Labor Statistics and Jobs Effect Elections

With much news recently about raising unemployment rates (California’s Unemployment Rate Hits Highest Point Since 1994, Microsoft announces first massive layoff in company history), I wondered if I could determine a relationship between employment rates and the outcome of presidential elections. As you will see below, the correlation turns out to be quite strong (data below comes from the US Bureau of Labor Statistics).


1980 Election
The incumbent party, the Democrats, lost to Republican Ronald Reagan. In the six months leading up to the election there was a net loss of half a million jobs, which did not bode well for Jimmy Carter.

1984 Election
The first two years of Reagan’s presidency was pretty rocky, but he finished strong with a net gain of 3.8 million jobs during his fourth year. This made him a pretty formidable opponent for Democrat Walter Mondale. The incumbent Republican party won in a land slide.

1988 Election
Reagan ended his presidency with a net increase during his two terms of almost 16 million jobs. The incumbent party, Republicans, and their nominee, George H. W. Bush, had little trouble beating the Democrats nominee, Michael Dukakis.

1992 Election
The six months leading up to the election saw a net gain of only 600,000 jobs, which was relatively weak growth. Combine that with a net loss of half a million jobs from 1990 to 1991, and it was enough for the incumbent Republican party to lose to Democrat Bill Clinton.

1996 Election
With stellar job growth only rivaled by Reagan’s second term, Bill Clinton’s first term saw 11 million new jobs produced and he had no trouble staying in power and defeating the Republican challenger, Bob Dole.

2000 Election
Though another 11 million new jobs were created during Clinton’s second term, the lackluster 456,000 new jobs in the six months prior to the election to not bode well for the incumbent party and Republican George W. Bush defeated Democrat Al Gore.

2004 Election
George W. Bush’s first term started out rough and got even worse after the terrorist attacks of September 11. Overall, his first term had flat job growth, but the six months prior to the election saw a healthy 1.1 million new jobs created. This was enough to keep the incumbent Republican party in power and defeat Democrat John Kerry.

2008 Election
With monthly job loss numbers that had not been seen since 1980 when Jimmy Carter was in the White House, things did not look good for the incumbent Republican party in 2008. And indeed, with a loss of 1.1 million jobs in the six months prior to the election, the Democrats and Barack Obama had no trouble defeating John McCain.

Conclusion
It’s pretty clear from the data that as jobs go, so goes the White House.

Taking Back the Minimum Wage Debate

Rush Limbaugh stated on his radio show recently that we Conservatives have lost the debate with the American people on the issue of rasing the federal minimum wage (http://www.rushlimbaugh.com/home/daily/site_010807/content/see_i_told_you_so.member.html). That may be so, but here is my attempt to take the argument back.

Here are the top three reasons why I am opposed to raising the federally mandated minimum wage:
1. It doesn’t work–it does not raise the income of average Americans.
2. It causes unemployment to rise, thus hurting the very people its proponents claim to want to help.
3. It attempts to buck the laws of free market economics.

1. It does not raise the income of average Americans.
In the chart to the right, you can see the average income of Americans over the last 75 years (the blue line is actual data points, the green line is the linear trend). With the exception of a few dips and spikes, the income of the average American has risen steadily, about 2% a year, for the past 75 years, regardless of the minimum wage. The minimum wage has not been increased in nearly 10 years, yet average American incomes continue to rise. Proponents of a minimum wage increase say it’s part of the broader war on poverty. Unfortunately, there is no correlation between raising the minimum wage and raising people’s income so they can emerge from poverty. I wish that were the case, but it does nothing to fight poverty, in fact, if anything, raising the minimum wage puts more families in poverty through unemployment. (data taken from http://www.dol.gov/esa/minwage/chart.htm and http://www.economagic.com/em-cgi/data.exe/var/inflation-cpiu-dec2dec)

2. It causes unemployment to rise.
Take a look at the chart to the left and you will see the correlation between raising the minimum wage and increases in the unemployment level. 4 out of the past 5 major increases in the minimum wage have resulted in unemployment skyrocketing. (data taken from http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_id=LNU04000000)

3. It attempts to buck the laws of free market economics.
Regulating the price of labor (i.e. wages), like any other price control, is an ineffective and crude way to micro-manage a free market; it takes supply and demand out of equilibrium. I like this quote from Tim Kane, Ph.D., “The goal of price controls like the minimum wage is essentially to repeal the law of supply and demand, but senators might as well try to repeal the law of gravity” (Minimizing Economic Opportunity by Raising the Minimum Wage). Raising the minimum wage will hinder the growth of our economy. The market needs to be set free to maximize growth and bring increased prosperity to all.

Many things on the surface appear appear to do good, but when analyzed we find they actually harm. Such is the case with chocloate ice cream (I love it, but it goes right to the waist line) and such is the case with the minimum wage. I hope, for the sake of all Americans who wish for increased economic prosperity in the future, that Conservatives in our governament stand strong against this errant policy of increasing the federal minimum wage.