Posted on 03/22/2014 11:58:32 AM PDT by Kaslin
Over and over we hear, slow growing wages and increasing inequality are holding up the recovery. It’s not so simple.
To the untrained ear these nostrums sound plausible. After all, giving the average American more to spend should boost demand, production and growth.
Progressive politicians and labor leaders use this line to argue raising the minimum wage would push the economy into high gear. If that were so, then increasing the federal minimum to $10.10 an hour, as President Obama happily campaigns, would not kill 500,000 jobs, as the nonpartisan Congressional Budget Office predicts.
What the president and the unions fail to mention is that businesses can’t print money to cover higher wages. They must charge higher prices, slash profit margins and reduce dividend payments to stockholders.
The latter are often middle-class workers with IRAs, and the elderly, who will spend just about every dollar they get as they draw down from those nest eggs. Those folks spend too, and in fact many of them buy more domestic products and fewer imports at Walmart, because older folks spend more on health care and other services, which are made in America, not China.
Much the same applies to wealthy Americans—they are more likely to spend their dividends at home.
That calculus has given rise to the myth that higher wages will boost growth. That's another misperception about demand. Americans really are spending again but not enough of those dollars stay at home to create jobs.
Thanks to oil imports and the rising tide of Chinese manufacturers—made artificially cheap by the Middle Kingdom’s purposeful undervaluation of the yuan, subsidies and steep barriers to foreign products—U.S. imports have been rising faster than exports and that is sending a lot of consumer dollars abroad.
The root causes are well catalogued but ignored by a president who spends his time campaigning for a $10.10 minimum wage, playing diplomat with a Vladimir Putin (who is really playing war), and scheming about ways to avoid legal and constitutional restrictions to do as he pleases without the inconvenience of Congressional ascent.
The president opposes drilling for oil off the Atlantic and Pacific Coasts. He has severely limited drilling in Alaska and the Gulf—and is blocking pipeline projects, too. All of which adds to the cost of transporting onshore oil and the environmental risks of rail shipments.
Fixing petroleum policy and encouraging Americans to engage in just a little more conservation would eliminate the 5 million barrels a day of oil the United States still imports. If America did that, and confronted China and other currency cheaters over protectionism, the economy could easily cut the ranks of the jobless in half and drive the unemployment rate to 4 percent.
That would put a lot of upward pressure on wages—especially in the lower and middle ranks of the labor force and mitigate income inequality.
Since the recovery began, wages have barely kept up with inflation, but cutting unemployment in half would easily boost wages after inflation by 3 percent overall, and 5 percent or better for folks on the lower end.
A minimum wage of $10.10 an hour with its devastating 500,000 job loss would sentence many workers now employed into deep poverty and dependence on government programs.
But there is a silver lining for the president—folks dependent on federal handouts are more likely to vote Democratic.
Given all this, how should the president spend his time: addressing those problems to really stimulate growth and equality, or tarring Republicans as unworthy of any public office above blackboard monitor for opposing ideological hidebound policies?
Perhaps if he paid attention to those real economic issues—instead of encouraging friends at major newspapers to publish bogus economic theories masquerading as science—he might have something to show for his second term other than being outwitted by Vladimir Putin.
Only if you believe government wage and inflation figures. For those who live in the real world, the story is otherwise. Americans are taking home less money which in turn buys less in the face of increased purchasing requirements.
The root cause was lowering our import tariffs and making our labor market compete with every third world country with excess labor including communist countries like China.
This has caused high unemployment and stagnated wages for those still working. We've put a lot of Chinese to work, but we've seriously hurt our own country in the process.
The wage stagnation actually goes back 40 years.
The economy kept adjusting redeploying labor each time industries were lost, until now it just doesn’t seem to be able to generate enough jobs to offset the off-shoring.
Worse, I think Gates is right, software advances and robotics are going to cause massive labor dislocations over the next 20 years.
We will be facing that with an already weak economy.
I guess this is the line that the GOPe and Chamber of Treason will be pushing.
Who believes a nobama goal is an energy independent USA?
Bump. You might have mentioned "Machiavellian", "mercantilistic", "expansionary", and "politically-driven" in there somewhere, too.
That's ASSENT, Congressional agreement not Congressional ưplift. This is what happens when you write your story with a speech recognition program and don't then proofread.
Progressive politicians and labor leaders use this line to argue raising the minimum wage would push the economy into high gear. If that were so, then increasing the federal minimum to $10.10 an hour, as President Obama happily campaigns, would not kill 500,000 jobs, as the nonpartisan Congressional Budget Office predicts. What the president and the unions fail to mention is that businesses can’t print money to cover higher wages. They must charge higher prices, slash profit margins and reduce dividend payments to stockholders.ATM machines instead of tellers? Just a fluke, or worse, just some kind of meanspirited sabotage of workers. Retail and restaurant chains closing 100s or 1000s of stores? Just a fluke, or worse, just some kind of meanspirited sabotage of workers... /s
BTW, the trend toward investing in rental housing will also go bust.
“Only if you believe government wage and inflation figures.”
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The inflation adjustment figures from the government are even phonier than the global warming temperature readings.
“Only if you believe government wage and inflation figures.”
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The inflation adjustment figures from the government are even phonier than the global warming temperature readings.
RE: “Excess Labor”
The most important pool of excess labor is right here in the USA.
We import 1 million new, foreign, low education, low skill workers each year.
Those are LEGAL workers, by the way.
We also have 11.5 million ILLEGAL aliens.
But, only 8 million of them are in the labor force.
Indeed!
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