From Job Loss to Automation: There Is a Real Price of Minimum Wage Laws

I have found fewer economic topics that have been more divisive for economists than the minimum wage debate. For advocates, it is a moral and economic imperative to help provide a living wage so no one ends up in poverty. For critics, minimum wage has unintended consequences that make matters worse, especially for the low-skilled workers minimum wage was meant to help. As minimum wages increase higher and higher, a new wave of research gives us a sense of what is to come with higher minimum wages. Today, I will cover some of the most recent research conducted on the topic of minimum wage.

The first is a working paper from the National Bureau of Economic Research on the increased minimum wage for fast food workers in California that was released last month (Clemens et al., 2025). This research found that increasing minimum wage to $20 decreased employment by 2.7 percent, or a reduction of 18,000 people. This is even more jarring given that this minimum wage increase only applied to fast-food restaurants with over 60 locations. 

Why does this happen? This is not merely theoretical. It is Supply and Demand 101 in action. Two phenomena take place when the minimum wage becomes higher than what businesses are paying. One is an increase in people who want to work for the higher wage. The second phenomenon is that fewer businesses want to pay, since workers are now more expensive. As a result of these two phenomena, the result is a labor surplus in the market, which is another way of saying that minimum wage causes greater unemployment. 

This NBER research makes a new contribution to the debate. Minimum wage proponents often argue that the benefits of higher pay outweigh the job losses, as this 2024 research paper does. However, the new NBER paper estimates that 29 to 49 percent of the wage gains were offset by job losses. This does not even get into the social or psychological costs of unemployment, not to mention how unemployment has the potential to slow one's career development and worsen the trajectory for lifetime earnings. 

This segues us into an interrelated phenomenon: automation. Automation is the use of machines, technology, and software to perform tasks that were previously performed by humans. I call automation interrelated because not all job losses are due to automation and not all automation results in job losses. 

All the same, automation is a response to higher minimum wage laws. Last week, the think tank Cato Institute released a policy brief entitled The Minimum Wage and Automation (Nain and Wang, 2025). This brief explores how minimum wage hikes led to greater automation-related patent applications. The researchers found that when there is a 10 percent increase in these patent applications, there is a 1.6 percent decline in employment share for workers in routine jobs without an education, as well as a 1.2 percent drop in their wages. How does this happen? 

By definition, minimum wage is an increase in labor costs. Minimum wage laws disproportionately impact industries that rely on low-wage, routine-task workers. In response, firms eyeing automation either decide to adopt existing automation technology or invest in new automation technology. This demand drives innovation from manufacturing and tech industries, which increases the opportunities to supply automation services to other end-users. This means that as automation increases, jobs entailing repetitive routine tasks are more susceptible to being permanently replaced. 

Minimum wage increasing automation is a finding that is confirmed by a study from Nature released this past June finding that an increase in minimum wage in Europe resulted in an increase in robot installations (Sharfaei and Thavorn, 2025). This Nature study shows that the deleterious effects of minimum wage are not confined to a certain industry or a specific country. 

Laws of economics do not get suspended simply because proponents want their favored policy to work. There are real-life consequences and tradeoffs to minimum wage laws. Job loss and automation are two outcomes. There are also the effects of reduced work hours, increased consumer prices, prolonged recessions, and an increased federal budget deficit. It is no wonder that minimum wage does nothing to reduce poverty. In the end, policies driven by good intentions that ignore economic realities only serve to hurt the people they were meant to help. Workers deserve better than having to navigate a labor market distorted by wage mandates that make it more difficult to find and keep a job. 

Morocco's Jobless Trap: When High Taxes, Labor Laws, and Corruption Stifle Economic Opportunity

Morocco is a country with such vibrant cities as Fez and Tangier, a diverse geography, a rich culture, a wealth of historic sites, and has been featured in such films as Casablanca and Game of Thrones. Guess what else Morocco has? High unemployment. According to the Moroccan government's Haut Commissariat du Plan, Moroccan unemployment is at 13.3 percent, which is slightly below the 30-year high (see below).

Youth unemployment is even worse, reaching a 25-year high (see below). Sadly, the problem is nothing new. NPR complained about high Moroccan youth unemployment in 2012. So what is causing this increase in unemployment? Sure, there was the COVID pandemic, but unemployment in Morocco is higher now than it was during the pandemic. 

As the International Monetary Fund (IMF) illustrates in its Article IV Consultation report, Morocco has withstood five droughts in six years that have led to production shortfalls of 40 percent. This seems like it explains the problem: lower agricultural output. However, Morocco's agriculture sector contributes about 15 percent to Morocco's GDP. That is a higher percentage, especially considering that high-income countries only have 2 percent of their GDP in agriculture. 

I bring this up because as economies develop and mature, they become less dependent on their agricultural sector. Similar to this recent article from the Institute for Research in Economic and Fiscal Issues (IREF), I argue that Morocco's dependency on agriculture is a larger symptom of government largesse getting in the way of true economic development. 

Taxation. Morocco's corporate tax can reach as high as 35 percent. You can read my analyses on corporate tax here, here, and here as to why that rate is too high. The standard value-added tax (VAT) in Morocco is 20 percent, which is higher than the global VAT average of 15 percent. A high VAT is significant because it reduces disposable income and discourages spending. On top of that, the Moroccan tax system has a narrow tax base and is riddled with tax exemptions that make evasion and avoidance common (Moutii, 2025). 

Government Spending. The good news is that Morocco is working on fiscal consolidation (IMF, p. 10). The bad news is that Morocco's debt-to-GDP ratio is 70.9 percent, which is about 30 percentage points higher than the recommended limit that should not be exceeded on the long-term for developing countries. Whether the Moroccan government can maintain fiscal discipline will determine how much this becomes a factor and avoids heading towards a fiscal cliff similar to that of the United States.

Labor Law Rigidity. The Legatum Institute details in its case study on Morocco that the Moroccan labor market is characterized by a lack of inclusion of women and youth, slow job growth, and low quality of jobs (also read this 2025 World Bank report on boosting the business environment in Morocco). This lack of labor market flexibility is brought on by a quickly growing minimum wage and high overtime costs, regulations that cause redundancies in businesses, rigidity on temporary contracts, and stringent barriers on terminating the employment of workers, all of which contribute to the high cost of labor. Additionally, a skills mismatch and lack of workforce development exacerbate the labor law rigidity (ibid., p. 50).

Corruption. According to Transparency International (TI), Morocco's corruption is worse than the global average. Even worse, its TI Corruption Perceptions Index score has declined since 2018. As I pointed out last year, corruption erodes economic growth. This is due to the fact that corruption impacts business confidence and hinders investment, as is illustrated by over 16,000 enterprises collapsing in Morocco last year. 

Postscript. It is true that there were global challenges such as pandemic and drought. It is also true that Morocco's high unemployment rate is more structural in nature. Punitive corporate taxes, a high VAT rate, and rigid labor laws make it difficult to modernize and diversify the economy. A richness in culture, geography, or global visibility is not going to save Morocco. It is a policy paralysis that will keep employment rates stubbornly high until the Moroccan government removes the barriers to economic prosperity.

Let's Hope Biden's So-Called "Infrastructure Plan" Doesn't Become Law

Last month, Congress and the White House enacted a $1.9 trillion so-called relief bill in which there was little relief to be found. Let's not forget the other $5.3 trillion that was passed last year in coronavirus relief, aid, and "stimulus." If it was not enough that the U.S. government has driven our debt-to-GDP ratio to a new high, Biden wants to spend even more money. This time, it's not to deal with coronavirus, but rather to purportedly deal with infrastructure. Last week, Biden proposed an eight-year, $2.3 trillion infrastructure plan, although the bipartisan Committee for a Responsible Federal Budget puts that figure at $2.7 trillion. When you look at it, Biden's plan is hardly original. It comes off as a combination of President Eisenhower's pitch to expand infrastructure back in the 1950s and the trope that Obama used in 2009 to justify the American Recovery and Reinvestment Act [ARRA].

Before delving into the details of Biden's plan, I would like to ask even if we have an "infrastructure crisis," especially since if you look at the media, everything is a crisis. When the centrist Brookings Institution analyzed local transportation policy (Turner, 2019), they found that "the situation is obviously not worse than it was than 20 years ago. In fact, there are fewer potholes on the interstate." If anything, a 2020 research brief from the Cato Institute shows that infrastructure has been improving. I'm not here to say that our infrastructure couldn't use an upgrade, but rather that we are hardly in crisis mode when it comes to national infrastructure. Aside from a questionable sense of urgency, what other reasons are there to object to Biden's plan? 

Raising the corporate tax rate to 28 percent would harm the economy. Biden is looking to undo the corporate tax rate cut from the Tax Cuts and Jobs Act and increase the federal corporate tax rate to 28 percent. We can ignore the fact that the Congressional Budget Office [CBO] found that higher taxes are not the answer to funding this. The only plausible way to generate the funds for federal investment without running a deficit is to cut non-investment discretionary spending (CBO, 2016, p. 13). 

There is the cost of raising the corporate tax rate. According to a February 2021 Tax Foundation analysis on Biden's proposed tax increase, such an increase would result economic output by 0.8 percent over the next decade, as well as eliminate 159,000 jobs and cuts wages by 0.7 percent. These findings do not surprise me. I have covered the topic of the corporate tax before (see here and here). I came across research from the OECD that found that corporate taxes are one of the most harmful to economic growth. They also reduce labor productivity, create a higher tax burden, shift the tax incidence to the working class (and not to the shareholders), and disincentivize investment. Speaking of investment.....

More federal dollars in investment translate into less net investment. The CBO calculated that each dollar of federal investment increases total investment by two-thirds of a dollar, i.e., for every dollar of federal investment, there is only $0.67 of actual investment (CBO, 2016, p. 4). To frame it in a slightly different way, when the federal government invests a dollar, state and local governments, as well as private actors, reduce their investment by $0.33. The joys of disincentive and the crowding-out effect! The CBO confirmed this in a separate analysis of highway infrastructure funding. Guess what the CBO found? A $1 increase in federal highway infrastructure grant money me that state and local governments reduce their spending from anywhere between $0.20 and $0.80 (CBO, 2018, p. 1).

Lower rates of return from public-sector investment. According to the CBO, the average rate of return on private-sector investment is 10 percent. For the public sector, that is 5 percent (CBO, 2016, p. 4). In other words, when the government invests, the rate of return is about half of what it would be compared to the private sector. 

Already-existing federal regulations will increase cost of capital projects. The federal government has a number of regulations that affect the cost of labor, which in turn, affects the rate of return mentioned above. The Davis-Bacon Act requires union-rate wages. Project labor agreements, which were enacted during the Obama administration, requires union-style work rules. As I discussed in 2017, "Buy America" provisions increase the cost of raw materials and equipment required for the projects. When you take out the competitiveness in the procurement process, limited options and labor market rigidities increase prices of projects. That means that we can invest in fewer investment projects, which is a way of saying that federal investment is inefficient. 

Electric vehicle subsidy seeks to benefit the wealthy. Part of the proposal is $175 billion to subsidize electric vehicles (EVs). Right now, EVs account for less than 1 percent of the vehicle fleet. By 2035, they are projected to be at 13 percent of the vehicle fleet (New York Times). Who disproportionately buys electric cars? The wealthy. Congressional Research Service found that 78 percent of those who purchase electric cars make over $100,000 annually. Aside from price, EVs are having issue gaining traction because of smaller ranges and longer refueling times. Technological development could change these factors and make EVs more accessible and more alluring. But at least in the short-to-medium-term, Biden's $175 billion is going to subsidize the wealthy. Plus, let us not forget that the production and charging of electric vehicles relies on fossil fuels. 

Biden's agenda with climate and electricity. Biden would like to have the United States have 100 percent carbon-free electricity by 2035. When I criticized the Green New Deal a couple of years ago, I pointed out that such associations as the Union of Concerned Scientists and the National Academy of Sciences predicted that using carbon-free energy would not be feasible before 2050. On the plus side, Biden is not removing nuclear power from the equation, which is vital if the long-term goal is carbon-free electricity. 

Amtrak subsidies. Biden would like to subsidize Amtrak with $80 billion. Amtrak is tricky because of its quasi-public status. While it is run as a for-profit corporation, it still receives public funding. I haven't scrutinized Amtrak since 2013, but I would contend that privatizing Amtrak is a better solution than throwing money at a company that has lost money every year since it was founded in 1971. 

Much of this bill has nothing to do with infrastructure. CFRB correctly points out that $621 billion of the bill has to do with traditional infrastructure (i.e., transportation infrastructure). Biden seems to add the word "infrastructure" at the end of the other spending that he would like to incur and make it seem like it is an infrastructure bill when it comes off more like an omnibus spending proposal. Here is a list of some of the things in Biden's proposal not having to do with traditional infrastructure:

• $400 billion to expand home and community-based health services
• $213 billion to retrofit houses
• $100 billion to modernize public schools
• $100 billion in workforce development
• $35 billion in climate change research and development
• $25 billion to "advance racial and environmental equity"
• $25 billion to upgrade child care facilities 
• $12 billion for community colleges

Conclusion

I can point out research that shows that infrastructure spending does not boost the economy short-term (Krol, 2020). I can drudge up the Solyndra debacle or the billions spent on light-speed rail in California. What I will say is that this bill is an excuse for government to spend more money and shovel out pork while under the guise of "helping us out." In many respects, this proposal takes money from one hand and puts it into another, all the while slowing economic growth with deleterious tax policy. Biden is not fixing the problem. He is merely throwing money at a problem without any mechanisms for cost control. We can talk about user fees, shifting spending to state governments, or using tax incentives to spur research and development in traditional infrastructure, but what is clear is that federal spending on infrastructure projects is only going to make matters worse. 

4-16-2021 Addendum: I came across an Ivy league economic analysis on the plan from the Wharton School of Business. A few things that are projected as a result. One is a decrease of economic output by 0.9 percent. The second is a three percent decrease in capital stock. Third is a 0.7 percent decrease in wages by 2031, which is ironic given this is supposed to be a "jobs plan." 

Can a Four-Day Workweek Succeed?

Economist John Maynard Keynes said that in the long-run, we are all dead. He also predicted that his grandchildren and their contemporaries would be working a fifteen-hour workweek. Like so much of his economics and his predictions, he was wrong on this one. An increase in living standards did not diminish the workweek. According to the Federal Reserve Bank of St. Louis, average weekly hours have not decreased in the United States. If anything, they increased in the past decade or so. 

Even so, the fight for a shorter workweek is not a hopeless endeavor. Earlier this month, the Spanish government announced that it is going to run a pilot for a four-day workweek (or 32 hours). Although this has been a popular idea among Left-leaning political parties for decades, Henry Ford made the case to lower the workweek from 60 hours to 40 hours. Those who advocate for such a change argue that a shorter workweek would create such benefits as improved productivity, reduced absenteeism, better physical and mental health for workers, and reduced burnout. 

The country that has the closest thing to a four-day workweek is France. In 1998, France passed the Aubry laws, which mandated a 35-hour workweek. According to a study from economists at the Massachusetts Institute of Technology, there were two main findings. One is that unemployment remained unaffected. The second is that turnover increased (Estevão and Sá, 2008). At the same time, the 35-hour mark is less of a cap and more of a threshold at which overtime and rest days kick in. If it is true that the French de facto do not particularly adhere to this law (or have found workarounds), then we are not left with any good case studies on a national level. That leaves us with company-level case studies:

• The city government of Reykjavik implemented it for its employees. It resulted in greater work satisfaction, fewer sick days, and greater wellbeing. 
• The Henley Business School at the University of Reading surveyed over 200 businesses in the United Kingdom that implemented the four-day workweek. Aside from two-thirds of the businesses reporting increased productivity, there was also reported savings of £92 billion annually. 
• Japan has such an overworked society that the Japanese language has a term for "death by overwork" (過劳死). That is why it was nice to Microsoft Japan give it a go. What they found was an increased productivity of 40 percent, as well as saving energy costs. 
• Online education company Treehouse tried applying the four-day workweek. However, it went back to five days because productivity was an issue. 
• The nursing home in Svartedalen gained media coverage, but it had mixed results. Much like Treehouse, the nursing home went back to forty hours to cover time and economic productivity lost. At the same time, it created more jobs, had fewer sick days used, and better perceived wellbeing.
• A New Zealand trust company, Perpetual Guardian, did an experiment with a four-day workweek. There was better wellbeing, work-life balance, greater job satisfaction, and higher revenue. At the same time, there was more pressure to get work done in a shorter time period. You can review the study here.

It is true that longer work hours make us unhappier (Nakata, 2017) and less productive (Pencavel, 2014). Combine the aforementioned with the fact that there is such a work-life imbalance in the United States makes me more in favor of a four-day workweek. At the same time, we have seen mixed results from various case studies. A shorter workweek is not for every company or every industry. The hospitality industry or other industries that have client-facing are less capable of switching to a four-day workweek. 

Whether we are discussing the minimum wage, paid family leave, menstrual leave, or other employment rigidities, implementing such labor market rigidities come with a price. I am interested to see how the Spanish pilot program plays out. However, I would like to conclude by saying that each business make its own decision, and in the meantime, we convince employers of the benefits of the four-day workweek. We did not arrive at the forty-hour workweek through government fiat or by the grace of labor unions. We arrived at a forty-hour workweek through a market-based system in which employers realized that fewer hours and not overworking employees generally lead to greater productivity. I would wager that is how we will arrive to the four-day workweek this century.

Biden's Federal Minimum Wage of $15 Per Hour Would Be an Economic Mishap

Nobel Prize-winning economist Milton Friedman once said that one of the great mistakes is to judge policies and programs based on intentions and results. When it comes to economic policy, there are way too many on the Left that think that simply by having good intentions makes a prescription of a welfare state or government largesse the correct one. The predominant thinking on the Left is so focused on intent and the process (i.e., government is always the answer) that it makes me facetiously wonder how much the result of actually helping out the poor matters. I have applied this to multiple anti-poverty policies on the Left, but I have found the "intentions matter more than results" argument to especially play out when it comes to minimum wage. 

President Joe Biden has not wasted any time since his inauguration. In addition to his flurry of executive orders, Biden has made a federal minimum wage of $15 per hour one of his major goals (Raise the Wage Act). This past weekend, Biden went as far as saying that "it's economics" that the economy booms if you raise the minimum wage to $15 per hour. 

What ceases to amaze me is how minimum wage proponents ignore the most basic laws of supply and demand. When you have a price floor above the equilibrium point in a given labor market, you create a surplus of labor (also known as unemployment). This is especially true in low-skill labor markets, in which there exists greater elasticity for demand. As we will see shortly, unemployment is one of the major costs of minimum wage laws. At the same time, it is hardly the only cost. Minimum wage laws prolong recessions, ineffectively targets poverty, make it more difficult for low-skilled laborers find work, and increase consumer prices. 

If that is not enough, the Congressional Budget Office [CBO] released its analysis on the proposal of a federal $15 per hour minimum wage yesterday. For those who do not know, the CBO is the gold standard of U.S. legislative research and analysis. This is not the first time the CBO has provided analysis on increasing the minimum wage. You can see my 2019 analysis and 2014 analysis of past CBO reports on the minimum wage. So what did the CBO have to say in its latest report? 

• Effects on poverty. Since the minimum wage is definitionally increasing wages for workers, it would make sense that there are some workers that are no longer in poverty. The CBO estimates that 0.9 million would be lifted out of poverty (p. 9).
• Effects on employment. Higher wages increase the costs for employers. Some of these costs would be passed on in the former of higher prices. This would lead to less consumption, which would affect production. Ultimately, it would mean less money to pay workers their wages. As such, one of the ways that employers compensate for minimum wage costs is to have fewer employers. The CBO estimates that between 2021 and 2025, the federal minimum wage will reduce employment by 1.4 million workers (p. 8). Another way of saying this is "the price of lifting 900,000 Americans out of poverty is to make 1.4 million Americans unemployed." The CBO's finding confirms what much of minimum wage research has to say about its effects on unemployment, especially a recent research paper from the National Bureau of Economic Research (Neumark and Shirley, 2021). 
• Effects on labor force. If it was not bad enough that minimum wage causes 1.4 million people be without a job, half of those who lose their jobs, or 700,000 people, will leave the labor force (p, 7). This effect has the potential to create a significant amount of potentially permanent unemployment individuals. This is all the more tragic considering that minimum wage earners are the ones who need the experience the most in order to ultimately gain better-paying work. 
• Effects on consumer prices and cost of labor. Labor is a major cost to employees. According to the CBO, estimated labor costs are to increase by $333 billion (p. 9). Since wages are a cost of doing business, it follows that consumer prices will increase because it is one of the ways that employers pass on the costs of minimum wage. This is even more true for industries using a disproportionate amount of low-wage labor (p. 10).
• Effects on the budgetary deficit. On the one hand, spending on food stamps [SNAP] would decrease (p. 4), as would the spending on the earned income tax credit and student loans (p. 5). On the other hand, unemployment compensation would increase because there will be more unemployed persons (p. 4). Spending would also rise for Social Security because the average benefits would increase (ibid.). On net, a federal $15 per hour wage would create a budget deficit of $54.1 billion from 2021 to 2031 (p. 17).
• Effects on real output. Raising the minimum wage means a slightly lower GDP. The effects of the unemployment would affect real output since the stock of capital goods would be smaller. Also, investment would be lower, which would lower productivity (p. 10). Any effects increase of consumer demand from lower-income households due to the wage increases would disappear in a few years (p, 10), thereby contributing to lower GDP. 

Postscript: In short, it's not "simple economics" that increasing the minimum wage helps the economy, as President Biden asserts. If it were that simple, why not raise the minimum wage even higher? Why do minimum wage laws not work after one increase? Because we live in a world of scarce resources. The laws of supply and demand exist for a reason. The more the minimum wage deviates from the market value of labor (read: equilibrium point), the more negative the effects, especially on the people it was meant to help. I really wish minimum wage proponents could see the price tag of their good intentions.

For more information, read the Cato Institute's analysis on the Raise the Wage Act here.

2020 State Ballot Hodgepodge: Florida Minimum Wage, Illinois Income Tax Reform, California Gig Economy, and Marijuana Legalization

One of the things I enjoy most about election season is not the presidential election hullabaloo or even when you have Supreme Court justice vacancies. I personally get a kick out of the state ballot measures voted on in November. They are voluminous, they cover a wide range of topics, and they have greater impact on our lives than we can anticipate. Some of the fun ones I have covered in past years have included  single-payer healthcare, condom use in the porn industry, the right to hunt, and labels for genetically modified food. Today, I will cover minimum wage, tax reform, labor market reform, and marijuana. 

Florida Minimum Wage: Florida is looking to increase its minimum wage to $15 per hour by September 2026 (Amendment 2). The legislative branch's research arm, the Florida Office of Economic and Demographic Research (EDR) conducted a fiscal analysis of the ballot initiative. The EDR found that by 2027, it would cost the state of Florida $540 million per annum. Proponents argue that Florida needs to increase the minimum wage to account for rising costs in housing and transportation. Aside from contributing to the broader economy, the additional spending would offset the unemployment losses. 

The Congressional Budget Office (CBO) released a study on what a $15 federal minimum wage would look like. CBO found that while 1.3 million would be pulled out of poverty, the same amount of people would become unemployed. That on top of the fact that it would have a net cost of $8.1 billion. Not exactly an economic booster! Data from the last recession also found that minimum wage increases prolong recessions. Not exactly a winning policy if one of the main goals is to pull Florida out of the recession. Generally speaking, minimum wage increases such as these make it more difficult for low-skill labor to find or retain work, it is a poorly targeted policy when it comes to poverty reduction, and adversely impacts business operations. If you live in Florida, vote "No" on Amendment 2. For further analysis on Amendment 2, see the Reason Foundation's analysis here. 

Illinois "Fair" Tax: The main ballot initiative in Illinois this November is for what has been colloquially referred to as a "fair" tax. Essentially, Illinois is looking to switch its income tax from a flat tax (everyone pays the same percentage) to a graduated tax system (the richer you are, the higher percentage you pay). I covered the Illinois "fair" tax last year, but the proposed brackets are the same, so the analysis still applies. Aside from asking what constitutes as "fair when it comes to taxation, I took issue with the following:

• The tax will not close the budgeting gap.
• The tax reform does nothing to change Illinois' atrocious spending habits.
• The "fair" tax does not adequately address the issues of fairness that proponents purport.
• Illinois already has lousy tax competitiveness. Switching to a graduated tax system will simply incentivize more people to move outside of Illinois. 

Illinoisans should vote "no" on the "Illinois Allow for Graduated Income Tax Amendment." If you want more recent analysis on the ballot initiative, here is one from the Tax Foundation.

California Gig Economy: Last year, the California legislature passed Assembly Bill (AB) 5, which applied a three-factor test to determine whether a worker could be classified as an independent contractor under California law. AB 5 had considerable implications for gig workers, but especially app-based drivers (e.g., Uber, Lyft). If it passes this November, Proposition 22 would essentially reverse AB 5. I covered AB 5 last year shortly before it became law this past January. I thought AB 5 was inferior policy because a) it would cause greater unemployment, b) cost the California economy millions, c) increase costs for consumers, and d) eliminate the flexibility in hours that most app-based drivers prefer to the 9-5 work hour. 

Looking at the analysis by the California Legislative Analyst, it would create a minor boost in income tax revenue because drivers would be earning more in income. More to the point, passing Proposition 22 would "would allow the companies to charge lower fares and delivery fees. With lower prices, customers would take more rides and place more orders. This could increase the companies' profits. High profit would increase the companies' stock prices." This analysis points out that AB 5 has been hurting app-based drivers, customers, and companies that hire gig workers alike. In case you need more convincing, here are analyses from Reason Foundation and the American Action Forum. I urge Californians to vote "Yes" on Proposition 22 this November. 

Marijuana Legalization: This November, we have four states looking to legalize recreational marijuana - Arizona, Montana, New Jersey, and South Dakota. Reason Foundation provides analysis on each of these ballot initiatives. There is a reason states have been trending towards legalizing marijuana in recent years. It is because the fears and stigma surrounding marijuana have been overblown, to say the least. Colorado legalized in 2014, and it has not been anywhere near the disaster that naysayers thought it would be. Economically speaking, marijuana legalization makes sense. We're not spending millions to enforce laws (that includes policing, prosecuting, and imprisonment costs), which means we can focus on more serious crimes. There is more government revenue, which means that if government dollars can be spent, it could spent where it could do more good, instead of punishing a victimless crime. Also, we can reduce the size of the underground market. This is great not simply because it expands the legal economy, but because less commerce in the underground market gives criminals and drug lords less power. Let's continue the trend towards marijuana legalization by voting these ballots and making them the law of the land for these states. 

Illinois' Attempt to Ban Self-Service Gas Stations: Why I'm Not Pumped About This Misguided Overregulation

I have complained about my home state, Illinois, on here before. I have pointed out how the State's budgetary mismanagement is so nightmarish that it almost makes Greece look fiscally responsible. I have criticized Illinois' governor on wanting to remove the flat income tax and a general call for wanting to raise state taxes. I have also gone after my home state for manipulating statistics to increase food stamp beneficiaries or how high pensions for Chicago Public Schools teachers is making pension reform in Illinois all the more difficult. As if there were not enough crazy news items coming from the Land of Lincoln, Illinois House Representative Camille Lilly introduced a bill to ban Illinois drivers from pumping their own gasoline (see Bill HB4571 here). It is likely that the Bill would not pass committee given the nature of the bill and the lack of co-signers. However, if it passes, Illinois will not be the only state with such regulations on self-service stations. Two other states already have restrictions on self-service at gasoline stations: New Jersey and Oregon.

The Bill's language is unclear as to why the Illinois House bill is necessary, although Lilly makes an argument based on safety and convenience. The regulation from the Oregon Assembly (2017 ORS 480.315) lists 17 reasons as to why the regulation exists, including needing someone who is professionally trained in dispensing liquids to contributing to the employment of young people. I want to respond to some of the arguments that proponents use in attempts to justify this regulation.

1. Handling gasoline is unsafe because it could cause a fire. You would think if people were dying or getting injured because of gas station fires, media outlets would bombard us with stories about it. That is why I looked at what the National Fire Protection Association had to say. The most recent NFPA statistics I could find were from 2004-2008 and 2009-2013 data from its 2015 report. Per the 2015 report, the average number of annual deaths was zero deaths (yes, that is nil), whereas the number of injuries was 14 injuries. This was the death and injury count over 460 fires at gasoline stations. According to the National Convenience Store Association, there are an average of 1,100 customers a day at a convenience store that sells gasoline. Multiply that by the 60,000-plus gas stations with convenience stores that exist in the United States, and the likelihood of catching on fire as a result of going to the gas station is quite small. 
• The safety argument is a solution in search of a problem. Even if gasoline fires were more prevalent, what is the basis that an attendant responsible for filling up multiple vehicles is going to be less rushed? 
2. Exposure to toxic fumes is unhealthy for customers. Healthline says that it's generally safe, but for argument's sake, let's assume this argument is valid. Customers are only exposed to the fumes for a short period of time (less than five minutes) once or twice a week, depending on how often they fill up their car. If I understand this correctly, it would not be okay to expose customers to a small amount of toxic fumes, but it is somehow acceptable to expose gas station attendants to these fumes for multiple hours throughout their work week? I don't know about you, but I don't consider gas station attendants to be disposable or that their health should be put at risk like that. 
3. Having full service is convenient. Some people do not want to have to get out in bad weather to fill their car or they do not want to smell like gasoline. If convenience were such a major factor for customers filling up their car, then there would be notable demand for full-service gas stations without a government mandate. 
4. What about the elderly and disabled? The elderly and disabled are the ones who are most vested in having full-service gas stations because it is otherwise difficult to fill up the car with gas. Instead of having a full-time attendant for a full-service station, an employee could help on a need-by-need basis. As a matter of fact, as long as a gas station provides assistance upon request [and it is not operated by a single employee], they are in compliance with the Americans with Disabilities Act (ADA). 
5. Reducing theft of gasoline (gas-and-dash). If you are a convenience store own that finds gasoline theft to be that much of a concern, you can install better video surveillance equipment. Or better yet, you can require pre-payment of gasoline. 
6. Full-service gas stations provides employment opportunities that would otherwise be destroyed by automation. Do proponents think that without these gas attendant jobs, people would be otherwise unemployed? If we go with the logic of this argument, does this mean that we need to mandate all entry-level positions or create superfluous jobs for the sake of employment? That's not how economic growth works. Yes, there is a concern that automation is decreasing job opportunities, although I have wondered if that concern is overblown. In the case of gas station attendants, self-service did not create a net loss in employment. As this Census Bureau working paper illustrates (Basker et al., 2015), there was a net loss of 0.4 workers per pump. Paradoxically, there was an increase of overall employment in the sector because stations became larger, they were able to add convenience stores, and freeing up the attendants' times allowed for the stations to be open for longer hours (Basker et al., p. 23). 

Whether it is safety, job creation, or convenience, the arguments banning self-service gasoline stations are flimsy at best. It is not simply that a self-service ban limits the freedom of consumers as to how they want to make purchases, erodes personal responsibility, or mandates that a business should hire certain labor. In the states that did not enact a government mandate, the full-service gas station did not withstand the test of time.

Self-service became increasingly popular throughout the 20th century, and it will only become more popular as technology progresses. We can use the ATM when we need money from the bank. Grocery stores have self-checkout lines. Fast food restaurants are installing kiosks to order food instead of interacting with a cashier, not to mention there are drink machines that allow you to pour your own drink. Airlines allow for purchasing tickets on their websites. Most drivers would rather pump their own gas than deal with the longer wait for an attendant, so why should self-service gas stations be different than any of the other forms of self-service that have organically evolved over time?

If there truly were no costs to labor, then why not demand one attendant for every pump? The answer is that there are costs to labor. What happens when you add an attendant? As Oregon State University economist Patrick Emerson points out, the price of gasoline increases. Whether it is minimum wage, paid leave, or menstrual leave, adding labor costs vis-à-vis government regulation always comes with a tradeoff. I am not going to be surprised if the outcome is more expensive gasoline for Illinoisans or that the supposed health or workforce benefits do not come into fruition. People have mocked the Oregon version of this regulation, and given what we have covered here, rightfully so. Illinois already has a ton of taxes and regulations that are a drag on the economy. Why should the citizens of Illinois have to be subjected to another baseless regulation?

California's Gig Economy Bill Will Cost Consumers and the Employees It Was Meant to Help

In September 2019, the State of California signed Assembly Bill (AB) 5, more colloquially known as the Gig Economy Bill, into law. What AB 5 is going to do when it takes effect on January 1, 2020 is that it will severely limit an employer's ability to classify an employee as an independent contractor. While this bill takes particular aim at ridesharing companies (e.g., Uber, Lyft) since they heavily rely on independent contractors, it can apply to any employer unless they can go through the extensive loopholes to get an extension. In order to determine whether an employee is an independent contractor is based on the ABC test:

• A) the worker is free from control and direction in the performance of services; and
• B) the worker is performing work outside the usual course of the business of the hiring company; and 
• C) the worker is customarily engaged in an independently established trade, occupation, or business. 

If the employee meets the criteria of the ABC test, they are considered an independent contractor under California state law. Proponents of the ABC test contend that employees need such protections in the first place because a misclassification means employers do not have to pay such benefits as unemployment insurance, overtime, or minimum wage. Essentially, those who view independent contracting unfavorably see the classification of independent contractor as a loophole to exploit workers (see analysis from Left-leaning Economic Policy Institute here). With AB 5, fewer employees are to be classified as independent contractors, which means greater labor protections. 

The Left-leaning news and opinion site Vox opined in September that the Gig Economy Bill is a victory for workers everywhere. It might seem like that for those on the Left....until irony strikes. In anticipation of the enactment of the Gig Economy Bill, Vox Media, which is Vox's parent company, had to let go of 200 freelance journalists in anticipation of AB 5. This example with Vox Media reminds us of an observable reality when it comes to labor law. Whether we are discussing paid family leave, minimum wage, or menstrual leave, there are tradeoffs to greater employee benefits. When we look at predictive analyses on AB 5, that's exactly what we see. 

Earlier this week, the libertarian Competitive Enterprise Institute (CEI) released its report on the impact of AB 5, specifically with regards to ridesharing. CEI's main takeaway was that AB 5 would result in "greater costs for the platforms, reduced pay for many drivers, reduced flexibility for all drivers, and higher fares for customers – as much as 50 percent higher in some cases." You are welcome to read the report for further analysis here on the impact it would have for health insurance, work hours, employee expenses, paid family leave, and state disability insurance. As an independent contractor, an Uber driver costs an estimated $31,776 annually. CEI calculates that costs would go up to $53,008 annually. If minimum wage is an indication of what happens when labor regulations increase labor costs at this magnitude, we will most likely see a combination of fewer hours for drivers, lower salaries for drivers, fewer choices for customers, and increased costs for customers. 

CEI is not the only think tank to have estimated the costs. The R Street Institute, which is a Right-leaning think tank, preliminarily did so in light of the Dynamex ruling of the California State Supreme Court. R Street estimated that if Dynamex's ABC test were to become law, like it has with AB 5, it would cost the California economy anywhere from $1.3B to $6.5B annually. 

A California-based consulting firm, Beacon Economics, looked at the impact from another angle: effects on employment for Lyft drivers. Depending on the scenario, their study found that it could mean anywhere between 219,547 and 300,673 fewer Lyft drivers in California. For context, there were 323,914 Lyft drivers in California in 2018, which could up to a 92.8 percent reduction in Lyft employment in California. Another interesting find was that flexibility was "very important" or "extremely important" for 95 percent of Lyft drivers, especially since the average Lyft driver in California works about 4 hours a week. 

This analysis brings me to another important feature: why people choose independent contracting in the first place. As R Street points out in their aforementioned analysis, independent contractors have the flexibility to dictate their own work schedules and work for multiple firms. Plus, employers like the arrangement because it entails fewer expenses, less risk, and fewer long-term commitments in a labor market in which employees are staying with their employers for less time than in previous generations. 

Not everyone wants the standard "9 to 5" work arrangement that has become standard in U.S. culture. There are those who would rather have the flexibility over the extra benefits. According to a June 2018 survey from the Department of Labor's Bureau of Labor Statistics (BLS), 79 percent of independent contractors prefer their working arrangement over a traditional employment arrangement. Fewer than ten percent of independent contractors would rather be in a traditional work arrangement. The flexibility also provides a financial benefit. The Right-leaning Heritage Foundation found that worker flexibility generated a worker surplus of 38-51 percent of earnings.

Far from feeling exploited, most independent contractors like the work arrangement they have. When you account for the costs and how independent contractors feel about their work arrangement, it really feels like a solution in search of a problem. We live in the 21st century, a time in which technology is advancing at a rapid pace. We cannot be beholden to working arrangements that worked better "back in the day." We need the flexibility and adaptability of independent contracting to enjoy that growth of on-demand services. Otherwise, states such as California undermine their own progress. 

California Provides an Argument Against Mandated Paid Family Leave

At least in a U.S.-based context, California is known as a state that is at the forefront of trying policies that are heralded by the Left. One such policy is that of mandated paid family leave. Under the California Paid Family Leave (PFLA), employees are provided partial pay to take off of work for up to six weeks to either tend to the serious illness of a close family member or to bond with a new child. Essentially, the premise behind paid family leave is work-life-balance vis-à-vis providing employees to take on a variety of family caregiving obligations without work getting in the way or needing to quit one's job to meet said obligations. If you want more information on paid family leave, please see my analysis on paid maternal leave from five years ago (see here), my analysis on Family and Medical Leave Act (FMLA), this policy report from the Cato Institute, or you can read this primer from the Congressional Research Service.

Having recently come back from a trip to France and see how they better manage work-life-balance than in the United States in the sense that they work to live (instead of the increasingly common practice in the United States to live to work), it got me thinking about whether it's an important value. Nevertheless, the tricky thing about public policy, especially when it has good intentions, is that it all too often comes with unintended consequences. Looking at the latest study on the PFLA, it seems that paid family leave is no exception. Last week, researchers from the University of Michigan, University of Utah, Middlebury College, and the U.S. Department of Treasury released a study showing that there is little evidence towards the benefits of paid family leave (Bailey et al., 2019). To quote the report:

We find little evidence that PFLA increased women's employment, wage earnings, or attachment to employers. For new mothers, taking PFLA reduced employment by 7 percent and lowered annual wages by 8 percent six to ten years after giving birth. Overall, PFLA tended to reduce the number of children born, and by decreasing mothers' time at work, increase time spent with children.

This finding is significant because one of the arguments used for legally mandated paid family leave is that at least for new mothers, it helps with labor force attachment. Based on these findings, reducing annual wages by 8 percent sure doesn't help with the gender wage gap that liberals are vehemently against (see my analysis on the gender wage gap here, here, and here). And I imagine that reduced employment doesn't do any favors when it comes to trying to get greater female representation in the workforce, nor does it help with make new mothers more likely to stay attached to employers, as proponents predict. While increased time with children is important, there is also the tradeoff of a lower fertility rate, which is problematic for a country that already struggles with a fertility rate below replacement rate.

Yes, this study draws upon robust tax data, has a large sample size, and does so over a relatively long period of time, all of which helps make it methodologically superior to previous paid family leave studies. While case studies have a role in discovering the efficacy of new ideas with little previous empirical data, there are limits to trying to draw general conclusions from this study. For one, PFLA lasts for six weeks. One could argue that six weeks is not long enough (or that it could be too long). Another issue is that PFLA provides 60-70 percent of a worker's wages. Perhaps providing a different amount would create different incentives. Perhaps an automatic enrollment would change the interactions. There could also be other elements within either the culture or economy of California that could make paid family leave less effective than it could be otherwise.

By itself, using this study to rally against mandated paid family leave is inadequate. Nevertheless, it does add to the empirical research showing the unintended consequences of mandated paid family leave. With that being said, here are a few points to consider when thinking of the tradeoffs of mandated paid family leave:

• Paid family leave lowers women's wages. The latest study is not the only one to confirm this point. One study analyzing 21 countries showed that paid parental leave is more effective when the time period is moderate, as opposed to being long (Misra et al., 2011). On the other hand, the same study showed that the same policies contribute to lower wage levels for women relative to men (ibid.). There are also older studies showing the same effect, including those from economists well-known on the Left (e.g., Ruhm, 1996; Gruber, 1994; Summers, 1988).
• Paid family leave affects women labor participation rate. A study from the National Bureau of Economic Research came to the conclusion that paid parental leave was responsible for about 28 percent of the drop of women labor participation between 1990 and 2010 (Blau and Kahn, 2013).
• Paid family leave makes it more difficult for women to receive promotions. A study of paid leave expansions in the United Kingdom not only resulted in fewer female managers, but also exacerbated gender inequality (Stearns, 2017).
• Support for paid family leave is in the details. Much like with so many policies, they sound nice in concept or in theory. That is why support for many Left-leaning proposals has higher support in the abstract. When you ask survey respondents about the details of the Left's latest and greatest policy ideas, support declines (see my analysis on that survey data here). Mandated paid family leave is no different. People assume that paid family leave is a wonderful thing, assuming they don't have to pay for it. When confronted with costs they would have to shoulder (e.g., lower salary, fewer benefits, less promotional potential for women), the support for federal paid family leave diminishes to the point where a majority are opposed (2018 Cato Institute survey).

I will leave you with this thought: whether we are discussing minimum wage, menstrual leave, or other rigid employee protections, they unquestionably come with a tradeoff. That is the economic nature of labor laws, and more specifically, employee benefits. If mothers want to prioritize more time bonding with their newborn children, that's fine. That is a decision they have to make for themselves. But let's not ignore the fact that that choice all too often comes with the tradeoff of less career development potential, a shift in career choices, and lower wages for women. While paid parental leave is becoming more popular, it comes with a price, a price that employers are too happy to ultimately pass either to the customer or their employees. The question is whether the price of a policy such as mandated paid family leave is worth the cost.

Workforce Innovation and Opportunity Act: Thoughts on Government's Role in Job-Training Programs

In 2013, President Obama signed into law what would be known as Workforce and Innovation and Opportunity Act (WIOA). The WIOA replaced its predecessor, the Workforce Investment Act of 1998 (WIA). The purpose of WIOA is to strengthen the U.S. workforce so more U.S. citizens have access to high-quality jobs, as well as help ensure that employers can retain these employees. Making sure people have jobs is important. After all, a job or a career is a path to providing for one's family. For some, it is more than a livelihood: it is a status symbol. Plus, look at alternative of long-term unemployment. It is generally accepted that having citizens employed, as well as make sure that skill sets are matched to market demand, is an important value for society and workforce development policy. I have to wonder if the WIOA and its predecessor, the WIA, have succeeded in such a task.

The inspiration for this blog entry came from the Heritage Foundation and their Blueprint for Balance project that was released a couple of months ago. Essentially, the Heritage Foundation looked at the federal budget to see what could be reformed. The Heritage Foundation came up with 181 recommendations, one of which was to eliminate WIOA. For one, Heritage Foundation put a price tag on WIOA: $3.3 billion. That is how much we spend on this Department of Labor program. A price tag unto itself is not justification to eliminate the program because perhaps the program generates net benefit. However, I have reason to doubt such an assertion.

My largest basis for doubting WIOA's efficacy is a 2016 evaluation from Mathematica Policy Center that was commissioned by the Department of Labor (DOL). The evaluation primarily looks at WIOA's predecessor, the WIA. Mathematica emphasizes that the report still has practical implications for WIOA because the basic set of services has not changed, nor have the eligible recipients (p. xv). What did the evaluation conclude? Although the findings are preliminary (a final evaluation is to be released later this year), those who received full-WIA services (e.g., skills assessments, workshops, job-search assistance) did not have earnings that were statistically significant from the core group (p. xxiii-xxv). Even in spite of having training and other one-on-one assistance, it does not seem to affect salary, which is the single most important metric for something such as WIOA. What is even more significant is that only 32 percent of full-WIA participants found jobs in their field, which sadly was not much higher than the core group (p. 87).

While the Mathematica study is not the only study showing a lack of positive outcomes, it is the most recent one. The Government Accountability Office wrote reports on issues with collecting WIA data (see 2013 and 2014 reports). A University of Massachusetts-Boston study showed how the WIA had issues acclimating to the labor market (Fesko et al., 2003). An economist from Georgetown University argues that the Earned Income Tax Credit [EITC] would be more effective than the WIA (Holzer, 2009). One study goes as far as saying that "most employment and training programs have either no impact or modest positive impact" (Barnow and Smith, 2009).

Even so, job-training programs on the whole have mixed results (e.g., Heinrich et al., 2008). What we have to keep in mind when analyzing such programs is that with all government programs, benefits need to exceed costs before one could even begin to justify the existence of that program. I'm not anticipating the WIOA going away anytime soon, even with President Trump wanting to cut WIOA funding, but I do hope that WIOA's future justification can be based on evidence-based analysis.

"Ban the Box" Laws: Should Employers Ask About Criminal Background at the Beginning of a Job Interview Process?

If someone commits a crime, I believe not only that people should be held responsible for their actions, but that the punishment should be proportionate the the crime committed. This idea of proportionality has more or less become standard in criminal law, at least in the developed world. The offender does their time, and afterwards, the individual comes back into society through what is known as prisoner reentry. The truth of the matter is that this transition from prison to society is tricky. It is more so the case in the United States since the United States incarcerates more people than China does, not to mention that the United States has the highest incarceration rate out of any major country (see International Centre for Prison Studies data here). As of year-end in 2015, there were 70 million with a criminal record, 6.7 million of which were either incarcerated or on parole or on probation. If we take that smaller number of 6.7 million, that is still about 3 out of 100 adults in the United States!

The high incarceration rate combines with another complication about integrating U.S. ex-offenders into society: getting a job. I say this because in the United States, it is commonplace to ask an applicant if they have committed a felony or has a criminal record. Employers use it as a screening question, which is easier than before because of the declining cost to conduct a criminal background check. After all, it is hardly the only factor potential employers use to screen out potential employees. There are a fair number of employers that would rather have a potential employee with a college degree or has a certain number of years of experience. It makes sense for an employer wants the best qualified and most motivated workforce possible. If an employer has a workforce that lacks discipline, honesty, integrity, it will directly impact business. And in certain fields, it makes absolute sense to screen a potential employee for a criminal record. A bank is not going to want to hire a former robber as a bank teller, and a fire department is not going to want to hire a former arsonist to be a firefighter. However, there are plenty of jobs out there where the position is unrelated to the past crime. Plus, if the crime were committed years ago and the ex-offender has become a better person, that is not reflected in checking that box on the job application. The simplified nature of this filter does not provide potential employees the opportunity to contextualize their former crime.

Combine that with ex-offenders more likely to have a lower level of education, lower set of job skills, and more likely to have mental and physical health issues, not to mention that they are more disconnected from the labor market on account of being in prison, it becomes a considerable challenge to find a new job (Doleac, 2016). As such, it takes longer for an ex-offender to find a job than your typical citizen. It takes 60 percent of ex-offenders at least one year to find a new job after leaving prison, which is important since employment is the single largest factor that prevents recidivism (Raphael, 2014; Berg and Huebner, 2010). In addition, there is evidence showing that ex-offenders who cannot find a job are more likely to reoffend. Due to the fact that this integration is difficult, about two-thirds of ex-offenders commit another crime within three years (Bureau of Justice Statistics), thereby perpetuating the cycle. This increase in crime and incarceration rates ends up costing us all.

One suggestion to break the cycle is referred to as "ban the box." Ban the Box (BTB) laws make it illegal to remove from their initial hiring applications the question of whether someone has a criminal record. This question is postponed to later in the hiring process, typically during the background check right after the conditional job offer (see flow chart below). The idea is that by postponing that consideration, ex-offenders will have a better chance at gaining employment. I ask about BTB laws in the first place because a study from the National Bureau of Economic Research (NBER) was released on how BTB laws affect crime rates (Sabia et al., 2018). With that said, I would like to observe the effects of BTB laws and see if proponents are correct in their optimism.

Callbacks and Employment Rates for Overall Ex-Offender Population
One question is how this affects ex-offenders. After all, the purpose of BTB laws is to make sure that ex-offenders can integrate back into society and be productive members of society, as opposed as to returning to a life of crime. A literature review from the Urban Institute (Stacy and Cohen, 2017, p. 11) shows that BTB laws increase the likelihood that an ex-offender receives a callback for employment. The same Urban Institute literature review also finds that there is little evidence that it actually increases the overall employment rate for ex-offenders (p. 12). A study from the Federal Reserve Bank of Boston confirms these findings. This study found that BTB laws decreased ex-employer employment by 4 percent (Jackson and Zhao, 2016). Their reasoning is that the BTB laws emboldened ex-offenders to apply for jobs for which they thought were previously out of reach, thereby lowering the employment rate. Semi-conflicting research from the Right-leaning American Enterprise Institute shows how BTB laws increase employment in high-crime areas by 4 percent (Shoag and Veuger, 2016).An interesting caveat is that it increases employment in the public sector (Craigie, 2017; Atkinson and Lockwood, 2014), but again, on the whole, the information we have suggests that it does not help with the overall ex-offender population.

Employment Prospects of African-Americans
I ask about African-Americans in particular because they have been disproportionately and adversely affected by the U.S. justice system. An African-American male without a criminal record is statistically less likely to get a job than a Caucasian male with a criminal record (e.g., Pager, 2003).

Even with that being said, the problem is that BTB laws do not remove an employer's reluctance to hire an ex-offender. An employer would rather have an honest, peaceful, agreeable individual. Not only is it good for the employer's reputation within the market, but because ex-offenders are more likely to reoffend, an ex-offender is more likely to be taken off the job by another arrest or conviction. When you remove an observable piece of information, such as a criminal record, employers have to use other information. Employers will use unobservable information that is related to the potential employee being "job-ready." Employers do this with college degrees. College degrees are not necessarily sought after because of the knowledge, but because of the correlated qualities of greater motivation and diligence required to acquire a Bachelor's degree. This "statistical discrimination" happens also with BTB laws.

Using a criminal record is a filter that is far from perfect, but what happens when it is removed? Employers use other information that is even less perfect. Men are much more likely to commit crimes than women. And as the Brookings Institution points out, an African-American male has a 32 percent chance of serving time in prison, a 17 percent chance for Hispanic males, and a 6 percent chance for Caucasian males (see Brookings Institution information below for breakdown by educational attainment).

Essentially, one of the unintended consequences is that rather than use criminal record to determine whether or not a candidate committed a crime, they go ahead and do something racist and sexist by using one's skin color and gender as ways to guess who is more likely to have previously committed a crime. One study from NBER (Doleac and Hansen, 2016) goes as far as suggesting that BTB laws make it more likely for an employer to hire a young, low-skilled Hispanic or African-American male when criminal records are not observable. This has a particularly negative impact on African-American males that do not have criminal records. There are other studies that confirm that statistical discrimination exists (Agan and Starr, 2016; Stoll, 2009; Holzer and Raphael, 2006). A recent study showed that while BTB laws can increase overall ex-offender employment, it still negatively affects African-American males (Flake, 2018).

How Do BTB Laws Affect Crime Rates?
There is some evidence that BTB laws decrease crime rates (Craigie, 2017). On the other hand, there is the NBER study I had cited at the beginning (Sabia et al., 2018). The NBER study found that it lowered crime rates for those who already have lower probabilities of having a criminal record (e.g., women, older individuals). This is consistent with the labor-labor substitution toward those who are perceived to have lower criminal records. The study found that BTB laws did increase property crime rates for working-age Hispanic males. Aside from suggesting an increase of crime rates, what the study does more importantly is confirm that BTB-induced statistical discrimination exists.

Conclusion
There is a desire on my end to have more evidence because some of it is suggestive but not conclusive. Nevertheless, based on the evidence, my opinion is that a "ban the box" policy should be left up to the individual employer. Policy alternatives should be explored because the price of not being able to successfully integrate ex-offenders into society is too great. Instead of ignoring criminal records, what we should do is find ways to show that ex-offenders can be successfully and safely employed. What would help in this case is to provide employers with more information, not less, about a potential employee's job-readiness. There could also be investment in these individuals' job-readiness, something which would most assuredly cost less than recidivism. A certification program signaling that the ex-offenders are indeed job-ready would help: Ohio's job-readiness certification program is showing preliminary success (Leasure and Andersen, 2016).

Some other policy alternatives offered (see Urban Institute's list below) have been improving the background check to better contextualize the ex-offender's history, transitional employment opportunities with supervisor references, providing companies that hire ex-offenders with liability insurance, expunging criminal records [for those with relatively minor crimes], or scaling back occupational licensing (see Slivinski, 2016), the latter of which I have discussed before. While considering these policy alternatives is important, we have to remember that this problem ballooned because of mass incarceration. To solve the issue of integrating ex-offenders, we also need to create a society without over-criminalization that caused the prevalence of the problem in the first place.