Author: Othman Mekhloufi

Othman John Mekhloufi is a writer for 71 Republic, and is currently in his sophomore year of High School. He is an active member of his local Libertarian Party, and his school’s debate team. Othman is also invested in his private debate academy which participates in many debate tournaments. He heavily believes in the enactment of small government, free markets, and protection of natural liberties. Not only this, but Othman holds a great love for his country, the United States of America. He can be reached on his social media; Twitter, Instagram, and Facebook @othmanmekhloufi

Germany Is Phasing Out Coal, Moving to Renewable Energy

Othman Mekhloufi | United States

A government-appointed German ‘Coal Commission’ released a recommendation to the German government on the morning of January 26th. The goals of said recommendation are to curb carbon emissions, turn to renewable energy, and take steps towards the deceleration of climate change.

The Report

The 28-member commission represents various German mining regions and utility companies. After 21 hours of negotiations, they reached a decision to fully phase out coal over a 19 year period (by 2038). This move will, in turn, shut down all 84 of Germany’s coal plants. Germany has also moved to fully shut down all of its nuclear power plants by 2022. This decision is part of another report by the commission that was legislated in 2011.  As of now, Germany shut down 12 of the 19 nuclear power plants in the nation.

The progress will be regularly reviewed by the commission in 2023, 2026, and also 2029. The goal is to find out if phasing out coal is possibly by 2035. Nonetheless, 2038 will remain the legally defined date to fully phase out coal pending German government drafting legislation based on the report.

The commission’s report is not legally binding as it still requires the action of the federal government. The report holds a set of guidelines and suggestions for the federal government to legislate accordingly in hopes of curbing climate change and CO2 emissions. German Chancellor Angela Merkel will likely approve the commissions’ proposal.

Coal in Germany

Coal plants in Germany currently account for 40% of electricity and power production. Renewable energy surpassed coal as the leading source in 2018. It now accounts for 41% of energy use. By fully phasing out coal and nuclear power, Germany aims to rely on renewable energy. Ideally, renewable energy will provide 60%-85% of Germany’s power.

Germany is currently #8 in global coal consumption, although the nation only accounts for 2% of such emissions.

The Impact

There are roughly 60,000 jobs with ties to the coal industry. Consequently, phasing out coal would put those jobs in jeopardy. There will likely be negative economic repercussions which will fall upon the companies and workers, as well as the families of workers. However, the commission allocated for $45 billion in aid to ease the economic hardships caused by their decision to end the industry. The aid includes an adjustment fund, as well as pension compensation for all employees aged 58 years or older. Younger workers out of a job will also receive aid in the form of education and training for jobs in renewable energy sources.

As we move towards the future, coal is being phased out on a global scale. Climate change is progressing. Therefore, many believe the shift towards renewable energy sources is a must.


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Raising the Minimum Wage Will Harm Workers and the Economy

By Othman Mekhloufi | United States

Left-wing and Keynesian economics have overwhelmingly called for an artificial raising of the minimum wage. This has been due to the belief that all workers must be paid a living wage regardless of their line of work or skill set. Essentially, this is a belief that it is unfair to not compensate workers with a living wage. However, to require employers to compensate their workers with higher wages will only play to the disadvantage of said workers through the inflation of prices, unemployment, as well as the cutting of work hours. Hence, resulting in a worse off economy for all individuals, and simply an unpragmatic economic policy.

The minimum wage is the legislated minimum amount of money an employee may be legally paid for their work. This minimum wage, whatever it may be, is not necessarily a living wage, but rather a wage paid for jobs which require a minimum amount of skills. For instance, if a worker were to create more than twenty dollars an hour for their employer, they would be compensated for twenty dollars an hour, or less. In essence, workers are paid according to how much they produce, and how much is possible to pay them. Such a method of compensation allows businesses to remain financially afloat by being able to make money at all, and, in turn, pay off expenses.

As a general rule, it is positive for all individuals for a business of any size to remain afloat. When businesses are present in the economy, it allows for a product and/or service to be provided to the consumer end of the market. In addition to this, jobs are created with the existence of the business, as well as its future expansion. 

However, when the minimum wage is artificially raised by the government, employers will be legally required to compensate some of their employees for possibly more than they initially produce.

Considering small businesses, this will result in one of two major negative economic repercussions. The first of which is work hours getting cut and employees getting laid off, resulting in the business most likely ceasing operations. The second impact is inflated prices, resulting in individuals, as well as the economy, being harmed. 

When small businesses must compensate their employees for more than they initially produce, compensation is rendered financially impossible. As a result, small businesses will be effectively forced to lay off employees, causing unemployment.

Having to lay off many employees, small businesses will be unable to continue their production, resulting in businesses being forced to cease operations. Considering the fact that small businesses are not as large-scaled as others such as McDonald’s, automation to replace workers would not be a viable option as it would be unaffordable.

Through causing small businesses across the board to cease operations, unemployment is bound to be brought upon the economy. In addition, the product and/or service that the business initially provided to the consumers would be brought off the market causing additional burden to customers who relied on said product and/or service.

For example, if a small business has workers that produce thirteen dollars for each hour of work, but compensates said employees seven dollars and twenty-five cents an hour, it would allow for the small business to rake in five dollars and seventy-five cents per work hour after paying employees. These five dollars and seventy-five cents would be used to pay other expenses, make a profit, as well as generally stay financially afloat. However, when the government is to raise the minimum wage to fifteen dollars an hour, the small business would be forced to pay employees two dollars more than they initially produce. In turn, the business would begin to lose two dollars for every work hour, as well as experience a total absence of income. In light of having no income, and losing two dollars an hour to compensate said employees, and to remain financially afloat would be impossible. Such would result in the small business having to lay off said workers.

In this case, automation would not be a viable option for said small business as it would be unaffordable. In the case where it would be affordable, said business would not be small, but rather one of larger scale.

Due to being unable to automate, and having a lack of labor, the small business would be unable to produce the product, and/or service which was initially produced. In result of such, the said small business would be forced to cease operations.

To avoid laying workers off and, in turn, ceasing operations, small businesses have the option to raise prices to remain financially afloat. However, this option is in itself still a negative economic repercussion for both the consumer, and the business. If businesses are to raise prices, many customers would be driven to competitors who offer a cheaper price, or would simply cease purchasing said product and/or service as a whole. In turn of such, businesses would begin to lose out on income, and the customers who remain would be financially burdened with higher prices.

Such economic repercussions are not limited to small businesses as the same has occurred with Starbucks in 2018. Starbucks had announced that it would be closing roughly three times as many stores in 2019 than it usually would in a year. The closures of these Starbucks locations will be focused in densely populated and urban areas on the west coast, as well as in the northeast where the minimum wage is particularly high. Starbucks CEO, Kevin Johnson, had stated that the affected stores are “in major metro areas where increases in wage and occupancy, and other requirements are things that were making those stores unprofitable.”

In the case of larger scaled businesses and corporations who would not go out of business due to an increase in the legislated minimum wage, negative economic repercussions would continue to take place.

When the minimum wage is artificially increased by the government, businesses that are able to stay financially afloat while paying their workers more will experience income loss nonetheless. Businesses, in all cases, will want to mediate income loss to the greatest possible extent for furthermore profit. To deter such income loss through spending less money, said businesses will cut work hours, lay workers off, as well as raise the prices for their services, and/or products.

Inflation of prices would drive customers to competitors, as well as cause the business to lose out on income as a whole. Because of this, price inflation is an unlikely method to combat a loss of income for larger scaled businesses as they can afford other means to do so. Most prominent of these other mechanisms to cut income loss is to cut work hours, as well as lay off employees.

This was seen in an estimation made by the Bank of Canada stating that over sixty-thousand jobs will be lost by the year 2019 due to minimum wage hikes; along with a study conducted by the University of Washington which had observed that after Seattle’s minimum wage hike from $9.47 to $11.50 an hour, there had been only a one percent decrease in low wages.

When workers are laid off to mediate income loss, they must yet again be replaced by an entity to continue doing the necessary work the business requires. In response to such, automation of labor comes into play. We witness this in today’s world as McDonald’s has announced that they will be replacing cashiers with automated kiosks in all 14,000 of its U.S. locations as of 2020In addition, McDonald’s had announced that it was prioritizing such automation in locations with prominently high minimum wages such as Seattle, and New York City.

After nineteen of the American states had announced a minimum wage increase to ten dollars an hour in January of 2017, a month later in February, the CEO of Wendy’s had announced financial shifts within the company. Wendy’s CEO had announced a four percent rise in wages, along with an eight percent loss in margin. In turn of this, although not confirmed, but evidently understood with the previously explained economic theory, Wendy’s had announced a plan to install automated kiosks sixteen percent of its locations; a cheaper alternative to conforming to the minimum wage hikes and paying workers more. 

With all economic theory, and evidentiary claims considered, it can be understood that artificial hikes of the minimum wage will indeed result in unemployment, cutting of work hours, shutting down of small businesses, as well as the inflation of prices; all resulting in a furthermore disadvantaged financial situation for workers, the individual, as well as the entirety of the economy itself. Therefore, inherently proving that a hike in the minimum wage would be detrimental, and counterproductive to the goal of left-wing, and Keynesian economics.


71 Republic is the Third Voice in media. We pride ourselves on distinctively independent journalism and editorials. Every dollar you give helps us grow our mission of providing reliable coverage. Please consider donating to our Patreon, which you can find here. Thank you very much for your support!

The City of Chicago Will Now Tax ‘Amusement’

othman Mekhloufi | United States

 

The Amusement Tax

The City of Chicago is now levying taxes on amusement, entertainment, or anything remotely fun-oriented.

The City of Chicago’s Department of Finance, rather than the City Council, issued a new tax ruling called an “amusement tax”. This tax would subjugate any residence within the official city limits of Chicago to pay a 9% tax, in addition to sales tax, on anything which is remotely related to amusement; whether it be streaming movies on Netflix, playing video games, or going to a football game, such a tax would apply.

Here is the following list of all the assortments to be taxed according to the ruling itself.

“Any exhibition, performance, presentation or show for entertainment purposes, including, but not limited to, theatrical, dramatic, musical or spectacular performance, promotional show, motion picture show, flower, poultry or animal show, animal act, circus, rodeo, athletic contest, sport, game or similar exhibition such as boxing, wrestling, skating, dancing, swimming, racing, or riding on animals or vehicles, baseball, basketball, softball, football, tennis, golf, hockey, track and field games, bowling or billiard or pool games; any entertainment or recreational activity offered for public participation are on a membership or other basis including, but not limited to, carnivals, amusement park rides and games, bowling, billiards and pool games, dancing, tennis, racquetball, swimming, weightlifting, bodybuilding or similar activities; or (3) any paid television programming, whether transmitted by wire, cable, fiber optics, laser, microwave, radio, satellite or similar means.”

With this ruling, there are also some exceptions. All venues held in auditoriums or theaters with a maximum capacity of not more than 1500 people are exempt from the 9% amusement tax. However, these venues must be in person live performances to be exempt from the tax. This exemption does not apply to movies or sporting events.

Currently, Chicago’s sales tax, with all jurisdictions considered, is the highest in the entire nation at 10.25%. With this amusement tax being set at 9%, it is also compiled onto Chicago’s default sales tax of 10.25%; meaning that the population of Chicago is not only stuck paying an astronomically high 10.25% sales tax, but they are also required to pay an additional 9% tax on any assortments in relation to the amusements previously listed.

The Impact on the Wallet

The economic repercussions of such a new tax would be quite negative for the City of Chicago. Said economic repercussions would revolve around the primary negative effect of margin loss. The government is now levying more taxes from the people via two separate sales taxes, one at 10.25%, and one at 9%. Because of this, less money will be the pocket of the populace. When the populace has less money in their pockets, they will have less money to spend. Because the populace will have less money to spend, businesses will lose out on customers, as well as profit. When it occurs that businesses lose out on customers, and income, one primary negative effect on the economy would take place; that being, margin loss.

This margin loss will always have two sets of negative economic sub-repercussions. The first set of sub-repercussions are unemployment, cutting of wages, as well as the cutting of work hours which fits into the internal-labor subsection. The second set of sub-repercussions are and the hiking of prices which fits into the consumer subsection. Meaning, that with such a tax, prices would in fact increase, and jobs, work hours, as well as wages,  would all be cut.

The Impact on Employment

Let’s take a look at the first set of sub-repercussions; unemployment, the cutting of wages, and the cutting of work hours. Due to the fact that businesses will be losing margin due to fewer customers, they will always want to mediate that margin loss. To mediate this margin loss, businesses have two choices; either begin to raise their prices, or cut spending somewhere within the company. Usually, when spending is being cut, it is centered around wages and not other essentials of the company. This is due to the fact that if companies were to cut spending for such essentials, the product, and or service being provided would degrade in terms of quality. In turn, this would only result in furthermore margin loss due to the general premise that no consumer populace wants to purchase an inferior product with poor quality.

With this, we can determine that a margin loss, for whatever reason it may be, will indeed result in a spending cut. Said spending cut will be focused on wages. More specifically, when implementing this, hours will be cut, some individuals within the company may be laid off, and many wages will be reduced all to minimize for the loss in margin caused by economic government intervention.

Don’t Forget About Prices

Considering the second set of sub-repercussions, the hiking of prices, this also comes with its own extended economic repercussions. Other than the fact that cheaper goods mean best for everyone on both sides of the transaction, the hiking of prices comes with its own furthermore economic disparities. When prices are hiked to mediate a loss in margin, an even higher amount of margin loss will occur. This is due to the following reasons; when a company raises its prices for whatever reason it may be, and in our case, margin loss, the populace will be less incentivized to purchase said product, and or service.

Because of this, sales will go down even more, and the company suffers even more margin losses. For instance, a 2014 study conducted by YouGov found that nearly 1 in 5 of Netflix subscribers polled would cancel their subscription if the price went up by $1 a month. Nearly half of those polled would cancel their subscription if the price went up by $2 a month. If these increases in subscription prices would happen due to a loss in margin, Netflix would experience even more margin loss as it loses even more customers due to price hikes.

As we can now see that not only do price hikes burden the consumer populace as everyone enjoys cheap goods, but they also cause margin loss in companies which, if it were to be on such a large scale, would cause unemployment, cuts in wages, as well as cuts in work hours as previously explained.

Many may claim that the amusement tax rate may only be 9%, and at such a small rate, it would not cause any actual negative economic repercussions as previously mentioned. However, this amusement tax is estimated to levy $189 million in the year 2018. Not only this, but the amusement tax’s levy margin has been trending upwards since 2017 when it took in a measly $168.7 million compared to the $189 million of 2018. With the amusement tax raking in hundreds of millions of dollars a year, and with it only trending upwards, we can truly determine that such a large amount of money being taken out of the economy will indeed cause the economic hardships previously mentioned.

Although these economic repercussions have not been extremely severe in Chicago due to the fact that the amusement tax is only centered within one jurisdiction; if the western world continues this trend of large government economics, and a similar policy begins to be implemented on the federal level, the economic repercussions previously listed would scale to a very large extent affected millions across the board.

In reality, with such a tax, we would only cause economic hardships; unemployment, cuts in wages and work hours, as well as hikes in prices across the jurisdiction in which it was applied.


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