Economic Ignorance Is Getting Even Worse

First, the economically ignorant push for huge (107%) increase in the federal minimum wage from $7.25/hour to $15/hour, not understanding the economic consequences – the ripple effects of an arbitrary increase in a commodity that doesn’t affect just those making minimum wage but everyone making less than the new minimum wage. It also affects those working under union contracts with wages tied to the federal minimum wage as they will also see their wages increase.

Such an arbitrary rise in wages with a follow-on decrease in economic activity as businesses cut worker hours or the number of workers even as the higher cost of labor drive costs of goods and services through the roof, in turn fueling inflation and increasing unemployment. Why some economists think only the inflated costs of raw materials, energy, transportation, etc. can have a deleterious effect on an economy while the artificially inflated costs of labor will have little or no effect never ceases to amaze me. How can it be they can ignore the effects of meddling with the feedback mechanisms that drive an economy, believing there will be no negative outcomes from doing so, that their actions will be a net positive? History has shown over and over again such meddling only brings disaster, distorting an economy and generating second and third order effects that go beyond the initial changes forced upon the economy.

Now there’s something else that’s being looked at, something driven by a not-unexpected side effect of the whole Covid-19 debacle, something that will be just as damaging if it is mishandled (and it will be, if history is any indicator). This new something?

Four day workweeks.

The explanation for this is that a four day workweek will reduce carbon ‘pollution’...and smog in general. With the lockdowns, traffic volumes plummeted. Carbon emissions and pollution decreased worldwide.

When the pandemic first forced offices to close and the number of commuters on roads suddenly dropped, the environmental impact was visible in cities like Los Angeles and New Delhi: Smog disappeared as more cars stayed at home. Carbon emissions temporarily fell. A new report looks at how some of the same benefits could come from a shift in schedules if more companies shifted to a four-day work week.

One downside to the proposal linked? The proposal calls for a 32-hour workweek, but still paying the workers for 40 hours. In effect it’s a pay increase for working fewer hours. While the argument has been made that “a shorter week can boost productivity because workers are more focused and refreshed when they are in the office.” I have two words that explain my feelings about that claim:

Yeah. Right.

Such a claim goes against both my experience and human nature. Workers will not be 25% more productive during their 8-hour work day, despite what the proponents of the 4 day workweek claim. If the 4 day workweek were a 10-hour work day then productivity may not be an issue (though a 10-hour workday can be tiring and productivity may fall off during the last two hours of the day), and workers will receive 40 hours pay for 40 hours of work. Commuting is still reduced by 20%, but without the 20% decrease in economic output. (I am one of those folks who regularly work 10-hour+ workdays, sometimes 6 days a week. This is due to our department being shorthanded. A 40-hour workweek is like a vacation to me. And before you think it, no, I am not virtue signaling. It is just reality and something I hope I and my colleagues won’t have to do once we get more staff hired.)

Now add the push for a $15/hour minimum wage to the proposal and the conditions are ripe for high inflation, a severe recession, and double digit unemployment. But the ‘economists’ will keep telling us it will help the economy, create all kinds of jobs (which they can never seem to tell us how that works), and cure the heartbreak of psoriasis. (No, not really. But it sounded great, didn’t it?)

Once again we have people who have never run a business, never had to meet a payroll or deal with the myriad of state and federal regulations, fees, and taxes who are telling us how everything is supposed to work even though they have no experience having to deal with the things business owners and their employees have to deal with. It’s all theoretical, all based upon perfect conditions that will never exist that include humans that are also perfect (which also do not exist). The have fallen under the sway of the Non-Reciprocal Theory of Theory Versus Practice:

In theory, Theory and Practice are the same thing.

In practice, they are not.

Thus endith the lesson. Too bad they will never learn it even when their face is rubbed in it.