Take Missouri’s 2018 decision to remove the 174-day minimum school year requirement. The goal was to give school districts greater flexibility in structuring their academic calendars. It worked. By 2023, nearly one third of Missouri districts had adopted four-day school weeks. The policy also had an unintended consequence—students now spend significantly less time in school.

While schools are still required to meet the minimum 1,044-hour requirement, Institute research shows that the average Missouri student is going to school 17 to 29 fewer hours per year than before. Over the course of an entire K–12 education, this equates to losing nearly a quarter of a school year.

This phenomenon is not unique to education policy. Unintended consequences abound in economic and social policies.

• Raising the Minimum Wage: The intention is to help low-income workers earn a living wage. In practice, however, higher labor costs often lead businesses to cut jobs, reduce hours, or replace workers with automation—hurting the very people the policy was meant to help.
• Housing and Zoning Regulations: Efforts to control urban development often result in reduced housing supply, making homes and apartments more expensive. In places with strict zoning laws, such as California and New York, these regulations have contributed to skyrocketing housing costs and homelessness crises.
• Corporate Tax Increases: Policymakers impose higher taxes on corporations to generate more government revenue, but companies respond by moving operations overseas, reducing investment, or passing costs onto consumers.

Public policies are often crafted with the best intentions, yet they reshape human behavior in unpredictable ways. When policymakers overlook economic incentives and fail to anticipate secondary effects, the result is often worse than the problem they set out to fix.

As Missouri’s school calendar experiment shows, flexibility in education policy may be valuable, but policymakers must exercise caution. Legislators should weigh not just the direct outcomes of a policy but also the unintended consequences that ripple through society.

The post Unintended Consequences: When Well-Meaning Policies Backfire appeared first on Show-Me Institute.

Moving from a $7.65 minimum wage to a $15 wage by 2020 is a huge increase, and something that is not even supported by all the usual liberal pundits. Matt Yglesias wrote in Vox of the effort in St. Louis,

In St. Louis, people are much more likely to adjust to a higher cost of employing people by employing fewer people. The most relevant precedent for a big hike in a relatively poor jurisdiction may be Puerto Rico, where an effort to match the US federal minimum wage led to a rise in unemployment and increased migration to the mainland United States. St. Louis is richer than Puerto Rico, but moving a person or a job across the St. Louis city line into the suburbs is a lot easier than migrating from Puerto Rico to the US mainland.

Here is what will happen in Kansas City if the wage is increased: Employers who rely on minimum wage employees will seek to avoid the higher labor costs by hiring fewer people and investing in technology. We’re already seeing the latter in fast food restaurants that rely on kiosks for ordering. With fewer jobs available, the competition for them will grow, and those with the fewest job skills—who are also those with the greatest need for that first job—will be harmed the most. There just won’t be enough work for them. This is true is most places that require an increase in wages.

The second item is particular to Kansas City and will further diminish job opportunities for poor and low-skill workers. Middle class kids from Overland Park, where the minimum wage is $7.25, will suddenly have an incentive to cross State Line Road to earn $12, $13, and perhaps even $15 an hour. (Remember, 44.6% of those earning minimum wage or less come from households that earn three times the poverty level.) Many of these kids will have work experience and skills that make them more appealing to employers. If you’re going to pay a higher wage, you will want a better employee.

There will be pressure on Overland Park employers to raise wages to keep workers on their side of state line. And Kansas City workers may then have to commute to Kansas to get the lower wage jobs that are suddenly available, but they may not have the access to transportation that their wealthier suburban job-seekers have. Kansas City’s urban poor will find themselves with fewer job opportunities locally and no good way to get to the jobs that are available to them outside of Kansas City.

There is no shortcut to creating an environment for more jobs and higher salaries—government cannot create wealth and success by fiat. Instead, local governments need to focus on delivering basic services efficiently and cost-effectively and on limiting taxes and business regulation.

The post A Minimum Wage Increase and the Unintended Consequences for Kansas City appeared first on Show-Me Institute.

We have written a ton about the adverse effects of raising cigarette tax rates in Missouri (and even produced a video). Missourians voted against a rate increase last November.

For many people, this was a disappointment. It can be counter-intuitive to think that raising the cigarette tax would be a bad thing. After all, don’t we want to discourage smoking, particularly among teens?

My personal opinion is yes, we should discourage smoking among teens. We all know how bad it is for our health; we have seen (and turned away from) the graphic anti-smoking TV advertisements.

But as we see in the cigarette smuggling study, increasing the cigarette tax is not a guarantee that there will be a reduction in smoking. It does, however, correspond with increased black market activity. Indeed, in Kansas City, federal authorities uncovered a conspiracy to illegally traffic tens of millions of dollars worth of cigarettes. Mackinac’s report details all the destructive effects of cigarette smuggling, including “corruption of government officials, violence, theft, counterfeiting and dangerous, adulterated products.”

The high occurrence of cigarette smuggling reminds us of the unintended consequences that can arise from government activity. Raising taxes is not a surefire way to solve problems, even when it may appear as straightforward as people buying less because cigarettes cost more. If only it were that simple.

The post Cigarette Smuggling On The Rise appeared first on Show-Me Institute.

Eight million Americans cut up their credit cards this year, according to new data out from credit bureau TransUnion. Some of those plastic deserters were folks who faced scary economic conditions and decided to voluntarily cut back on debt spending. But for others, it wasn’t a matter of choice.

Millions of customers found themselves unceremoniously ejected from the ranks of the card-worthy thanks to last year’s Credit Card Accountability, Responsibility, and Disclosure Act, or Credit CARD Act. The new rules were supposed to “protect American credit card holders” by stopping “unfair rate increases.” Instead, credit card companies prepared for their new straitened circumstances by booting customers who would no longer be profitable (read: poor people and other risky borrowers), and hiking interest rates for others. American Express even offered $300 bonuses to customers willing to pay off their cards and close their accounts—a deal designed to entice the kind of cash-strapped customers AmEx was soon to find less lucrative.

But as the new rules make it less appealing for credit card companies to offer their services to certain segments of the population, most of those people don’t revert to a cash-only state of nature. The appetite for credit doesn’t vanish when credit cards are harder to get. Instead, customers turn to options like installment plans, layaway, and payday lending for quick credit—and the fees they pay for those options are as high or higher than the credit card costs Congress and the White House found so objectionable. And in an economy that runs on plastic, debit cards replace credit cards for everyday purchases.

Congress has destroyed credit card access for many low income individuals, but many states have already eliminated second- and third-best options like payday loans, and there is pressure for Missouri or its localities to follow suit. For instance, in this editorial from the Springfield News-Leader, Pastor Roger Ray argues that Springfield should ban payday loans because “on a per capita basis, no state takes such reprehensible advantage of the desperate poor, fueling drug and alcohol addiction and gambling addiction with easy-to-get but hard-to-pay-back loans.” The rest of the editorial is packed with evidence-free assertions, overblown rhetoric, and enough fallacies that it would take a book to refute them all, so I will confine myself to the consequences that would follow from such a ban.

As I showed in my op-ed about this subject earlier this year, restricting payday loans leads to more bounced checks, complaints to the Federal Trade Commission about lenders and debt collectors, utility shutdowns, and higher rates of bankruptcy. Payday loans are far from the best form of credit, but, in some cases, they are the best available to people. If Pastor Ray wants to eliminate payday loans in his community, I would encourage him and his congregation to start a fund to lend to low-income individuals at lower interest rates (or for free). If enough people share his sentiment, the payday loan industry can be eliminated without the force of law because very few people will opt for a more expensive loan over a cheaper one.

However, if the city government eliminates the loans by law, debtors will be forced to turn to even worse alternatives. I’m relatively certain Ray believes that a ban on payday loans would improve the lot of the poor, but that is an empirical question that most studies of the issue have answered with a resounding “no.” So, in the famous words of Oliver Cromwell, “I beseech you, in the bowels of Christ, think it possible you may be mistaken.”

The post Helping the Poor by Denying Them Access to Money appeared first on Show-Me Institute.

Tightening restrictions in Missouri gives an automatic boost to the strip club industries along Missouri’s borders, which in some cases may be even more unsavory. Closing the Missouri clubs earlier than in other states will also unwittingly create more post-midnight (including cross-river) traffic — a public safety concern that effects more people than the clubs’ patrons.

Well-intentioned measures frequently have unintended consequences.

Consider Springfield’s proposal to ban smoking in workplaces. Most workplaces are smoke-free by choice, but some businesses — like cigar bars and hookah lounges — are built around smoking customers. Although it’s likely that the ordinance will make some exceptions, those exceptions themselves create a tilted playing field for competition.

If you don’t like strip clubs and smoking (and I certainly do not), the simplest solution is not to smoke and not to patronize strip clubs or smoky bars. This an example of how the over-regulation of an industry potentially creates conditions favorable to further problems — while solving none of those it was intended to solve — and, in the process, harming the livelihoods of people who have elected to work in affected industries (after all, erotic dancers need to eat, too).

The fairest (and most effective) way to kill an unsavory business remains not to patronize it.

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So, let’s recap: The United States Congress passed a bill that makes tax changes. Those tax changes will by design affect corporations’ balance sheets and generate more revenue for the government. When corporations inform the public of these effects, members of Congress request verification of the accuracy of these effects, merely because they contradict what the legislators expected and said would happen.

In the letter, the congressmen state that the bill is “designed to expand coverage and bring down costs,” which makes AT&T’s claims “troubling.” The key word here is “designed.” The legislation may indeed have been designed with the intention of reducing costs, but that doesn’t mean it will actually have that effect when implemented. The letter also cites reports from the Congressional Budget Office and the Business Roundtable projecting that premiums could decrease during the next six to 10 years as a result of the reforms. The report by the Business Roundtable says that “if enacted properly, the right legislative reforms could potentially reduce [premiums] by more than $3,000 per employee” (emphasis added). So, this depends on the right reforms being enacted in the proper way (which we know almost never happens), and then premiums could potentially be reduced. The congressmen neglect to mention in their letter that this report also has a section titled “Risks Could Jeopardize Cost Reductions,” which points out that revenue raisers such as a “high-cost” tax could make health insurance costs worse for affected plans and employees.

The worst thing about this is that the government is asking a private company to explain its accounting, something they have no authority to demand. Beyond filing their taxes accurately, AT&T has no obligation to the government to explain itself, only an obligation to its shareholders. The shareholders are perfectly capable of “verifying” the company’s financial information on their own. The congressmen’s request that AT&T justify the increase in expenses reflects the apparent unwillingness of many legislators to acknowledge the unintended consequences of their legislation.

The post This Just In: Health Care Legislation Passed by Congress Has Unintended Consequences appeared first on Show-Me Institute.

The most obvious consequence of these closings would be that people formerly employed in that segment of the adult business in Missouri would either seek new lines of work or move to other states that are more accommodating of their current professions. The supply of this good may diminish or even disappear, but the demand for it won’t go anywhere. This situation could easily lead to results that should give pause to the social conservatives who support this bill.

The increased hassle of the legislation might dissuade some people from consuming such lascivious services, but others will seek out substitutes. It would likely lead to an increase in the consumption of pornography and prostitution (and some unemployed strippers would probably enter the world of prostitution, as well). But that still may not be the worst of it.

A 2006 study by Clemson University economist Todd Kendall argued that greater access to Internet pornography helped drive down the incidence of rape during the prior two decades. In a Slate article, fellow economist Steven Landsburg summarized Kendall’s findings:

First, porn. What happens when more people view more of it? The rise of the Internet offers a gigantic natural experiment. Better yet, because Internet usage caught on at different times in different states, it offers 50 natural experiments.

The bottom line on these experiments is, “More Net access, less rape.” A 10 percent increase in Net access yields about a 7.3 percent decrease in reported rapes. States that adopted the Internet quickly saw the biggest declines. And, according to Clemson professor Todd Kendall, the effects remain even after you control for all of the obvious confounding variables, such as alcohol consumption, police presence, poverty and unemployment rates, population density, and so forth.

OK, so we can at least tentatively conclude that Net access reduces rape. But that’s a far cry from proving that porn access reduces rape. Maybe rape is down because the rapists are all indoors reading Slate or vandalizing Wikipedia. But professor Kendall points out that there is no similar effect of Internet access on homicide. It’s hard to see how Wikipedia can deter rape without deterring other violent crimes at the same time. On the other hand, it’s easy to imagine how porn might serve as a substitute for rape.

If not Wikipedia, then what? Maybe rape is down because former rapists have found their true loves on Match.com. But professor Kendall points out that the effects are strongest among 15-year-old to 19-year-old perpetrators—the group least likely to use such dating services.

Moreover, professor Kendall argues that those teenagers are precisely the group that (presumably) relies most heavily on the Internet for access to porn. When you’re living with your parents, it’s a lot easier to close your browser in a hurry than to hide a stash of magazines. So, the auxiliary evidence is all consistent with the hypothesis that Net access reduces rape because Net access makes it easy to find porn.

There are legitimate reasons to question such a strong conclusion on Kendall’s part, some of which were pointed out by Steven Levitt of Freakonomics fame, but it cannot be easily dismissed. Furthermore, it would be inappropriate to draw direct parallels between Kendall’s study and the strip club situation in Missouri, because they are not perfectly analogous. Most obviously, 15-year-old to 19-year-old boys are not likely to be found in strip clubs to begin with. Still, the general idea holds up. People seeking sexual gratification may turn to much worse alternatives in the absence of easy access to common consensual options like pornography and strip clubs.

Let me be very clear: I am not predicting that this law would result in a measureable uptick in rapes in Missouri. In fact, absent a good control group, it would be hard to establish statistical correlation, let alone causation. What we do have is some very suggestive evidence that the law of unintended consequences may apply to this law in a fierce way, and it is something that the law’s supporters should think carefully about.

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Here is my advice to every person in Missouri: Stay away from the payday loan industry; the vast majority of the time, it is a terrible financial decision to make use of it. Here is my advice to the government: Stay away from the payday loan industry; it is not your role to interfere in private contracts and prevent people from making poor financial decisions.

Then there are the unintended consequences that would result from eliminating, or severely restricting, the industry. It is not as though the people who now use payday loans would suddenly no longer have any need for a loan. Some would move into receiving loan services from the banking system (a good result), some would entirely lose the ability to obtain credit (a mixture of both positive and negative results), and some would turn to the loan shark industry with all of its attendant risks, violence, etc. So, if you want to improve the climate for loan sharking and enforcing collections with baseball bats, then by all means legislate the payday loan industry out of existence.

This set of arguments about payday loans has also been covered by Show-Me Institute op-eds superior to this blog post.

The post Payday Loan Industry Bad; Mob Racketeering Good appeared first on Show-Me Institute.

An individual mandate would be similarly counterproductive. The Wall Street Journal reports on an analysis by the Heritage Foundation showing that “roughly 93 percent of uninsured households under age 35 who face a penalty for remaining uninsured would rather pay the penalty than buy health insurance.” As the article points out, paying this penalty would require money that would have otherwise been spent or saved, causing an unnecessary drain on both the economy and the individuals who are forced to pay this fine.

This is a perfect example of the unintended consequences that so often occur as a result of well-intentioned legislation. It seems like legislators are usually more focused on how their proposals sound, rather than on the actual results of those policies. Unfortunately, this never ends well; we all know the saying about the road that’s paved with good intentions.

The post Unintended Consequences appeared first on Show-Me Institute.

The Affton School Board has approved a policy that could fine parents who habitually pick up their children late from the district’s after-school program. […]

Parents who arrive late will now be given one warning. Thereafter, parents will be subject to a $10 fine for arriving up to 15 minutes late, $15 for up to 30 minutes late, and $20 for any pickup after 6:30 p.m.

In the book, Levitt and Dubner discuss a study in which an incentive scheme like that was found to increase the number of kids left at school late (actually, in the case of the study, I think it was a daycare center). That’s because in the absence of fines, parents assume that leaving their kids late is a large burden on the staff. They’ll try hard to get there on time. When you institute modest fines, parents think, "Hey, the school doesn’t really care whether I’m on time or not. It’s just a little bit of an inconvenience for them, but I don’t need to feel bad about that because I’ll pay the $15." Now, if they charged $150, that would bring down the number of late parents.

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