The Aristocracy of Pull
But guess who got to ignore California’s restaurant-closing measure? That’s right: Governor Gavin Newsom. On October 9, 2020, his own Department of Public Health issued a prohibition on gatherings of more than three households. But on November 6, less than four weeks later, Newsom was seen at an expensive restaurant attended by at least twelve people, celebrating the birthday of a lobbyist.
Newsom did what politicians often do when caught: he lied. He claimed that the dinner had been outdoors. But photos showed his claim to be false. Then Newsom did what politicians often do when caught in a lie: he apologized. Although I may have missed it, I don’t recall his expression of sympathy for others who might have wanted to celebrate birthday parties indoors with people from multiple families.
Newsom and his staff set the rules for all of us and expected us to obey them. But Newsom exempted himself and his friends and apologized only when caught. That is the aristocracy of pull.
This is from David R. Henderson, “The Aristocracy of Pull,” Defining Ideas, September 8, 2022.
I also get into the higher minimum wage we can now expect for fast-food workers in California:
Economists know what happens when governments raise minimum wages. In the simple model that we teach our students, employers lay off workers whose productivity isn’t high enough to match the higher minimum wage and employers also adjust by making production more capital intensive. We often point out that the minimum wage law doesn’t guarantee a job; all it guarantees is that if you get a job, it will pay the minimum wage. But for workers who are relatively unskilled, that’s a big “if.” It’s precisely the requirement that they be paid the minimum wage that makes them less likely to get or keep a job.
But some economists also teach a more complex model that more completely fits the reality of the labor market. They point out that the wage is only one part of the compensation package. Other components are employers’ contributions to health insurance and retirement plans, and general working conditions: free food for employees, flexibility so that employees can deal with sick children, etc. When the government sets a high minimum wage, employers can reduce those benefits. Critics of this view might argue that employers of unskilled workers do not give a lot of fringe benefits. But that actually helps make the economists’ case: the higher the minimum wage, then, all other things equal, the skimpier the fringe benefits.
And a chance to recount one of my favorite skits:
In the 1930s, in a play on Broadway called Ballyhoo of 1932, actors Willie and Eugene Howard did a famous skit. In the skit, a speaker, wanting to persuade his audience of how great communism would be, shouted, “Come the revolution, everyone will eat strawberries and cream.” One member of the audience yelled back, “But I don’t like strawberries and cream!” The speaker responded, “Come the revolution, you’ll eat strawberries and cream—and like it!”
I think of that when I think of the fast-food council. This council will make decisions for thousands of employers and hundreds of thousands of employees. It’s true that many employees might like the decisions. But it’s also true that many employees might dislike the council’s narrowing of their options. In a world of heterogenous tastes, many employees might not “like strawberries and cream.”
Read the whole thing.