The president calls for higher unemployment
By Tom Quiner
I couldn’t bring myself to watch the State of the Union address last night.
President Obama calls for another hike in the minimum wage
It is predictable.
I knew it would be a laundry list of destructive liberal spending and undue government intervention in the free enterprise system.
The president did not fail.
Let me focus on his call for higher unemployment. I know, I know, you Obama supporters are spitting nails right now and screaming at your computer monitor, “He never said that! He called for more job creation!”
How? By increasing the cost of labor.
Obamacare has already done that with increased taxes (or fines, whatever you want to call them) for insuring our employees. And most of Obamacare hasn’t kicked in yet. Employers are wary. That’s why unemployment rates remain so high.
Now the president calls for a dramatic new hike in the minimum wage.
Is that how you create jobs, by increasing the cost of labor? No, it’s a prescription to increase already high unemployment, especially for young workers, and even more for black teen-aged boys.
Retailers warn of the consequences. Says David French, senior vice president for government relations at the National Retail Federation:
“A minimum wage hike right now would be one more factor driving up costs for employers and creating headwinds for job creation, especially among the small businesses that create most of our nation’s new jobs.”
The minimum wage has already increased 41% since the start of the Great Recession. Now the president wants to boost it from the current level of $7.25 to $9 per hour.
This is government policy at its most ruthless. The president talks dreamily of lifting people out of poverty with a higher minimum wage.
Researchers from Cornell and American Universities disagree. Writing in the Southern Economic Journal , they warn that Obama’s hike in the wage …
“would eliminate at least 467,000 jobs. The study also found that the higher minimum wage would not reduce poverty, as a majority of beneficiaries live in households with incomes about the poverty level.”
The president is at a disadvantage. He’s never worked for a small business. He’s never owned a business. He’s never had to meet a payroll. He can’t relate to the negative impact increases in the minimum wage can have on employers and their employees.
I’ve been a small business owner most of my life. Let me tell you that labor costs loom large in any business. The president’s call for a higher minimum wage may make him and his liberal buddies feel good about themselves. But it will hurt like hell to the folks who lose their jobs.
I’ve given him up for Lent.
Not a bad idea.
Let’s face it. the President has no clue.
Doesn’t seem like it.
What kind of employee in a small business makes less than $9 an hour? The only low paying jobs I know of are at McDonalds, Walmart, and probably the grocery stores.
What kind of employee earns the minimum wage? Teenagers starting a job, I suppose. I started off as a dishwasher in a hospital at $1.50 per hour. By the time I left, I was up to $2 per hour. Regarding Walmart, it depends on the job. A cashier gets on average $8.53 per hour. An associate gets $9.32. A department manager gets $11.10 per hour. Notice the progression. In addition, they receive performance bonuses ranging from $1800 to $2200. Even more, Walmart provides health benefits, 401k plans for qualifying employees, and even profit-sharing opportunities. Employees who do not think the compensation is sufficient have the same opportunity as anyone else, namely to better themselves through education and seek employment with companies with higher wages and more opportunities for growth.
If a person making $7 an hour started making $9 an hour, they would end up spending the extra each pay check, plus they would pay more in taxes and get less government subsidies.
If a small business has to lay someone off because of a $2.00 an hour raise, they weren’t very profitable to begin with and I would question management.
Read my next post.
The only people who will celebrate the raising of the minimum wage are the unions, who will use it to raise THEIR costs accordingly.
Thus the cost of the related goods and services will rise, and we’ll be back at square 1 again, with higher costs and higher unemployment.
You are, of course, exactly correct as to what the immediate effects of this will be: more employers will determine that the job being done by their $7.25/hour person is not worth $9.00+ per hour, and will cut the job.
It happens every time.
But it sounds so ‘compassionate’, the press will never dispute it.
You are exactly right. I build on this idea in my next post, where I quote yours’ and mine favorite economist, Milton Friedman.
Friedman, along with Hayek, is one of my all-time heroes.
Looking forward to it…
I’m very glad you highlighted this aspect of the SOTU speech. I touched on a bunch of Obama’s ridiculous statements this morning, but there were just too many to include ALL of them.
Nicely articulated, Tom.
Thank-you. I’m looking forward to checking out your post on the SOTU tonight.