Skip to comments.Barack Obama and the Teachable Wage
Posted on 02/18/2013 7:39:41 AM PST by Kaslin
The U.S. President wants to up the national minimum wage to $9 per hour. How daring.
Such pushes to increase the legal minimum wage often succeed. Theres no mystery why. Most folks wages are not directly affected; we work for far more than that minimum. So its about other people. One consequence of this is that we dont think very carefully about the logic of the regulation.
Which is why so many of us simply bow to social pressure, thinking that opposition to raising the minimum wage is uncaring.
Thats why its such a favorite issue among liberal Democrats, for they can play the caring card, their favorite in the deck.
And yet it is these Democrats who are obviously uncaring.
They could raise the minimum wage to $49 an hour, or more. Its not Republican greed stopping them. I am sure that if Republicans did the smart thing and engaged in irony, demanding no minimum wage increase unless it was substantial, like, say, to $49 an hour — a substantial pay raise for all, not just a marginal increase for the few! — the Democrats would backpedal faster than Lance Armstrong, approaching a sunrise, on blood transfusions from Vlad the Impaler.
The truth is, the presidents paltry $1.75 increase is suspicious.
Why so little?
The reason is simple. Minimum wage laws hurt the poor the most. The poor dont vote as much as seniors and college grads and union workers. And the one group here that often competes for low wages — college graduates — is helped by the minimum wage, for it cuts out least skilled workers from the job market.
Minimum wage laws do not give out pay raises. Thats not what the law does.
A minimum wage law is a price floor. It prohibits transactions, in this case the hiring of somebody for wages or salary, below a certain amount. The current minimum wage is $7.25, and applies to most workers in most industries. (There are a few exceptions.) When legislators enact such laws, they are not giving people earning the minimum a wage hike. (They can do so only with their own employees, and, notoriously, legislatures often exempt themselves from their own employment rules.) They are prohibiting workers from working for wages lower, and prohibiting employers from hiring workers for less, than the minimum.
When a minimum wage rate is hiked, its up to the employers to decide whether (a) to raise the wages of those working below the rate, or (b) to let them go, or (c) to downsize their jobs (say, raising their hourly rate but employing them for fewer hours).
Folks dont go into business to deplete their wealth. They go into it for profits. When the cost of doing business rises — as paying higher wages neatly accomplishes — they tend to economize, shifting productive factors around to reduce costs. So, they often invest in capital goods that make labor more productive, allowing them to shift down on units of labor — hiring fewer people. So, even if they dont fire anyone right after a minimum wage hike, they may lay off hiring more people as time goes on, or downsize jobs over time.
The effect on employment is there, but not so as youd notice.
Further, as they must pay for more low-end work, employers tend to substitute more qualified laborers for less-skilled ones. So the unemployed college grad is going to find it easier to get a job than a high-school dropout — much easier, since the deck has been rigged in his favor.
Its not difficult, then, to see why politicians tend to prefer incremental increases in the minimum wage to huge leaps: The damage done is comparatively small, the people who are most hurt are less likely to realize who imposed the harm and also less apt to vote than those who are helped or not at all effected, and some of the effects are spread out over time to decrease the likelihood that voters would notice.
But hike the rate to above most market wages, and youd see massive unemployment. Most folks would get hurt.
And even politicians would suffer.
By raising the minimum wage to $9 an hour, Barack Obama risks little. Most of his admirers will impute continuing high levels of African-American unemployment to other factors, seniors and union workers wont be affected directly, and white high-school grads and college students may even be helped, if at the expense of others. So hes covered several of his major Democratic constituencies.
Of course, it makes hash of the Democrats care about the poor mantra.
But thats only if you are paying attention.
It might behoove Republicans to make Americans pay attention. Make the minimum wage a teachable moment. Up the ante. Demand (as I suggested above, and at Common Sense on Friday) that any minimum wage rate hike be significant, so that it could affect most folks wages.
And let the conversation begin. In earnest. And rationally. Not with knee jerks, bluster, and the usual political hucksterism. [further reading]
The real minimum wage is zero: unemployment. Thomas Sowell
Economists have recognized for decades that minimum wage laws result primarily in increased unemployment among the most vulnerable sectors of society, specially poor unskilled teenagers of racial minorities.
The amount of evidence to back this is huge, but still people refuses to accept that just because it sounds like a good idea to magically give poor workers a raise it doesnt mean that it actually works this way.
Ironically the main groups that consistently lobby to raise the minimum wage are unions of skilled workers that already earn much more than the minimum wage, and big business in the retail market who offer salaries slightly above the minimum wage.
This unholy union of unions and big business can be explained if one looks at the real consequences of raising the minimum wage: unskilled workers that might be able to compete with unionized workers thanks to their lower salary are put out of work safewarding the jobs of the well off unionized workers. At the same time small retail business that have very small margins are driven into bankruptcy by big corporations that take advantage of economies of scale and can afford to pay their workers salaries slightly above the minimum wage.
I've heard some people say that nowadays, unemployment can pay better than working.
Set the minimum wage at the same level it is in Switzerland - SF 0.00. Unemployment rate there, 3%.
Or raise it to about the level of Frances minimum wage, about Euro8.86. Unemployment rate there, 10%.
The Federal Government has ZERO business setting minimum wages anywhere. Let state or local governments have that opportunity, and watch the experiences as the various levels of minimum wage either dry up the number of new hires, or encourage the economic growth of the area by allowing employers to determine the viable wages for their particular industry.
Employers are in business to make a profit, and widespread competition for both sales and employees is what sets the pay scale, not artificial “guidelines” concerning poverty and wealth.
Wages are a function of productivity, NOT “social justice”.
Teach is correct
Government regulations create deterrents to starting businesses.
Min wage is just one example of thousands of reasons not
to start a business.
Always differ from the Dems by a factor of 2 and make them justify what they are seeking. Switch back and forth at a moment's notice. Keep them on the defensive. Never agree to anything.
At $20/hour, everybody working can be middle class.
Or unemployed on full govt benefits.
Sounds like nirvana to me...at least as long as the markets let Baraq, Bernanke, and Lew borrow 40 cents for every dollar coming in.
People shouldn’t settle for less than $40 an hour.
At my first job, when I was 18, at a fast-food place, I was paid about half the mimimum wage (but with tips made about 75% of the mimimum wage). I was just glad to have a job. The owner would only hire males over 18 because women and males under 18 had to be paid the minimum wage. I had tried to get a job there when I was 17 but couldn’t get one because of the minimum wage law.
Union salaries are usually tied to the minimum wage. That’s why the Dems insist on increasing it all the time.
Their real goal here is not just to kick it up to nine or ten bucks, but to also allow it to self-adjust for inflation each year (giving all the unions their automatic increases)