading to higher costs of production. This cost increase leads to the closing of facilities that cannot compete on a cost basis. The increasing stringency of the [greenhouse gas] policy leads to more closure of manufacturing sectors over time, leading to fewer manufacturing jobs,” the report says.
It continues:
In 2025, the manufacturing sector alone could potentially lose 440,000 job-equivalents relative to the baseline jobs and about 3.1 million in 2040. Taking into account the loss in employment in other non-manufacturing sectors, the job-equivalents impact for the overall industrial sector could be about 1.1 million job-equivalents in 2025 and 6.5 million in 2040.
A large share of this job loss occurs in the construction sector, which employs a significant portion of the overall industrial labor force. Total economy-wide employment losses amount to about 2.7 million jobs in 2025.
4. Eliminating Freelance Employment
Biden also backs the Protecting the Right to Organize Act, or PRO Act, which organized labor also supports, prohibiting contract or freelance work—as well as part-time work. Organized labor strongly backs the legislation as a means of increasing union membership.
A similar law in California left many freelancers unemployed. It’s difficult to pinpoint how many jobs would be lost if this law were passed at a federal level.
The Freelancers Union estimates that 1 in 3 workers in the United States participates in independent work. Furthermore, about 10% of workers perform independent work, such as contracting, freelancing, and consulting as their primary job. Fewer than 1 in 10 independent contractors would prefer a traditional work arrangement, according to the Bureau of Labor Statistics.
“It would not just kill jobs, but it would force people into a certain type of job,” Greszler said.
Single parents and disabled people who benefit from flexible jobs would likely be harmed the most, she said. She added the federal proposal is more strict than the California law.
Biden backed the federal legislation as a candidate.
“Biden strongly supports the Protecting the Right to Organize Act’s (PRO Act) provisions instituting financial penalties on companies that interfere with workers’ organizing efforts, including firing or otherwise retaliating against workers,” the Biden campaign website said. “Biden will go beyond the PRO Act by enacting legislation to impose even stiffer penalties on corporations and to hold company executives personally liable when they interfere with organizing efforts, including criminally liable when their interference is intentional.”
Specifically, the federal legislation would broaden the definition of “employee” under the National Labor Relations Act. The new definition would be that an individual performing any service shall be considered—with some exceptions—an employee and not an independent contractor.
The proposal also raises concerns about workers’ privacy, the right to secret ballots in union elections, and invalidating 27 state right-to-work laws against compulsory union membership
With a $15 federal minimum wage, any jobs that don’t produce at least $36,000 per year in goods and services will eventually be eliminated—either because businesses close their doors, outsource their labor, or automate low-skilled jobs. (Photo: Moyo Studio/Getty Images)
President Joe Biden has proposed a nationwide $15 minimum wage as part of his so-called “American Rescue Plan.” Talk about bad timing: Raising labor prices on businesses that are struggling to stay afloat is like throwing them a load of bricks instead of a life preserver.
State and local governments raising their minimum wages is one thing, but to more than double the federal minimum, from $7.25 to $15 per hour?
Nearly one in every five restaurants permanently closed their doors in 2020 as 30 large retail and restaurant companies filed for bankruptcy.
Meanwhile, employment in food services (restaurants and bars) fell 19% in 2020 as retail clothing jobs dropped 24% and accommodations (hotels) jobs plummeted 32%.
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Although very few people—only about 1% of all workers and 0.1% of single parents—make the $7.25 minimum wage, a good portion of restaurant, retail, and hotel jobs pay less than $15 per hour.
No one would suggest raising the rent on households who are months behind on their payments, so how could raising labor prices help businesses?
For a restaurant with five full-time workers making minimum wage, a doubling of the federal minimum wage would mean an extra $85,800 in wages and employment taxes. With restaurant profit margins of about 5%, that could require an extra $1.7 million in food sales ($4,700 more per day)—a seemingly impossible feat in normal times, let alone in the middle of a global pandemic.
Higher wages are a great thing—especially when the gains accrue to lower-income workers. But the only way to achieve actual wage increases—that is, lasting wage increases that don’t take jobs and incomes from others—is for workers to become more productive.
To that end, government mandates are powerless. A $15 minimum wage won’t help workers gain education and experience or provide them with technology that will enable them to produce more value and earn larger incomes. In fact, it could cause the opposite, by shifting employers’ resources away from training and investments to wages instead.
Moreover, raising wages by government fiat hurts many workers in the short and long run by cutting off the bottom rungs of the career ladder.
A $15 federal minimum wage translates into over $36,000 per year in wages and mandated taxes and benefits paid by employers. That means that any jobs that don’t produce at least $36,000 per year in goods and services will eventually be eliminated—either because businesses close their doors, outsource their labor, or automate low-skilled jobs.
That’s why even liberal economists and the nonpartisan Congressional Budget Office caution that a $15 federal minimum wage would lead to a survival-of-the-fittest labor market, reduce future incomes, and disproportionately harm African Americans and women.
The former chair of President Barack Obama’s White House Council of Economic Advisers, Alan Krueger, warned in 2015, “Research suggests that a minimum wage set as high as $12 an hour will do more good than harm for low-wage workers, but a $15-an-hour national minimum wage would put us in uncharted waters, and risk undesirable and unintended consequences.”
Those consequences would be unequal across the country. Large cities with high costs of living—many of which already have or are on the path to a $15 minimum wage—may not experience huge consequences. But non-urban areas and places with lower costs of living could be devastated.
Imagine if policymakers were proposing a minimum wage hike to nearly $36—ensuring that all full-time workers earned at least $74,000 per year.
Most people would say that’s too much, realizing that such a high minimum wage would have massive consequences in terms of lost jobs, increased prices, and a complete and utter disruption of the American labor market and economy.
Yet, $15 per hour in Mississippi would be equivalent to $35.74 per hour in D.C., where federal lawmakers seek to impose a national standard across the U.S.
Minimum wages are best left to local governments, where decisions can be made based on economic conditions and the cost of living.
If a local government sets its minimum wage above the market wage, at least workers and business owners who lose their jobs and businesses can move to places where it’s still possible for them to earn a living.
But if policymakers impose an excessively high nationwide minimum wage across 50 very diverse states and more than 3,000 counties, there will be nowhere else for the harmed to go.
Instead of mandating policies that irrefutably harm some people to the benefit of others, policymakers should focus on opening doors to income opportunities for all workers.
Reducing barriers to jobs and income gains is what helped contribute to the 14.6% increase in wages for workers at the 10th percentile of earners (those earning about $10 per hour) between 2016 and 2019.
Lawmakers at all levels should be seeking to help Americans recover and gain new opportunities instead of permanently wiping out existing ones.
©2021 Tribune Content Agency, LLC.
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Ep. 4 – From Cradle to Grave [6/7]. Milton Friedman’s Free to Choose (1980)
February 9, 2021
President Biden c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500
Dear Mr. President,
Thank you for taking time to have your office try and get a pulse on what is going on out here in the country.
I read this article on January 15, 2021 about your announcement the previous night concerning your first proposal to Congress. Biden’s $1.9 Trillion COVID Relief Package Includes More Stimulus Checks, State Government Bailout, $15 Federal Minimum Wage
I wanted to let you know what I think about the minimum wage increase you have proposed for the whole country and I wanted to quote Milton Friedman who you are familiar with and you made it clear in July that you didn’t care for his views! Let me challenge you to take a closer look at what he had to say!
Milton Friedman on the minimum wage
All too often, the policy debates of today are simply refights of the battles of yesteryear. As a result, old arguments often retain a striking relevance.
In February 1973, economist Milton Friedman gave an interview to Playboy magazine. It was a wide ranging interview, covering topics from monetary policy to political philosophy. Friedman was an economist with a rare gift for translating technical arguments into clear prose (as you will find in his books Capitalism and Freedom and Free to Choose). His remarks on the minimum wage, as given in that interview, are startlingly contemporary.
PLAYBOY: But you prefer the laissez-faire—free-enterprise—approach.
FRIEDMAN: Generally. Because I think the government solution to a problem is usually as bad as the problem and very often makes the problem worse. Take, for example, the minimum wage, which has the effect of making the poor people at the bottom of the wage scale—those it was designed to help—worse off than before.PLAYBOY: How so?
FRIEDMAN: If you really want to get a feeling about the minimum wage, there’s nothing more instructive than going to the Congressional documents to read the proposals to raise the minimum wage and see who testifies. You very seldom find poor people testifying in favor of the minimum wage. The people who do are those who receive or pay wages much higher than the minimum. Frequently Northern textile manufacturers. John F. Kennedy, when he was in Congress, said explicitly that he was testifying in favor of a rise in the minimum wage because he wanted protection for the New England textile industry against competition from the so-called cheap labor of the South. But now look at it from the point of that cheap labor. If a high minimum wage makes unfeasible an otherwise feasible venture in the South, are people in the South benefited or harmed? Clearly harmed, because jobs otherwise available for them are no longer available. A minimum-wage law is, in reality, a law that makes it illegal for an employer to hire a person with limited skills.PLAYBOY: Isn’t it, rather, a law that requires employers to pay a fair and livable wage?
FRIEDMAN: How is a person better off unemployed at a dollar sixty an hour than employed at a dollar fifty? No hours a week at a dollar sixty comes to nothing. Let’s suppose there’s a teenager whom you as an employer would be perfectly willing to hire for a dollar fifty an hour. But the law says, no, it’s illegal for you to hire him at a dollar fifty an hour. You must hire him at a dollar sixty. Now, if you hire him at a dollar sixty, you’re really engaging in an act of charity. You’re paying a dollar fifty for his services and you’re giving him a gift of 10 cents. That’s something few employers, quite naturally, are willing to do or can afford to do without being put out of business by less generous competitors. As a result, the effect of a minimum-wage law is to produce unemployment among people with low skills. And who are the people with low skills? In the main, they tend to be teenagers and blacks, and women who have no special skills or have been out of the labor force and are coming back. This is why there are abnormally high unemployment rates among these groups.
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Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733
Williams with Sowell – Minimum Wage
Thomas Sowell
Thomas Sowell – Reducing Black Unemployment
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The Daily Hatch 