Inconsistent, Incongruous or Insane?

When I look at federal policy across the spectrum of issues it is hard to not scratch my head quite often. Inconsistent? Absolutely? Incongruous? It seems so. Insane? Perhaps.

Let's see what I am talking about.

We have 92 million Americans of working age who are not working.  The unemployment rate is stubbornly high almost six years after the economic downturn of 2008.

However, many employers say that we need to reform our immigration rules to allow more workers into the country because they can't fill the jobs that they have.  This clearly points to an educational   system at the high end of the job market where we are not producing the right number of graduates (tech, engineering, science).  At the same time, the low end jobs can't be filled because we have established a welfare system that makes it more attractive to stay on the dole than work.

So the answer is to let millions of more people into the country when so many Americans are not working?

We are also hearing calls to raise the minimum wage.  Minimum wage workers tend to be young. Although workers under the age of 25 only represent 20% of all workers, they make up about 50% of all minimum age workers according to BLS data. 

Those under age 25 also have an unemployment rate that is more than double the overall rate according to the most recent BLS report..  For example, the unemployment rate for those 16-19 is 22.0% and it is 11.9% for those 20-24. This compares to a 5.4% unemployment rate for those 25 years and older.  Bear in mind, the unemployment rate only considers those that are actively seeking workers.  This does not include any young people in school.

Therefore, what exactly will an increase in the minimum wage accomplish?  It certainly will not result in assisting any of these young people to get a job.  In fact, basic economics suggests that it will result in an increase in unemployment.

An increase in the minimum wage will almost assuredly result in greater incentives for business to further automate to eliminate low wage jobs.  Why do you need a person to take your order at McDonald's?  Just put your order in on a touch screen. No need for a human being to do that.  The machine also never shows up late for work.  Or complains about their workload. And there is no FICA taxes or health insurance coverage to be paid.

McDonald's is already in the midst of adding touchscreens in 7,000 of its restaurants in Europe.  Is it any coincidence that this effort has gone into Europe first with its onerous work rules and sky high labor costs due to big government rules?  By the way, Europe also has an overall unemployment rate of 12.0%.

We also have health care reform which was supposed to address the needs of some 47 million Americans without health insurance coverage.

Of course, almost half of the uninsured in the United States is "healthy and young". Asked the question as to why they have not purchased health care coverage previously most of them say that cost is the main reason.

So how was healthcare reform structured to handle this problem?  Obamacare established a slew of mandated benefits that drove up the costs of health insurance across the board. It also required that the old could not be required to pay more than three times the cost of the young for health coverage.  The problem is that actuaries will tell you that the old actually have about six times the health costs of the young.  This means that under Obamacare the cost of health insurance coverage is actually much, much higher than it before for the young.

Predictably, the young and healthy uninsured are not buying Obamacare policies. The health insurer Humana stated last week that only 20% of its Obamacare enrollees are under age 30.  42% are 50-64.  Humana said that they expect to tap into three risk adjustment mechanisms funds under the law of between $250 and $450 million for reimbursement of these losses by the federal government.  These numbers indicate that the policies they sold were underpriced by about 25%.

Therefore, the solution to the problem was exactly the opposite of what was required if the objective was to lower the number of insureds. The net result appears to be that many more people were forced off of individual plans they liked than those who purchased health insurance in the Obamacare exchange.  In fact, it appears that only about 20% of those enrolling in the Obamacare exchange were previously uninsured. People have just been churned from one plan to another.

Do you see why I scratch my head often when I see what is going on in Washington?

Inconsistent? Incongruous? Insane?

You decide.