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Raise the Minimum Wage and Get Minimum Jobs
Fiscal Times ^ | 02/15/2013 | Ed Morrissey

Posted on 02/15/2013 8:16:42 AM PST by SeekAndFind

Like those of all modern presidents, Barack Obama’s State of the Union speech was filled with agenda-list items, long-held hobby-horse issues of his party, and inflated claims of the success of his own policies. Most of the content could have been lifted from campaign speeches in 2012, probably 2008, and arguably every Democratic campaign for the last 40 years. Kirsten Powers, the liberal analyst on Fox News, wrote in a column for USA Today that the speech made it seem that “President Obama's chief speechwriter has been replaced by a cliché-generator circa 1960.”

Among the blizzard of clichés was a surprising throwback to 2007. President Obama focused on middle-class economic issues, which came as no surprise after having taken criticism over his inaugural speech, which hardly mentioned jobs and the economy at all. The White House didn’t make that mistake on Tuesday evening, with 32 mentions of “jobs” peppered throughout the address, and a pledge to focus on economic growth and job creation. However, included with that commitment to focus on job expansion came a new proposal to raise the federal minimum wage from its current $7.25 per hour to $9 per hour.

“We know our economy’s stronger when we reward an honest day’s work with honest wages,” Obama told the joint session of Congress. “But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong.” The President worked in a shot at wealthy CEOs at the same time: “In fact, working folks shouldn’t have to wait year after year for the minimum wage to go up, while CEO pay has never been higher.”

This plays into Obama’s theme of “fairness,” a strategy that ended up being successful in his campaign against the wealthy Mitt Romney. It plays on very sympathetic messages; most Americans will wonder how anyone can live on their own on $14,500 a year. Voters want an economic system that generates a fair, living wage for a fair day’s work. But the framing of this issue by Obama in the State of the Union speech provides a misleading context, and masks the failure of this policy in the past to produce the desired outcome.

Let’s start with the worker end of the equation. It’s true that minimum-wage earners don’t get a lot of money, but these are usually entry-level positions and starting wages. Workers don’t “wait year after year” for wage increases, unless they aren’t progressing from entry-level status or are changing from job to job at that level. Employers don’t wait for the government to raise the minimum wage to give existing employees a raise, mainly because the accrued experience makes the employees more valuable on the job market.

And that’s the big problem with these proposals. They don’t make people more valuable on the job market, especially those with no experience or proven skills. Minimum wage hikes make it more difficult for them to find jobs, especially in the short run. The raise proposed by Obama would increase just the straight wage cost for a business by 24 percent in its entry-level positions (and probably in other positions near that level), which businesses would have to absorb in one of two ways. Either they raise prices without providing consumers with a commensurate increase in product or service value, or they have to reduce staff to cover the increase. The former is inflationary and harms their competitive edge, while the latter gives businesses less flexibility to take risks, especially on new hires. Forced to pay a higher cost for employees, businesses will stick with experience rather than look to younger workers entering the workforce.

Consider what happened when Congress last passed a minimum-wage increase in 2007. At that time, overall unemployment was 4.7 percent and the job market favored workers. Among those between 16 and 19 years of age, the jobless rate was 15.3 percent, on the lower end of the range seen during the previous four years, the highest rate of which had been 19.0 percent in June 2003 during the previous recession.

By July 2008, overall unemployment had jumped to 5.8 percent due to the then-moderate recession that had begun in December 2007, but youth unemployment rocketed upward by more than five full points to 20.7 percent. As the wage floor stepped upward to its present level by July 2009, the youth unemployment rate rose to 24.3 percent. And while the overall unemployment rate has declined from 9.5 percent at that time to 7.9 percent now (albeit with a plummeting workforce masking the true nature of chronic unemployment), youth unemployment remains at nearly the same level as in July 2009, at 23.4 percent. Why has this been the case? When forced to pay more for labor, businesses will insist on getting more value for their money – experience and proven skills, even in entry-level positions. Younger workers never get a good chance to earn their stripes. That has long-term implications for their ability to earn in the future, as well as the social costs of high unemployment and restlessness of youth.

Worse yet, it’s the small business owners who get squeezed the most by this economic vise. The wealthy CEOs to whom Obama refers run companies large enough to dissipate the increased costs of minimum-wage hikes by balancing out cost reductions through economies of scale that aren’t available to mom-and-pop businesses. That puts smaller businesses at a competitive disadvantage that benefits the very CEOs that Obama scolded in his address.

Furthermore, that corrosiveness was amply demonstrated in a still-relatively healthy job market in 2007-8. With millions more unemployed, the jobs market is even more heavily tilted in favor of the employer, which will make that situation all the more dire for younger, less experienced workers – for whom the minimum wage is intended. That’s why John Boehner called this proposal dead on arrival.

“I’ve been dealing with the minimum wage issue for the last 28 years that I’ve been in elected office,” Boehner said. “And when you raise the price of employment, guess what happens? You get less of it. At a time when the American people are still asking the question, ‘Where are the jobs?’ why would we want to make it harder for small employers to hire people?”

We all want to see Americans prosper, and for people to earn wages that allow them and their families to live in dignity. Arbitrary hikes in the minimum wage don’t provide that, however, and even Obama’s target of $9 would produce an annual wage below the current federal poverty line ($18,720 vs $22,000). So what does succeed? As a former hiring manager, I can tell you what works. I spent 15 years hiring people into entry-level office positions for call centers, positions that usually paid above the minimum wage but reliant on it as a compensation basis. When the economy was slack and investors discouraged, I would have a flood of applicants for every open position, including on one occasion an unemployed man with a doctoral degree, and an unemployed college professor on another.

There was no competitive pressure to raise the entry-level wage, and my employees didn’t get wanderlust at the wage they were being paid. Most importantly, I never had to take a flier on an inexperienced but impressive applicant, thanks to the volume of more experienced candidates who were practically bursting through the door.

However, when investors put money in the economy and job creation flourished, we suddenly had to compete – and not just for new employees. As employees on staff gained experience, they would leave for greener pastures unless we raised the pay for everyone. During the Bush recovery, our company had to repeatedly revisit compensation to stem the outflow and get applicants to commit to joining our firm. That competition, in a well-performing and properly regulated economy, made the minimum wage an afterthought and lifted the living standards of everyone in the job market.

If we want to aim at that outcome as our goal, then we cannot punish the workers who want to enter the market and the business owners who would otherwise hire them by pricing new workers out of the equation. We need to focus on fixing the conditions under which businesses and investors operate in order to create the kind of expansion that spreads prosperity, rather than create arbitrary new costs that smother it.


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: jobs; minimumwag

1 posted on 02/15/2013 8:16:50 AM PST by SeekAndFind
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To: SeekAndFind

Kinda wish they’d raise it to $100 per hour, or perhaps to whatever-per-hour Pelosi gets. Show a little respect for the working dudes.


2 posted on 02/15/2013 8:19:29 AM PST by laweeks
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To: SeekAndFind

Too bad none of the folks voting for this have ever run a business themselves. If they would LOWER the minimum wage, the economy would be helped ... more people would be hired. Keep in mind, they talk $14,000 a year as a minimum wage, but with Food Stamps, health care, etc, it is actually nearer %65,000 a year ... thanks to our contributing tax dollar subsidy.


3 posted on 02/15/2013 8:22:57 AM PST by ThePatriotsFlag (...and to the Republic for which it STOOD...)
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To: laweeks

RE: Kinda wish they’d raise it to $100 per hour, or perhaps to whatever-per-hour Pelosi gets. Show a little respect for the working dudes.

____________________________

OK folks, here is a liberal’s defense of the minimum wage — given to me as I speak to them and as I read their arguments:

Here are just a few of them:

1) They cite Walmart, the biggest employer next to the government, which pays an average (not entry level) of $8.80 an hr for non-management jobs.

This qualifies most of their workers for government welfare, such as foodstamps and medicaid.

This means that the cheap prices at Walmart have a hidden tax, the money taxpayers pay to support the below standard wage paid by Walmart.

At new workers orientation, Walmart tells them to apply for welfare to supplement their incomes. This is corporate welfare shifting costs to the public.

So, the liberals argue based on this observation that paying substandard wages costs the taxpayer money thru the welfare programs to which workers are referred.

So the argument goes like this -— Why should the taxpayer subsidize Walmart? Why shouldn’t a fulltime worker make enough, without welfare, to live?

2) Liberals argue that studies have shown that raising the minimum wage has a tiny effect on jobs (far less than 1%) tho the myth that it will cause widespread unemployment is promoted nevertheless (This was Bill Clinton’s argument
in the 1990’s and the New York Times echoes it. Nothing has changed. I have not read such “studies”).

Workers who make more (let’s say on a par with the original minimum wage level) cost the taxpayer less and pay more taxes, a win win win.

If you want to increase revenues, reduce welfare costs, and increase consumption, which fuels economic and job growth, support raising the minimum wage to the level it once had, before inflation.

3) Most minimum wage earners are NOT teenagers.
They are adult working poor (Anybody check this at all?).

In the past 30 years, with an 85% increase in labor productivity, the 1% have nearly tripled their incomes and wealth, while the median wage has declined by over 30%. The loss of the buying power of the minimum wage is the foundation of this loss of median income, along with the destruction of the labor movement, which when it is strong is able to leverage more productivity and profits into wage gains.

If Someone is not worth $9 a hr. Don’t hire him; there are millions of able workers who can do the job. They deserve enough to live on.

Companies that pay substandard wages, like Walmart, depend on the government/taxpayers to make up the difference.
We need both a minimum wage and a strong labor movement to advance the interests and wages of all workers. Raising people out of poverty (as with the working poor that Walmart, et al employ) fuels the economy and job growth.

The minimum wage is one good way to accomplish this.

END OF LIBERAL ARGUMENT.

So, what’s your rebuttal to these?


4 posted on 02/15/2013 8:25:34 AM PST by SeekAndFind
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To: SeekAndFind

Here’s what happens with leftists:

1) Assume that the feel good policy is a good thing with no other consequences.
2) After instituting the policy, be surprised by the consequences that you ignored.
3) Blame the consequences on anything but your policy.
4) Pass new laws to try to alleviate those consequences.


5 posted on 02/15/2013 8:25:58 AM PST by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
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To: ThePatriotsFlag

RE: Keep in mind, they talk $14,000 a year as a minimum wage, but with Food Stamps, health care, etc, it is actually nearer %65,000 a year ... thanks to our contributing tax dollar subsidy.

Well that’s PRECISELY the liberal argument FOR the minimum wage.

They cite Walmart, the biggest employer next to the government, which pays an average (not entry level) of $8.80 an hr for non-management jobs.

This qualifies most of their workers for government welfare, such as foodstamps and medicaid.

This means that the cheap prices at Walmart have a hidden tax, the money taxpayers pay to support the below standard wage paid by Walmart.

At new workers orientation, Walmart tells them to apply for welfare to supplement their incomes. This is corporate welfare shifting costs to the public.

So, the liberals argue based on this observation that paying substandard wages costs the taxpayer money thru the welfare programs to which workers are referred.

So the argument goes like this -— Why should the taxpayer subsidize Walmart? Why shouldn’t a fulltime worker make enough, without welfare, to live?


6 posted on 02/15/2013 8:27:42 AM PST by SeekAndFind
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To: SeekAndFind

I’d first challenge them to present empirical data that increasing the minimum wage has ever reduced the welfare roles.


7 posted on 02/15/2013 8:28:25 AM PST by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
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To: SeekAndFind

Well, maybe $95 dollars per hour . . .I could handle that!


8 posted on 02/15/2013 8:28:34 AM PST by laweeks
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To: laweeks
Does any Freeper reading this article have an understanding of the relationships between the minimum wage and union contracts?

It sticks in my mind that there is a relationship - as the minimum wage goes up so does “the union scale”. This raise is written into various existing contracts.

Or, is this something out of my imagination?

9 posted on 02/15/2013 8:29:20 AM PST by Nip (BOHEICA and TANSTAAFL - both seem very appropriate today.)
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To: Nip
Gets better than that.

The minimum wage is raised, the employer shells out more money, which he collects from the customers, and passes it to the employees, which then pass a larger chunk of income tax, to the fed gov. Nothing more than raising more taxes, under the cover of being attentive to the needs of the poor.

Same thing with the forced imputed tips for waiters and waitresses.

10 posted on 02/15/2013 8:37:15 AM PST by going hot (Happiness is a momma deuce)
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To: Nip
Does any Freeper reading this article have an understanding of the relationships between the minimum wage and union contracts?

Yes, I'm well aware of the union manipulation of this crap. I'm still trying to find out where in our Constitution it says anything about minimum wages . . . so far, I can't find anything.

11 posted on 02/15/2013 8:39:19 AM PST by laweeks
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To: MrB
4) Pass new laws to try to alleviate those consequences.

You mean like the smack-down of employers who have cut their employees to under 29 hours to avoid Obamacare which is most assuredly coming?


12 posted on 02/15/2013 8:39:51 AM PST by Buckeye McFrog
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To: SeekAndFind
Raise the Minimum Wage and Get Minimum JobsThrow a Bone to the Unions
13 posted on 02/15/2013 8:41:52 AM PST by bmwcyle (People who do not study history are destine to believe really ignorant statements.)
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To: Nip

Almost all union contracts include a negotiated uptick should the Minimum Wage be raised during the term of the contract. Hence the unions are always lobbying Democrats to raise it.

The latest push is to go ahead and index it to inflation so the boosts would become automatic. The Pubbies in their infinite wisdom appear to be negotiating a deal to raise it to around $10/hr. but without the automatic COLA adjustments.


14 posted on 02/15/2013 8:43:03 AM PST by Buckeye McFrog
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To: SeekAndFind

“Destroying the Enemy from Within using Liberal Idiots”; a handbook for tyrants, Communists, and jihadists”

Bonus chapter - Saul Alinsky’s Rules for Radicals Simplified
Mixing the Koolaid for maximum effectiveness
Using the MSM to do your work for you
Using celebrities to sway the masses
Making people pay for your vacations and hold clubs and more while scolding them for not sharing their wealth and more....

On the al Qaeda best sellers list for 214 weeks and running...

Wholeheartedly endorsed by Mahmoud Ahmadinejad, Mohammed Morsi, Vladimir Putin, Hugo Chavez, and King Abdullah

“I couldn’t believe how easy it was to get the American youth on board using social media and celebrities; I mean, they really buy that stuff? Are they really THAT stupid? I couldn’t put it down” - Mahmoud


15 posted on 02/15/2013 8:47:21 AM PST by jsanders2001
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To: jsanders2001

“Destroying the Enemy from Within using Liberal Idiots”; a handbook for tyrants, Communists, and jihadists” by Barrack Hussein Obama

Bonus chapter - Saul Alinsky’s Rules for Radicals Simplified
Mixing the Koolaid for maximum effectiveness
Using the MSM to do your work for you
Using celebrities to sway the masses
Making people pay for your vacations and hold clubs and more while scolding them for not sharing their wealth and more....

On the al Qaeda best sellers list for 214 weeks and running...

Wholeheartedly endorsed by Mahmoud Ahmadinejad, Mohammed Morsi, Vladimir Putin, Hugo Chavez, and King Abdullah

“I couldn’t believe how easy it was to get the American youth on board using social media and celebrities; I mean, they really buy that stuff? Are they really THAT stupid? I couldn’t put it down” - Mahmoud


16 posted on 02/15/2013 8:48:56 AM PST by jsanders2001
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To: SeekAndFind

The best bet to kill the idea of minimum wage would be to change the law to offer alternatives to it.

Probably the best thing would be to have an opt-out from FICA, so that employees could choose whether they wanted to be in the Social Security system and Medicare, or not. If they opted out, they would get the money that their employer had previously sent to the government. Effectively doubling their wage.

This would be a huge bonus for those working minimum wage but who do not intend to stay in those jobs, but work in salaried employment.


17 posted on 02/15/2013 8:51:19 AM PST by yefragetuwrabrumuy (Best WoT news at rantburg.com)
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To: SeekAndFind

When the government raises the minimum wage to $9 an hour employers will stop hiring people who are only worth $7.25 an hour.


18 posted on 02/15/2013 8:53:25 AM PST by Iron Munro (I miss America, don't you?)
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To: SeekAndFind

Walmart and other places DO pay more, sometimes much more in places where the cost of living is high and the labor pool is low. Liberal policies of high taxes and regulations are usually the culprits for high cost of living policies (CA) and in this case artifically raising wages just increases the cost of living and thereby increaes the poverty level, not accomplishing anything but inflation and increases in revenue for the gov’t. But it also happens in economic growth (a good thing), which results in the market setting wages higher than minimum wage without gov’t intervention.


19 posted on 02/15/2013 8:54:14 AM PST by Rusty0604
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To: SeekAndFind

I’ve hired many a employee at minimum wage.Some got a raise in less then 30 days ( one after the first day)and some have stayed at minimum wage as long as they worked for me.It’s not meant to be a living wage, just a starting point. If your stuck at minimum wage job you need to look at your self, and fix it.


20 posted on 02/15/2013 8:54:59 AM PST by woodenickel
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To: Nip

Totally true. I worked for a union and they admit that this is the only reason they push for minimum wage. They don’t care about the poor, they care about raising their member’s already inflated wages.


21 posted on 02/15/2013 8:57:08 AM PST by Rusty0604
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To: going hot

Exactly, and it will help fund SS and disabiity payments a little longer.


22 posted on 02/15/2013 8:59:57 AM PST by Rusty0604
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To: jsanders2001

Robert Reiche has been advocating a $20 per hour minimum wage for DECADES.


23 posted on 02/15/2013 9:06:20 AM PST by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: SeekAndFind
The author is using logic to answer an attempt to increase the size of the dependent classes for partisan political purposes. The Left knows full well what a minimum wage increase does to entry-level employment. That's what they want to happen.
24 posted on 02/15/2013 9:07:46 AM PST by Mr. Jeeves (CTRL-GALT-DELETE)
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To: Buckeye McFrog

Yep... the left gets all up in arms when people/businesses move to COMPLY WITH THE LAW but not with what the left intended them to do - ie, eat it.


25 posted on 02/15/2013 9:09:49 AM PST by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
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To: SeekAndFind

Whenever I hear some leftist offer that we need to raise the minimum wage, I always say, “If raising it is good, then why not simply raise it to $100/hr?” I always love seeing their dumbfounded expressions as they ponder this option. They know there has to be something wrong with this idea, but they just can’t figure out what.


26 posted on 02/15/2013 9:18:49 AM PST by Hoodat ("As for God, His way is perfect" - Psalm 18:30)
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To: Rusty0604

The difference now is that union membership has plummeted so dramatically that they are increasingly desperate for new revenue to keep the gravy train rolling. So organizing new amnesty recipients in their minimum-wage workplace has become attractive to many unions. Anything for the dues.


27 posted on 02/15/2013 9:19:15 AM PST by Buckeye McFrog
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To: SeekAndFind
3) Most minimum wage earners are NOT teenagers.
They are adult working poor (Anybody check this at all?)

Less than two percent of people earning minimum wage do so to support their families.

28 posted on 02/15/2013 9:20:57 AM PST by Hoodat ("As for God, His way is perfect" - Psalm 18:30)
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To: MrB
You nailed it. American leftists never take into account that people will change their behavior accordingly when the rules are changed. That's why California leftist are shocked that California entrepreneurs would actually have the effrontery to leave the state when faced with overall tax rates in excess of 60%.

Of course European leftists already learned this lesson, which is why they build a wall around West Berlin back in the late 50s.

29 posted on 02/15/2013 9:26:02 AM PST by Hoodat ("As for God, His way is perfect" - Psalm 18:30)
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To: SeekAndFind

Like I heard on Rushbo sometime ago that Union contracts are based on the minimum wage. That’s Obamas bone to the Unions.


30 posted on 02/15/2013 9:27:46 AM PST by Rappini (Veritas vos Liberabit)
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To: Hoodat

The difference between liberty and tyranny is the direction the guns are facing at the border.


31 posted on 02/15/2013 9:35:30 AM PST by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
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To: SeekAndFind

I would simply ask that everyone please start referring to this wage properly. Please start calling it the beginners wage. The minimum wage is meant to get a young person started in the labor force. If you are twenty five years old and are working for minimum wages something is wrong. Maybe you are suffering from a lack of ambition. Obama would say that we need more worker training. Bull all Americans are not stupid only the ones who voted for Obama.


32 posted on 02/15/2013 9:40:48 AM PST by cquiggy
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To: SeekAndFind

O.K. I’ll play.

1) Walmart is forcing you to see the unfairness of robbing one person to give to another (you presumably feel more deserving). This is what Foodstamps and Medicaid are. (Notice they are NOT in the Constitution.) It seems to rankle you when Walmart takes advantage of this, but not when people using and abusing these programs do. So, my hypocrit/BS meter is going off.

2) It would take a lot of detailed and compelling “studies” by organizations that are demonstrably non-partisan to convince me that Up-is-Down, or Left-is-Right. Bring it on. You are forcing a price for labor that the market does not support. This has many effects, all negative, on a free market. I’m not going to elborate any more on this than you have on your “studies”.

3) The extent to which minimum wage earners are NOT teenagers is the extent to which minimum wage and other point 1) programs are being abused. Minimum Wage is SUPPOSED to be exactly that. A MINIMUM wage that keeps a skill-less, inexperienced worker from being completely exploited by his lack of anything competitive to offer that allows him to command a higher wage. If he is NOT a teenager and single than WTF is going on? Is this the Gravy-Train? Do you have a RIGHT to reproduce irresponsibly or force others to compensate for you not improving yourself? If the JOB is not worth $9 an hour, then it is NOT. You can close your eyes and stamp your feet all you want, but you’re not going to change reality. All you’re going to ultimately do is change the value of what that $9 is worth.

How did I do?


33 posted on 02/15/2013 9:54:52 AM PST by Empire_of_Liberty
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To: SeekAndFind
So the argument goes like this -— Why should the taxpayer subsidize Walmart?

That question is trying to confuse the issue by conflating two ideas and misusing the word subsidize. The taxpayer is not subsidizing Walmart. The government would be subsidizing Walmart if it were paying Walmart directly so that Walmart could keep its prices low. Walmart is able to keep its prices low by keeping its costs low. Walmart has no control over whether or not the government gives out welfare or who the government gives it to, or how much.

Why shouldn’t a fulltime worker make enough, without welfare, to live?

A full time worker would make enough if he became more productive. The formula for wage rates is w = (d/s), or in other words, average money wage rates equals demand for labor divided by supply for labor. There is no divine right of stagnation. If a worker wants to earn enough then he should improve himself. There is a higher demand for knowledgeable, skilled, and experienced workers, and less of a supply of them, so they will be able to earn a higher wage rate on average.

34 posted on 02/15/2013 9:56:40 AM PST by mjp ((pro-{God, reality, reason, egoism, individualism, natural rights, limited government, capitalism}))
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To: SeekAndFind

The Pelosi house raised the min wage in the 2nd/3rd qtr of 2008 and GWB signed it into law. By the 4th qtr 2008 we were in an official recession. So, now Obama wants to do more of what caused the “terrible economy he inherited.”

Oh well, at least we get to punish small business owners!


35 posted on 02/15/2013 10:19:47 AM PST by CSM (Keeper of the Dave Ramsey Ping list. FReepmail me if you want your beeber stuned.)
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To: Iron Munro

2 people at $7.25 per hour will be merged into 1 person at $9 per hour, for a net saving to the employer of $5.50 per hour. The liberals will have to pass another law to prevent this.


36 posted on 02/15/2013 10:42:05 AM PST by Cyber Liberty
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To: mjp
A full time worker would make enough if he became more productive

The problem with that is that the average Lib can show you two hours worth of Powerpoint graphs based on Government data that demonstrate decades of climbing productivity vs. stagnant wages. (yes, I know that is due to increased automation and computers, but the Low Information Voters out there will never get that. They're convinced they've become more productive than ever but the Mitt Romneys of the world are pocketing their raises.)


37 posted on 02/15/2013 10:59:15 AM PST by Buckeye McFrog
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To: SeekAndFind

As has been reported, all the entitlement programs could be eliminated and that money would pay each family $60,000 per year. But, administrative costs eat up most of the money.


38 posted on 02/15/2013 11:00:53 AM PST by PatriotCause (California Sucks)
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