No, California’s Minimum Wage Hike Did Not Create Jobs

Posted on by Patrick Tuohey

Despite the November 5 vote approving Proposition A (a measure that will raise Missouri’s minimum wage and mandate paid sick leave), there will continue to be debate on the matter in courts and perhaps the state legislature. Whatever those outcomes, Missourians need to be wary about the claimed successes of mandated wage increases elsewhere.

Regarding the courts, a coalition of Missouri business groups, including the Missouri Chamber of Commerce, has filed a lawsuit challenging Proposition A.

The plaintiffs argue that combining wage increases with sick leave provisions violates the state constitution’s single-subject rule for ballot initiatives. Proposition A, which passed with 58% of the vote, would incrementally increase the minimum wage from $12.30 to $15 by 2026 and provide workers up to seven paid sick days annually starting in May 2025. Supporters contend that wages and benefits are integral to overall compensation and thus constitute a single subject. The Missouri Supreme Court has yet to schedule hearings for the case.

As for the legislature, because the proposition was a statute, the legislature may act to overturn it. One Missouri legislator introduced the Entrepreneur Rights Act, which would exempt some small and seasonal businesses from minimum wage increases.

Supporters may point to California’s recent mandate elevating the minimum wage for fast-food workers to $20 per hour as a triumph for labor rights. However, a closer examination reveals that the anticipated benefits, particularly in job creation, have not materialized. A study from the University of California, Berkeley, initially suggested that the wage hike did not adversely affect employment levels. Yet, upon scrutinizing the data, it becomes evident that fast-food employment in California has grown at a slower pace compared to the national average. In fact, since the law’s implementation, California’s fast-food employment increased by only 1.85%, while the national rate rose by 3.22%. This discrepancy indicates that the wage increase may have hindered job growth within the state. Such outcomes underscore the complexities of implementing blanket wage policies without fully accounting for market dynamics and the potential unintended consequences on employment opportunities.

Show-Me analysts have consistently been critical of the arguments for, and the claimed benefits of, increases in the minimum wage. Minimum wage hikes just don’t deliver on their promises—even if academic studies twist themselves into knots trying to demonstrate otherwise.

Crime Trends in Missouri’s Largest Cities with Bryan McCannon

Posted on by Susan Pendergrass

Susan Pendergrass speaks with Bryan C. McCannon, Dean of the School of Business and Economics and Robert S. Eckley Endowed Professor of Economics at Illinois Wesleyan University, and data analyst with Sicuro Data Analytics, LLC.

They discuss a new report written for the Show-Me Institute titled “Crime Trends and Criminal Justice Policies in Missouri’s Largest Cities”. The report examines the rise in violent crime and homicides in Missouri since 2015. Bryan breaks down how the report compares Missouri’s crime trends with other similar cities, explains how certain policies may have contributed to the increase, highlights some issues with crime data, and more.

Read the full report here

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Produced by Show-Me Opportunity

KC’s Corporate Welfare: JE Dunn’s HQ Renovation Gets Public Support

Posted on by Patrick Tuohey

Thomas Friestad of the Kansas City Business Journal writes that JE Dunn Construction has secured public incentives through Port KC for a $20 million renovation of its downtown headquarters. Approved on December 11, the deal provides a 50 percent personal property tax exemption and a sales tax exemption on construction materials, covering $14 million in office finishes and $6 million in new personal property.

This is just the latest example over the years of City Hall favoring wealthy, connected corporations with taxpayer subsidies and special treatment.

Port KC CEO Jon Stephens framed the incentives as a “small, supportive element” aimed at ensuring Kansas City retains high-quality jobs. The project promises to add 150 jobs with an average salary of $126,000 while retaining 600 current employees. Yet no precise value for the tax exemptions was disclosed. Its not clear if PortKC attached performance requirements to the deal, but Friestad indicates there was no such discussion of it among the commissioners when the subsidies were approved.

Readers may recall Stephens backed subsidies for an independent baseball team in Kansas back when the team couldn’t pay its utilities. If nothing else, he is consistent in his apparent desire to redirect taxpayer money to private corporate interests

Such a deal is nothing new for JE Dunn. The company received a lucrative incentive package when building its headquarters in 2009. That project fell under the East Village tax-increment financing plan, redirecting $19 million in public funds for a parking garage, demolitions, and blight removal.

This latest deal follows a familiar script in which major corporations, including Cerner, H&R Block, Burns & McDonnell, and Commerce Bank have secured public funding for their private office projects. Research has indicated for years that such incentives do not significantly impact corporate decisions on location.

Port KC has repeatedly played a central role in funneling public dollars into private hands. Its recent involvement with JE Dunn reflects a long history of negotiating deals that often leave taxpayers holding the bag, such as the millions each year taxpayers must fork over to cover bond payments on the Power & Light District owned and operated by Cordish Company. (Stephens is a former manager of that project.)

As Kansas City grapples with persistent infrastructure needs, ballooning public debt, and limited funding for essential services, its continued reliance on subsidies for corporate renovations raises questions about priorities. For now, Kansas Citians can only watch as the city’s public funds are diverted to underwrite private gains.

Missouri’s Free-Market Policy Guide

Posted on by Show-Me Institute Staff

Missouri’s Free-Market Policy Guide outlines key areas where targeted, well-researched reforms can make a meaningful difference in the lives of Missourians. From expanding educational opportunities and empowering parents to choose their children’s schools to fostering greater economic freedom and accountability in government spending, the policies here can help create a more prosperous and dynamic Missouri. Each section offers a clear analysis of current challenges, explores solutions grounded in research and facts, and presents actionable recommendations for policymakers.

Click here to download this publication.

Model Policy booklet

Medicaid’s Checkup: Part 2

Posted on by Elias Tsapelas

In this post on my series about Medicaid in Missouri, I want to dive deeper into the effects of Medicaid expansion.

Missouri voters approved Medicaid expansion as a constitutional amendment in August of 2020, during the height of the COVID-19 pandemic. Due to legal challenges and various technical issues, expansion-eligible Missourians didn’t begin joining the program until October of 2021. As I stated in part one of this series, because of COVID’s impact on the program as well as the federal rules accompanying the increased funding, it’s been nearly impossible until now to fully analyze the rollout of Medicaid expansion.

Before voters weighed in on the measure, expansion supporters made several claims about how the policy would impact Missouri. At the time, I wrote repeatedly about three of their key claims with which I disagreed. First, they estimated that fewer than 250,000 people would enroll within the first year. Second, they said the expansion enrollees would be “newly eligible” for the program, which is something the federal government requires as a condition of receiving extra federal funding. And third, they said the expansion wouldn’t cost state taxpayers any money. In fact, they argued it would save money. Unfortunately, none of these projections came true.

As I also mentioned in part one of this series, prior to the pandemic, Missouri’s Medicaid enrollment was around 850,000, with about 520,000 of those being kids. Within one year of expansion being implemented (October 2022), Missouri’s Medicaid enrollment had ballooned to 1.4 million with 288,000 adults in the “newly eligible” expansion population. Today, with COVID safely in the state’s rearview mirror, program enrollment is still nearing 1.3 million total with 340,000 adults enrolled as a result of the expansion of eligibility requirements. The only Medicaid eligibility category that has seen a decline in recent years is that of people with disabilities—but that is a topic I’ll discuss in greater detail in the next post in this series.

To quickly summarize the impact of expansion thus far, enrollment has exceeded projections by around 35 percent, and current program costs are approximately 75 percent ($7.8 billion) higher than they were in 2019. The prediction that Medicaid expansion would be costless relied on Missouri being able to shift a significant portion of its costs to the federal government, which would in turn have saved state taxpayers money. Thus far, this has not been the case as Missouri taxpayers’ contribution to the state’s Medicaid program has grown by 74 percent ($1.6 billion) over the same period.

While hindsight is 20/20, it’s fair to say that the current problems with Missouri’s Medicaid program were predictable four years ago. Further, there’s no longer any reason to think today’s data represent anything other than the new normal for the program. It’s time to accept that Missouri voters were sold a bill of goods on Medicaid expansion, and it’s incumbent on our state’s elected officials to explore whatever actions are possible in the coming years to fix the problems that expansion has created.

For More Affordable Housing We Need More Housing, Period

Posted on by Grace Hearne

St. Louis, at least relative to other cities, is not facing a housing affordability crisis. In fact, a 2024 study from Chapman University and the Frontier Centre for Public Policy authored by Wendell Cox ranks St. Louis second (tied with Rochester, New York) for middle-income housing affordability among 94 major housing markets in eight countries. As for rental units, Apartments.com gives an average rent in St. Louis as $1092/month, which the website describes as 30% lower than the national average rent of $1559/month.

These are average values, of course, and not everyone can afford an average mortgage or rent payment. However, the United Way also ranks St. Louis second in the nation (tied with Pittsburgh and trailing only Cincinnati) for the highest number of affordable rental units (80) per 100 households.

It’s good to see St. Louis earn a high national ranking in something other than crime; nevertheless, 80 rental units for every 100 households that need a place to live still isn’t enough housing. So, what can St. Louis do to meet the remaining affordable housing demand?

First, local governments need to get out of the way and let the free market work its magic. My colleague Patrick Tuohey has highlighted the harm that misguided government intervention has done to housing markets in both St. Louis and Kansas City:

Kansas City’s adoption of the 2021 International Energy Conservation Code (IECC) stifled new home construction by inflating costs. Builders, facing steep regulatory burdens, simply stopped building. In St. Louis, a reliance on tax credits and incentives for flashy developments has left vast swaths of the city with vacant lots and dilapidated buildings. In both cities, the results are clear: policies that ignore basic market principles fail to deliver desired results.

Second, the demand for low-income housing can be met indirectly by constructing more expensive or luxury housing. More housing, whether low-income or luxury, is beneficial and will positively impact the availability of affordable housing. Even if the construction of luxury housing occurs when there is a greater demand for profitable low-income housing, the filtering effect will help address the need.

Andrew Cline of The Josiah Bartlett Center for Public Policy extrapolates on the positive effect of luxury housing construction, describing the filtering effects of new apartment development:

Building luxury or higher-end apartments draws higher-income renters out of yesterday’s luxury apartments and into the new luxury apartments. Increased vacancies in yesterday’s luxury apartments attract higher-income residents who’ve been living in mid-level apartments. As new construction creates more vacancies, rents come down. That effect filters throughout the housing supply, lowering rents all the way down. 

It is precisely because of this filtering effect that projects like the one in Town and Country are good news even for those looking for something in a lower price range. While a new luxury condominium development may seem irrelevant to someone seeking a more affordable place to live, it nevertheless represents an increase in supply and exerts downward pressure on housing prices.

Does Missouri Need a DOGE?

Posted on by Patrick Tuohey

The Cato Institute’s recent report, “Cato Institute Report to the Department of Government Efficiency (DOGE): How to Downsize and Reform the Federal Government,” underscores the urgent need to streamline federal operations by significantly reducing government intervention. The report identifies three critical challenges: the federal government’s frequent failure to achieve its objectives, a notable decline in U.S. economic growth over the past 25 years, and an unprecedented surge in government debt.

The report advocates for a substantial reduction in federal spending, emphasizing the elimination of programs that are redundant or fall within state jurisdiction. The goal of this new approach is to alleviate the economic burdens imposed by excessive federal regulations and expenditures.

Missouri needs to conduct a similar exercise. The state’s budget has expanded significantly, with general revenue spending increasing nearly 50% over the past three years. As my colleague Elias Tsapelas has pointed out, this led to a “D” grade for Governor Mike Parson in the Cato Institute’s Fiscal Policy Report Card, indicating a pressing need for more disciplined fiscal management.

These reports serve as critical reminders of the importance of efficient government operations. We need a leaner government that prioritizes essential functions and empowers states to manage their affairs more effectively.

This Is Not a Drill

Posted on by Susan Pendergrass

As you may have read here many times, Missouri’s public school enrollment is shrinking. A big part of the reason for this is declining birth rates. A recent report released by the Western Interstate Commission for Higher Education (WICHE) projects that Missouri will have its largest class of high school graduates this school year—spring 2025—at 68,656 graduates. That includes 63,349 public school high school graduates and 5,307 private high school graduates. By 2041, WICHE projects that Missouri will have just 58,880 total high school graduates, with 54,401 coming from public schools and 4,776 from private schools.

Now that we have reached the (projected) enrollment peak and are heading down the cliff, Missouri needs to begin considering the implications for higher education and the workforce. First, the state should focus on the cost and access of public colleges and universities. Second students not planning on attending college should have access to career-building skills and certificates while still in high school. Finally, and most importantly, every Missouri high school graduate should leave school college or career ready.

We’ve known about these trends for a while, but there’s still time to adjust to our new enrollment reality if we make needed changes now. We’ll see if Missouri lawmakers actually follow through.

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