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Elizabeth Warren’s $22 intellectual Waterloo

Elizabeth Warren’s $22 intellectual Waterloo

There is plenty to criticize about Elizabeth Warren’s made-for-YouTube theatrics in the Senate Banking Committee.

Warren has some good goals shared on both sides of the aisle, such as addressing “too big to fail” and “too big to prosecute,” but unfortunately she goes about it the wrong way by belittling witnesses with questions properly addressed to other people or with questions which make no sense.  It makes her a hero to the left, but it does little to advance actual economic reform.

But her performance on the Senate HELP committee with regard to a $22 minimum wage has the potential to push the narrative of her Senate agenda into pure mockery.

I addressed the $22 minimum wage, and her claim that $14 of that has gone missing, in my post Elizabeth Warren cherry-picked $22 per hour minimum wage number:

Three were many possibilities raised in the study: $9.22, $10.01, $10.52,  $12.25, $15.34, and $21.72.

Warren picked the absolute highest figure to make her point, a figure which makes no sense because it assumes that minimum wage worker productivity gains kept pace with worker productivity gains in the overall economy.

Unlike her Banking Committee performance, Warren’s minimum wage posturing is being met with deserved mockery.  In a post at Real Clear Markets, Robert Tracinski takes apart the claim that $14 has gone missing, Elizabeth Warren’s Acquired Economic Stupidity (emphasis added):

The problem with a reductio ad absurdum argument is that sometimes your opponent accepts the absurdity and just runs with it….

Leave it to an academic to be totally ignorant of the workings of the economy. So let’s clue in Senator Warren about where those productivity gains came from and where the profits went to.

If we’re talking about productivity gains across the entire economy, some of those gains came from higher-level skills acquired by workers. But that’s not the case for minimum-wage workers, because they are by definition unskilled. (The possession of a skill is precisely what makes it possible for a worker to command a higher wage.) For minimum-wage workers, productivity gains are the result of investment in new technology that allows businesses to get more value out of the same amount of unskilled labor. Think of a supermarket scanner versus the old system–which people over 40 can still remember–in which all prices had to be pasted manually onto grocery packaging and entered manually into a cash register by the cashier. In that old system, it took a lot more labor for the same unskilled or low-skilled worker to check out a customer.

The profits from these productivity gains went mostly to the people who created them: the businesses who adopted new technologies and the inventors and entrepreneurs who developed them. Put simply, if Senator Warren wants to know “what happened to the other $14.75,” she might start by taking a stroll around Silicon Valley. The money went (among other places) to reward the inventors of productivity-enhancing computers and software. By the same token, if we were to mandate that all productivity gains must go to unskilled workers, we would eliminate all of those profits and kill any incentive to invest in higher productivity.

Bill McMorris at The Washington Free Beacon makes a similar point, Elizabeth Warren’s Fuzzy Math (emphasis added):

Warren raised the prospect of a $45,000 annual minimum wage at a March 14 Senate Health, Education, Labor, & Pensions Committee hearing. Warren embraced tying wages to productivity during a question and answer session with radical activist-turned-University of Massachusetts Amherst economist Arin Dube….

However, [Employment Policies Institute] research director Mike Saltsman says Warren and Dube oversimplify the nation’s growth in productivity.

“There’s a considerable difference between what people are doing and what they’re producing—there’s only so fast you can bus a table or cook a burger,” he said.

“The productivity gains don’t match the overall economy. It’s completely inaccurate to link the minimum wage to overall productivity.”

Most minimum wage workers are employed in the service sector, rather than the computer and cell phone companies that experts say drove productivity gains in the latter half of the 20th century.

Productivity in the food service industry, a hotbed for entry-level positions, grew by only 7 percent over the last 20 years, as opposed to nearly 60 percent gains in all businesses.

“These national gains don’t translate in the service industry and the data shows that,” Saltsman said.

The $22 minimum wage may be Warren’s intellectual Waterloo.

Whereas the regulatory points made in the Senate Banking hearings are esoteric and easily abused to create YouTube moments, the $22 minimum wage issue is readily understandable to the public and understood as absurd.  What small business or retail outlet could survive if the minimum salary were $45,000 per year, regardless of what the employee did or what experience the employee had?

Other aspects of Warren’s positions are coming under scrutiny, such as Senator Warren’s Inconsistent Approach to Regulatory Accountability:

Last week, at her first Senate Banking Committee Hearing, Senator Elizabeth Warren excoriated regulators for entering into settlements with big banks rather than bringing them to trial.  Also last week, Ms. Warren called for a vote to confirm Richard Cordray as director of the Consumer Financial Protection Bureau, a role in which he is already serving by virtue of a recess appointment of questionable legality.

Setting aside the senator’s odd emphasis on trials as the only means to punish banks, the juxtaposition of these two events is interesting.  On the one hand, Ms. Warren clearly relishes her new oversight role.  On the other hand, she is insisting on the enshrinement of a regulator over whom she will not be able to exert effective oversight.  If Mr. Cordray doesn’t embrace the litigate-because-it-looks-tough approach–and so far he too has entered into settlements with big banks–there will be little she can do to hold him accountable besides public shaming.  Under the institutional design blessed by Ms. Warren, the CFPB director has a free hand to do whatever he wants to do, even over the objections of members of Congress, the president, and the American people.

I don’t underestimate Warren’s political talents.  The Native American / Cherokee controversy alone would have sunk most politicians, but she seemed to thrive on it notwithstanding the fact that her explanations of family lore did not hold up to scrutiny.

Given her political talents and solid base of true believers, Warren’s intellectual Waterloo will not be her political Waterloo.

Update:  Another interesting read is Elizabeth Warren’s Unwarranted Wage.

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Comments

casualobserver | March 27, 2013 at 9:15 am

Most sanctimonious progressives may not admit it openly, but surely they don’t care about individual productivity. It’s about the collective. If telecommunications workers are more productive, and especially if they earn more – inherently living a better life – then it should be (must be?) SHARED.

I think Warren’s popularity within her ‘community’ is high and will remain or grow simply because she is an image or a symbol. It’s what she represents and not what she accomplishes or perhaps even HOW she attempts it. Just as her minimum wage discussion is more about measurements of largely accumulated groups of people, so she represents a progressive clan. Or tribe? If ‘justice fighters’ can excuse the actions of a violent academic (when young – Ayers), surely they can overlook Warren’s shallow intellectual positions and arguments and foist her onto their ‘collective’ shoulders.

Constituents in Massachusetts voted for this person, unfortunately what SHE and other dim-bulbs in the halls of Congress AND the Presidency ‘infect’ 313,914,040 (Jul 2012
Source: U.S. Census Bureau) Americans.

Would it be rude to demand an elementary test, such as below, prior to those elected actually taking their/OUR seats?

which doesn’t belong picture puzzle

Elizabeth Warren is being managed by Leftist masters. Her natural instincts consistently drive her to bombastic claims, Hard Left policy and ego-reinforcing postures. She should do well in an organization which is filled with like minded people.

Maybe Elizabeth Warren is just stupid. She really thinks if you make minimum wage higher like that, that magically things are better over all.

I would go with the simplest explanation.

Come on. Two things.

1) the $22 minimum wage is HARDLY going to be a “Waterloo” moment for her. Simple for the public to understand ? I’ll tell you what’s simple for the public to understand – “Hell yeah, I should be making $22 an hour”. The idea that explaining why minimum wage earners have not seen the same kind of increased productivity or how such productivity improvements don’t apply to such jobs is “easy” is ridiculous.

2) Liz Warren doesn’t have a politically astute bone in her body. More idiotic things come out of her mouth than almost anyone, with the possible exception of Martha Coakley. The only reason Liz Warren beat Scott Brown is because almost ANYONE can get elected in Massachusetts as a Democrat. The only reason Scott Brown was able to win his seat was because it was a special election with its own quirky demographics, and because he had no national record to attack, and because the big Democrat’s money didn’t think he COULD win. Oh, and the media invented “war on women” (and gays). She all but admitted after the election that the primary advice she was being given was to just keep her mouth shut.

Good lord. The least we can do is acknowledge reality.

    casualobserver in reply to deadrody. | March 27, 2013 at 12:19 pm

    It’s pretty obvious now that her handlers knew then what we do now. She’s a symbolic candidate who was a great foil for the War on Women program (don’t pick on Granny). As long as you don’t allow her lack of real depth to surface. She may be okay with theoretical analysis (???) and other academic activity, just not on common sense and real world matters.

If the DC dimbulbs would stop devaluing the purchasing power of the dollar by monetizing the debt, then maybe those making the current minimum wage could afford more on that pay. Nothing like the idiots creating the problems not realizing what the consequences are to that meddling.

1. According to EBL:

Maybe Elizabeth Warren is just stupid. She really thinks if you make minimum wage higher like that, that magically things are better over all.

I would go with the simplest explanation.

She graduated from high school at 16 and, by hook and by crook, wormed her way up to tenure at Harvard Law School.

2. According to Robert Traczinski as quoted in the post:

The problem with a reductio ad absurdum argument is that sometimes your opponent accepts the absurdity and just runs with it….

Leave it to an academic to be totally ignorant of the workings of the economy.

My link above indicates that Warren waited tables in her teens. LI has documented how big corporations hired her to participate in the litigation of major bankruptcies.

Traczinski is leading with his chin.

3. Yeah, those stooopid Democrats…have been taking over this center-right country. I have repeated, and am doing so again, that conservative reaction to November’s blundered elections is more worrisome than the losses themselves.

    Insufficiently Sensitive in reply to gs. | March 27, 2013 at 12:21 pm

    With regard to Lizzie Warren’s smarts, they are of a cynical, self-serving and viciously partisan sort. Yes, she figured out to check the ‘Indian’ box for hiring preferences at Pennsylvania and Harvard, with no supporting evidence whatever. Good for her. But she didn’t build the politics of preferences, she just kept a big hunk of them for herself by fraud, and has been aided and abetted by both those Universities – who are as cynically partisan as she is.

MaggotAtBroadAndWall | March 27, 2013 at 12:36 pm

Piles and piles of academic economic literature have been published over the years demonstrating that minimum wage laws contribute to higher unemployment.

Everybody agrees we have a high unemployment problem. That means we have an excess supply of labor. There is not one economic theory anywhere that anyone can point to that says raising the minimum wage rate will help clear the excess supply of labor and reduce unemployment. None. In fact, it will be counter-productive. It will make unemployment worse. You’ll see companies fail. Higher labor costs will provide a powerful incentive to companies to substitute technology for labor where possible. For example, those self check out lines at Wal-Mart where one employee and a “camera in the sky” watches 3 or 4 check out lines will quickly become the norm.

Obama knows the literature. Warren knows the literature. They don’t care. They are not interested in facts. They are Democrats. They are interested in winning elections by ginning up emotion. Facts be damned.

The reason Republicans lose is because they deal in facts. Facts have to be explained and often run contrary to popular opinion. And emotion. A Democrat says, “I believe everyone deserves to make a minimum of $22/hour”. The Republican says, “no, no, $22/hour will actually lead to much higher unemployment and lessen overall societal prosperity”. It is so easy to demagogue. The Democrat comes off as caring about people because he wants them to earn at least $22/hour. The Republican seems to care more about the business owner. The Republican is right about the facts but the Democrat will often win because he is appealing to emotion wrapped in compassion.

Or, after a horrible mass shooting you hear a Democrat say, “let’s ban “assault rifles”, but Republicans point out that “assault rifles” are used in only a tiny, trivial number of the actual murders committed each year, so banning them will not lessen violent crime. Whose argument sounds better emotionally? Emotion often wins even if it means forever surrendering a constitutionally protected liberty.

Democrats learned a long time ago that facts don’t always win elections. With a dumbed down low information electorate, emotions wrapped in compassion have a better chance – even if the data and facts prove that the policy is detrimental and ineffective. Until Republicans can figure out how to sell their policies emotionally, they are going to have problems.

Well, considering that liberals are nothing more than the “emotion based community”, you are right on target.

The profits from these productivity gains went mostly to the people who created them: the businesses who adopted new technologies and the inventors and entrepreneurs who developed them.

Take’s not entirely true.

Back in the 1980’s you could by a computer at Radio Shack for $8000 to $9000. Today, over at BestBuy, I can buy a Google computer for $300.
… but you say, why didn’t you pay $8000 to $9000 for the Google computer ? Funny you should ask that question.

It’s because the productivity gains in the computer market when to the inventors and eventually, to the consumer.

I can remember figuring out once to get 16 Mbytes for a new MC68000 microprocessor would cost about $4000. Now, you can’t buy memory that small.

Much of the confusion about economic matters arises from the inability of an increasing portion of our population to distinguish between an abstraction and real people. People who, today, are in the group labeled “minimum wage employees” are not in that group after they learn or acquire skills in their job. Yet the media, all politicians and pressure groups as well as many of those who talk about it, speak and write as if the abstract concept “minimum wage employees” referred to a specific group of actual people. It does, right at this moment, today, but over the time required for any government policy, law, regulation or rule to take effect it does not. And that basic fact of economics – coupled with law-makers’ inability to grasp that difference – is one of the factors which confounds even the most well-meant laws. No social organization is a machine. Therefore, thinking, talking about it and acting on it as if it were a machine is going to fail. Consider the old bit about “Seven Blind Men and the Elephant” and add to it what would happen if they acted upon their misperceptions. Exactly!

[…] Jacobson at Legal Insurrection has been following the economic nonsense concerning Senator Elizabeth Warren’s claim that the […]

On the other hand, if the Federal Reserve keeps printing a trillion dollars a year, unskilled workers WILL be making $22 an hour. And that sum still won’t be enough to buy a single movie ticket, or a quart of olive oil, or two gallons of gas.

So there’s that.

[…] Legal Insurrection has two other economic responses, namely, that low-skilled productivity does not increase the same way that productivity in high-skilled labour has, and that the makers of the new productivity-enhancing technology, not the users of it, are the ones who (justly) got wealthy off this. […]

[…] The productivity gains she’s touting weren’t among the unskilled workers making minimum …. So no, they shouldn’t be earning $22 an hour. […]

[…] She’s a Socialist, what did you expect?: Elizabeth Warren’s $22 intellectual Waterloo […]

[…] this toxic mixture of perverse incentives add Elizabeth Warren's crazy suggestion that the minimum wage ought to be set at $22/hour, and suddenly all those enrollees to EBT find that, somehow, for reasons that are completely […]

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