Pen, Phone, Executive Orders, Administrative State, Regulatory Surge: Obama Knows Best. @RichardAEpstein. @HooverInst

Aug 20, 2016, 04:51 AM

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Pen, Phone, Executive Orders, Administrative State, Regulatory Surge: Obama Knows Best. @RichardAEpstein. @HooverInst

“…Finally, the President’s orders have done nothing good for the workplace. Yet the Times fails to critically evaluate the many initiatives of the Obama administration in the areas of wages and hour regulation. Instead, it lauds the increase in overtime eligibility brought about by changes in the wages and hour laws, without asking once how these rules will affect established patterns of business in such key areas as the gig economy, tech startups, university laboratories, and ordinary business. In some industries, the hour is a meaningless measure of productivity. In others, increasing the number of workers eligible for worker’s compensation requires many firms to reengineer key parts of their business. The implicit assumption of the President—and the Times—is that more regulation is better, without taking into account the administrative costs needed to put the new schemes into place, or the increased efforts of compliance. Similar objections apply to the effort of the President to increase by executive order the minimum wage paid to employees of government contractors. It sounds like a humane policy in theory, but it’s important to ask if these high minimum wages will do good, given the evident risk that they will drive up unemployment, especially in teenage and low skill markets. The Times cites the claim of government economist Betsey Stevenson that higher minimum wages will reduce turnover and thus improve overall production. Then it adds, anecdotally, that Noble Prize–winning economist George Akerlof and his wife, Federal Reserve Chairwoman Janet Yellen, found that they got better babysitting care when they paid a premium over market. But these time-worn arguments get matters exactly backwards. If higher wages will increase productivity, as they sometimes do, firm managers will not miss the point and will increase wages themselves. The correct government response therefore is to leave matters as they are, because no one in government knows on a firm-specific basis that a $15.00 minimum wage will improve workplace performance. Indeed, if the minimum wage is set too high, the present generation of parents would be less likely to pay their babysitters those premium wages once the base is artificially raised. It is just astounding that major economists concoct dreamy policies that are based on the premise that omniscient government officials are needed to correct the assumptions of the fools that populate ordinary businesses….”

http://www.hoover.org/research/our-regulator-chief