Re-learning the Lesson of the 18th Amendment

California has banned cigarettes in state prisons. The results are predictable.

The people of this nation tried prohibition before, with alcohol. The 18th amendment banned alcohol - not a bill or a law, a Constitutional Amendment. The result was the rise of organized crime and a sharp rise in illegal binge drinking.

Now California legislators probably had the intent to improve the health of inmates and prison employees. Instead, they have created a booming market in illegal cigarettes. Inmates are still smoking. Those supplying the inmates with legally-purchased cigarettes are now criminals.

Packs of cigarettes are going for more than $100 for a single pack.¹

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Source:

1. Jeremiah Marquez. Smokes Bring Big Bucks in Calif. Prisons.
ABC News. Feb 20, 2007.

© 2007 Michael Cale

Minimum Wage Up, Teenage Employment Down

Action, reaction. Drop a ball. The ball falls, hits the ground and bounces. It's predictable. It's mathematical. It's scientific.

Similar relationships exist in economics. Raise prices and demand falls. Labor is not exempt from this relationship.

Chad Graham reports from Arizona:

Tom Kelly, owner of Mary Coyle Ol' Fashion Ice Cream Parlor in Phoenix, voted for the minimum-wage increase. But he said, "The new law has impacted us quite a bit."

It added about $2,000 per month in expenses. The store, which employs mostly teen workers, has cut back on hours and has not replaced a couple of workers who quit.

Kelly raised the wages of workers who already made above minimum wage to ensure pay scales stayed even. As a result, "we have to be a lot more efficient" and must increase menu prices, he said. ¹

The largest segment of the labor force earning minimum wage are young, unskilled, and do not entirely support their own household. They often still live with their parents.

Yet an interesting thing happens when uneducated, unskilled workers become employed and stay on the job - they become more skilled at their job. They become skilled workers. They become skilled workers earning more than the minimum wage.

Over time, low income workers tend to become middle income workers and often high income workers later in life. One thing they have in common is that they all had to get that first job. Minimum wage laws ensure that there are fewer first-jobs available.

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Source:

1. Chad Graham. New wage boost puts squeeze on teenage workers across Arizona .
The Arizona Republic. Feb. 10, 2007.
http://www.azcentral.com/news/articles/0210biz-teenwork0210.html.

© 2007 Michael Cale

Concentration Camp Found Using Google Earth

http://freekorea.us/?p=6442

Bi-Coastal Housing Pain

As housing softens nationwide, the east and west coast seems to face the most difficulty . These two regions previously enjoyed spectacular price increases.

From Northern Virginia:

The pace of home construction in Loudoun County slowed dramatically last year, dropping to levels not seen in a decade, according to recently released county figures. By the end of 2006, the county had issued 3,284 residential building permits, 35 percent fewer than the year before and fewer than half the number issued at the peak of the Loudoun housing boom in 2003, according to a January report by the county's Department of Economic Development.¹

From the West Coast, speculation is beginning to slow:

Flippers bailed from California's troubled housing market in 2006, according to a report today by a Southern California real estate researcher. ``There's a lot more caution in the wind when it comes to investors,'' HomeSmartReports.com President Michael Ela told Bloomberg. ``The margins are getting a little skinnier, and there aren't as many people making money in the flipping arena.''²

These are both positive signs. Real estate price growth had become unsustainable in many markets. As a result, supply has exceeded demand. Eventually, this imbalance will correct itself.

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Source:

1. Sandhya Somashekhar. Home Construction Hits 10-Year Low.
Washington Post. February 4, 2007.
http://www.washingtonpost.com/wp-dyn/content/article/2007/02/02/AR2007020202153.html

2. Frank Michael Russell. California housing slump made 2006 a bad year for flippers.
Mercury News. January 11, 2007.
http://www.mercurynews.com/mld/mercurynews/business/columnists/business_update/16438457.htm

© 2007 Michael Cale