Why Economic Freedom Matters

Economic freedom is one of my favorite topics and the one that is discussed the least by politicians in this country. Everyone on every news channel discusses all types of "freedoms" -- many without Constitutional legs, but the one that is clearly seen in our governing document (by the Tenth Amendment and the limited powers in Article I, Section 8) is largely ignored. Politicians do not discuss economic freedom and those in the media have no idea why such even matters.

The National Center for Policy Analysis (NCPA) brought some excellent information on this topic from several different resources to my attention. The Federal Reserve Bank of St. Louis has released a new study called "Economic Freedom and Economic Growth in the US States." That report notes that there is a definite link between such freedoms and employment growth. Other studies have come to similar conclusions, but Michael D. LaFaive (Director of the Mackinac Center's Morey Fiscal Policy Initiative) notes that the thing that makes the Federal Reserve's study significant is its findings on labor markets. The authors write: "In addition, we find that less restrictive state and national government labor market policies have the greatest impact on employment growth in U.S. states."

Having had come from Michigan originally, I am always saddened by stories of that state's continuous decline. LaFaive states that the findings of the study only translates into more bad news for the Great Lakes State. Michigan has one of the worse labor environments in the country. It is not only a closed union shop state, but the epitome of big labor out of control. It is simply much easier for a business to move capital (and jobs) than to subject itself to the highest wages, biggest employee benefits, and toughest "pro-labor" regulations of any state in the Union. These type of policies have forced businesses to leave the state, which has created a revenue shortage, and has led Michigan to answer that problem by raising taxes even higher. Its $1.4 billion tax increase has made Michigan and even less friendly place for doing business, according to LaFaive.

These factors are among the reasons Michigan has consistently suffered from the highest unemployment in the country. The Fraser Institute and Pacific Research Institute have also chimed in on the decline of economic freedom in Michigan. In 2004, Fraser ranked Michigan 32nd among states in economic freedom. By 2009, it had dropped to 39th. Meanwhile, the Pacific Research Institute pointed out that the state fell from 27th in 1999 to 34th in 2004, and most recent, to 43rd (in its 2008 report). This rapid decline of freedom in Michigan has translated into economic ruin for the once great manufacturing giant.

LaFaive suggests several steps in reversing Michigan's economic slide, including:

• Put a halt on the state's new tax increases. Michigan has to develop ways of being more competitive in some areas than other states. Currently, Ontario, Canada does commercials boasting a lower tax rate than Michigan. That has to change if that state is going to attract job creators.
• The state should end entirely its repressive business tax and replace that with real spending cuts and other reforms. Again, the state has to develop ways to attract new businesses. Ending such a tax would certainly help.
• Forbes Magazine notes that all but one of the ten most prosperous states are right-to-work states. Michigan has to make it easier to fire and control employee expenditures, if that state is interested in businesses hiring more and increasing payrolls.
• Finally, Michigan has environmental laws that are among the most aggressive in the country. Michigan has to get its regulations in line with other states, if it is interested in job growth.

Michigan is in a state of crisis. Many other states are following a similar path (as is the nation, seen in businesses taking capital and move to other countries). It is imperative for policy makers on every level of government to recognize the relationship between economic freedom and jobs.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Who Loses from Minimum Wage Increases?

We have all heard the saying that "The Road to Hell is paved with good intentions." This saying could not be more true than when it comes to minimum wage. Liberals determine whether a policy is "good" entirely on what it should do, rather than what it actually does. Liberal policy makers decide they want to raise the incomes of individuals (salaries), when they should seek to increase the spending power of individuals (which would happen from increased productivity and the lower costs that follows).

Increasing the minimum wage, which is intended to raise the living standards of millions of Americans holding unskilled and entry level positions, finds itself playing a much different role. Instead of making individuals more financially well off, minimum wage increases always lead to massive layoffs. In fact, a new study from Ball State University suggests that the most recent minimum wage increase may have led to the elimination of 550,000 jobs. This level of lost jobs makes an eloquent case for opening up the possibility that such wage levels should be reconsidered.

Part-time workers monitored by the Bureau of Labor Statistics (from 1999 to 2009) found that raising the minimum wage to its current high of $7.25 during this recession, contributed to many businesses reducing the number of jobs they have available through attrition or to eliminate them entirely, according to Michael J. Hicks of Ball State's Center for Business and Economic Research (CBER).

The findings of the study did not end there:

• The youngest and least qualified Americans are those who suffer the most from minimum wage laws. Approximately 67 percent of teenagers and young adult minimum wage workers are members of households with incomes that are at least twice the poverty level (for example $44,000 for a family of four). This means that the vast majority of these jobs do not "make or break" a household's income, but are important ways for people to get the tools they need to get better jobs in the future. But if the job costs too much due to the government, the opportunity will never arrive.


• Adult workers working at minimum wage have limited skill. Raising the salary, in many cases, will force employers to consolidate many positions and eliminate many of these jobs. No one benefits from this kind of result.


• About two-thirds of all adult minimum wage workers have a high school degree or less. Frankly, the preparation of these workers are commiserate with their skill, training, and abilities.


• One benefit of a lower minimum wage is that it provides individuals the incenive to be more compeitive in the job market. Artificially high wages would reduce incentives to improve ones situation, would lead to higher prices for goods made, and leads to the elimination of many jobs. Minimum wage has many down sides, but not many causes for enthusiasm.

The study goes on to make several "real world" recommendations:

• The development of a "sub-minimum" wage that would lead to the creation of lower minimum wages for students and new hires would be assisted in keeping jobs.


• A student minimum wage would allow employers to hire seasonal workers without having to pay the full cost of adult employment.


• Introducing a tenure-scaled minimum wage would give employers an incentive to "take a chance" on less skilled and unskilled workers.

In addition, there are several aggressive steps that could be taken on the minimum wage front. The most important, in my opinion, is eliminating the current minimum wage entirely, but instead have he federal government mandate the states to have minimum wages of their own. This would allow states like Michigan, Ohio, and Nevada to be able to tackle their massive unemployment problem in creative ways that make sense to their particular circumstances. For example, they could have a different minimum wage for cities with disproportionately high unemployment, in order to make them more competitive.

Surveys show that unemployment is the most pressing issue facing voters today. Our current double digit unemployment puts us at a level we have not seen in a quarter of a century. The American people are looking for Congress to take serious steps to eliminate the barriers between people and jobs. Reforming minimum wage is an excellent place to start.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Why Detroit and the Rest of the Nation suffers

I grew up in a suburb of Detroit, Michigan and thought it was a great place to live at the time. We had four seasons, beautiful trees, and it was a wonderful place to be a kid. However, it was also a place in significant economic decline and, by the time we left in the mid 1970s, Detroit was a place on the ropes. Like the many "Michiganders" that flew south to escape the economy of Detroit, we often joked, "would the last person to leave Detroit, please turn off the lights." With many economists indicating that real unemployment in the Motor City is around 50 percent, the day this city dies seems to be drawing near.

Detroit has reached such a dire status that its own demise has become a description for the decline of other economies. The Michigan based Mackinac Center discusses "Detroitification," which is defined as the "hollowing out of the private economy to prop up unsustainable (and often unresponsive) government establishments." That is a perfect explanation of what is going on in our nation's capitol today.

The federal budget is expanding at a breakneck pace, with the deficit growing annually at an amount our entire national debt was just two decades ago. The US already has the second highest tax rates of any industrialized country in the world. Our fiscal policies are going to make the government demand more. Every dollar the government takes is money that would go to an expanding economy and job creation.

What is the government doing with its expanding expenditures? According to USA Today, during the current recession, the number of federal workers earning six-figure salaries has grown at a rapid rate. While Americans struggle with economic decline that is demonstrated in higher unemployment, falling wages, businesses going under and housing foreclosures; federal employees are flourishing at the expense of taxpayers.

USA Today provides an example of this growth in government employment, at the beginning of the recession, the Transportation Department had only one person earning a salary of $170,000 or more. Today there are 1,690 employees with salaries above $170,000. The growth in six-figure salaries has made the average federal worker's pay climb to $71,206, compared with $40,331 in the private sector. Furthermore, government jobs usually include many benefits that are not typical in the private sector, making the public jobs even more expensive. One can easily see how the costly nature of the government and private sector trade off.

Michael Jar of the Mackinac Center rightly notes, "So much for shared sacrifice." The same tragic policies that have economically wiped out the city of Detroit are now being applied on a national level. Such policies keep certain political parties in power, and certain bureaucrats happy, but create ruin for the rest of the population.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Detroit Newspaper Has Sad Event

Increasingly, the idea of going out in your front yard to get a newspaper in a plastic bag that is littering, is outdated before it hits the grass, and you paid for, seems ridiculous. It appears I am not alone as circulation for such publications are decreasing dramatically and advertising revenues shrink. The only ones who seem to be slow at "getting it" are the newspapers themselves. That finally seems to be changing.

I grew up in Michigan at a time in which some of my neighbors received the Detroit Free Press daily, while others got the Detroit News. Some even had the morning or evening edition. My father liked the Free Press in the evening. We even received the Daily Tribune which focused on Oakland County. Now the only real player in Detroit newspaper news is the Free Press (they have had a marketing agreement with the Detroit News for around two decades) and it made an announcement that would have been unheard of a decade ago, but seems long over due today.

Paul Anger, Editor of the Detroit Free Press wrote:

"The newspaper industry can identify with the American auto industry -- we have important products and similar emergencies that demand bold, immediate action. The transformation announced Tuesday by the Detroit Free Press and the Detroit Media Partnership is such an action, unique in the country. Some newspapers have reacted to crushing business realities by not publishing on certain days, or drastically slashing their news-gathering staffs, or exploring outsourcing of local reporting and editing jobs overseas -- or all of the above. The Free Press chooses a path not traveled."

With that eloquent introduction I expected something really big. Anger, unfortunately, disappoints. Their description of the up coming changes are filled with hyperbole, but not much substance and certainly not the paradigm shift that is necessary for tackling the onslaught being brought on by the Internet. Even as Anger details the heart of the changes, it is done in the context of inevitable defeat, stating "we do not make these moves lightly. We know that delivering the Free Press to homes three days a week -- Thursday, Friday and Sunday -- instead of seven will disrupt many breakfast-table routines. Fact is, though, those routines have already changed as many people tune in to the news by laptop or cell phone." In sum, since your not missing the newspaper, why deliver it seven days a week? The likely retort to this is, if that's the case, why deliver it at all?

The new Free Press encourages you to take action, pointing out that they are "offering a digital subscription to the Free Press that combines both worlds -- a way to go online and see the newspaper pages, including ads, exactly as they appear in print. You can sign up at freep.com." Unfortunately, the new Free Press -- like the old -- is anything but free. Unlimited monthly access is $12.50 a month. Unfortunately, that goes against the prevailing trend that has made the Internet so popular. People don't want to pay for such content and because of competition, typically don't have to.

Following these few details, Anger serves up a great deal of information on the research that went into the decision. This includes surveys, consultants, and other methodologies to assure us that this decision is in all of our best interest. In the end, Anger's well written document makes one conclude that the writing is already written on the wall for traditional media. The Free Press' current efforts are only trying to slow down the ink from drying.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Brett Farve Calls It a Career

I grew up in Michigan and was (and still am to a certain extent) a NFC Central (now North) fan. However, I never liked the Packers much, they were always difficult for my favorites (the Lions and the Bears) and I didn't like many of the personalities over the years. Brett Farve was one of the rare exceptions to that sentiment.

Brett Farve rarely spoke about how great he was, but he is one of the finest quarterbacks in the history of the game. He spoke with his strong intellect, unprecedented passion, and athletic ability and not with his mouth. During his career, Farve accumulated 3 MVPs, 8 seasons with 30 or more touchdown passes, 16 consecutive 3,000 yard passing seasons, 18 straight games with a touchdown pass in the playoffs, a record number of wins for a starting quarterback (160), 442 touchdown passes (a record), 5377 pass completions (an all time high), and many others. He was extraordinary.

For a while, because of injuries, Farve struggled with an addiction to pain killers. He didn't make excuses for the behavior, but owned it, went into recovery and put the problem behind him. He worked hard and never measured anyone by a double standard. He never expected anything from anyone, that he didn't expect for himself.

I believe we have yet to hear the end of Farve. I believe he will parlay his awesome career on the football field to a great career where ever he goes. Be it to the front office of a team, a career in coaching, or one in business. Farve's best years may very well be, yet to come.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

Google's Street View: A Very Strange Trip

Any frequent reader of this blog or listener of my show knows that I am from the Detroit, Michigan area. The suburb of Ferndale, to be precise. Growing up there, I had a relatively happy childhood and loved my neighborhood in particular. I have told my kids more than a few stories of my old home town.

The last time I visited was 1981 after living in Texas for around five years. My brother was there at the time and I thought it would be fun to visit. He was planning on coming back to Texas with me so I spent a few weeks catching up with old friends and visiting some of the sites and sounds that made Michigan home. I really thought I would visit again, but that has yet to materialize.

A few years ago Google Maps came on the scene with its nifty satellite and I finally got to see the old neighborhood. Sure, it was just the roof tops and really rough side views, but I got a sense of what it looked like. Then we got Streetview. I noticed it was only at a few locations at first -- none near the Detroit area -- but in no time it all it was in Pleasant Ridge, about a half a mile from where I grew up, and this week, it is along Hilton and zipped right down Goodrich, where I grew up. I saw the church at the end of the street that I went to, the tree I ran into playing football, and all the homes of my friends I grew up with.

It was interesting and, oddly, largely took away my desire to visit. I don't know if that was an intended result, but the travel industry may never be the same. I tell you something else it may have shot -- new websites designed to connect people to their old home towns. At least any such sites that would charge money.

However, Streetview is still cool and I'll keep watching for its expansion. I'm looking forward to seeing the park that I grew up (and often fell down) in.

Click the Google Map image above and you will find the map and a little guy standing on my street. Click Streetview, and then the little guy and you will see where I grew up. If you care. I liked it any way. You might like to go from there to some great places you want to remember.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

Too Slow Cities?

Recently I wrote two articles about "fast cities" according to Fast Company magazine. According to Fast Company, these cities are on the cutting edge of culture, entrepreneurship, innovation, and other areas that major progress. Fast Company's analysis didn't end there, however, they also have opinions about cities that they describe as "too fast" and "too slow." In this post I'm going to focus on this latter group.

Budapest, Hungary

"Breathtakingly romantic--but its economy is broken. Among the world's 150 biggest cities, last in predicted GDP growth, according to PricewaterhouseCoopers."

I have to agree. This is the most beautiful city I have ever seen and one very difficult to make a profit. I traveled extensively through out Eastern Europe and the former Soviet Union following the fall of Communism and Budapest was one city I had a great deal of hope for and it is a city that has shown little progress. Very sad indeed.

St. Louis, Missouri

"Too normal for its own good. It ranks dead last on CityVitals' "Weirdness Index," a measure of passion and engagement."

My dad grew up near this once great city and he use to often sing its praises. It is sad to see that it to has reached such a lowly position.

New Orleans, Louisiana

"We wish it weren't so. But NOLA was slow before Katrina. The cleanup debacle has only reinforced that reality."

New Orleans is a tragedy that I believe we remain a shell of the city it once was. The political leadership in both the state and city have done everything they could, in my opinion, to prevent this community from turning around.

Detroit, Michigan

"Last one out, shut off the manufacturing line. Tragically, inevitably bound to the U.S. auto industry's failings."

When I left the Motor City in the 1970s the joke was "will the last person leaving Detroit please turn off the lights." Fast Company's statement may be better. In addition to being a slave to unions, the city hates innovation and seem to prefer dying a slow death than doing what is necessary to revive this once great city.

Havana, Cuba

Celebrating a half-century of economic decay. Thanks, Fidel. Seemingly no cars on the road made after 1968.

Well put.

I liked Fast Company's assessment of slow cities far more than those they described as "fast." What about those they deem too fast? Those will be examined in a future post.

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When Ads are Too Subtle

For quite some time I have been seeing an ad campaign on television about why businesses should move to Michigan. I like Michigan, I was born just outside of Detroit and have fond memories of growing up there. Like many, my parents had to leave in the 1970s because of a deteriorating economy. The joke then was "will the last person to leave Michigan please turn off the lights." So, I was glad to see an effort to lure business back.

I've seen the ads many times and took close note of the testimonies of individuals whose lives or businesses have changed since moving into that state. Each advertisement ended with "Michigan has the upper hand" and a nifty little drawing showing the state. Upper hand, hmmm. I saw the ad on TV so often, I can't even tell you, but I was thumbing through a magazine and saw it again with special emphasis on the picture (see above).

Ahh, upper hand. It's a glove. One of the first things you learn about Michigan when growing up in the schools there is that it is shaped like a glove. Furthermore, it is one of the country's most northern states (just south of Canada, unless you are in Detroit, which is just north of Windsor, check it out on a map).

I grew up in Michigan and it took forever for this message to finally click with me. This ad is intended to reach people outside of Texas (thus they didn't likely go to Michigan public schools) and they are expecting it to resonate with the vast majority of its viewers? I doubt it. If Michigan is going to attract new businesses, it is going to have to be a little clearer in reaching its audience. As an aside, it would help if they created an economic environment that will attract business. But that will be another post.