Perhaps because he wants to divert attention from the slow-motion train wreck of Obamacare, the President is signalling that he will renew his efforts to throw more people into the unemployment line.
Needless to say, that’s not how the White House would describe the President’s proposal to increase the minimum wage, but that’s one of the main results when the government criminalizes certain employment contracts between consenting adults.
To be blunt, if a worker happens to have poor work skills, a less-than-impressive employment record, or some other indicator of low productivity that makes them worth, say, $7.50 per hour, then a $9-per-hour minimum wage is a ticket to the unemployment line.
Which is the point I made in a rather unfriendly interview with Yahoo Finance.
But a higher minimum wage is popular with voters who don’t understand economics, and unions strongly support a higher minimum wage since it means potential competitors are then priced out of the market.
So it’s not exactly a surprise that the White House is siding with unions over lower-skill workers. Here’s some of what is being reported by The Hill.
President Obama might soon renew his push for a $9 minimum wage, a top economic adviser said on Monday. “You’ll certainly be hearing more about it,” Jason Furman, the chairman of the Council of Economic Advisers, told reporters Monday at a Wall Street Journal event. …Obama urged lawmakers during January’s State of the Union address to boost the wage from $7.25 to $9 per hour and index it so that it rises with inflation.
The “indexing” provision would be especially pernicious. In the past, rising overall wage levels have diminished the harmful impact of the minimum wage. But if the minimum wage automatically increases, then the ladder of opportunity may be permanently out of reach for some low-skilled workers.
Walter Williams also has weighed in on this issue, noting specifically the negative impact of higher minimum wages on minorities. Indeed, he cited research showing that, “each 10 percent increase reduces hours worked by 3 percent among white males, 1.7 percent for Hispanic males, and 6.6 percent for black males.”
The bottom line is that businesses aren’t charities. They hire workers when they think more employees will improve the bottom line. So if you artificially increase the price of labor, it’s easy to understand why marginal workers won’t get hired.
For more information on this issue, here’s a video produced by the Center for Freedom and Prosperity.
P.S. I wrote yesterday that the tax-hike referendum in Colorado was the most important battle in the 2013 elections.
Well, I’m delighted to report that Colorado voters are even wiser than Swiss voters. A take-hike referendum in 2010 was defeated in Switzerland by a 58.5-41.5 margin. Colorado voters easily exceeded that margin, rejecting the tax hike in a staggering 66-34 landslide.
Here’s what the Denver newspaper – which liked the tax increase – wrote about the referendum.
The pro-66 side raised more than $10 million that it lavished on advertising, messaging and get-out-the-vote efforts, thanks in part to huge donations from teachers unions, Michael Bloomberg, and Bill and Melinda Gates. Opponents meanwhile had barely the equivalent of a street-corner megaphone at their disposal. And yet Colorado voters, in another display of independence, ignored the prodding in one direction and chose to go their own way. They didn’t merely defeat Amendment 66. They demolished the idea.
In other words, taxpayers were heavily outspent by union bosses and out-of-state billionaires, yet they easily prevailed and Colorado’s flat tax is safe. At least for now.
P.P.S. I conducted a test this morning on media bias. I’m still in Iceland, so I went to sleep last night long before American election results were announced. When I woke up this morning, I looked first at both the CNN and Washington Post websites. When I didn’t see any results for the Colorado tax referendum, I was 99 percent confident that the statists had lost. Needless to say, it would have been front page news if the referendum was approved.
P.P.P.S. Since I’m adding some comments on Colorado elections, we also should be happy that the pro-school choice members of the Douglas County School Board were all reelected, notwithstanding a big effort by the unions.
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[…] it goes without saying that Obama has been a demagogue on the […]
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[…] little legislation was enacted during the year, the sequester (while it lasted), the overwhelming rejection of class-warfare tax policy in Colorado, and the government […]
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[…] a lot of money on the earlier gun-related recall elections, and he also dropped a lot of cash on a failed effort to replace the state’s flat tax with a so-called progressive scheme that would set Colorado on a path to becoming another […]
[…] At least the President is consistent. He also is pushing another policy that would increase […]
[…] At least the President is consistent. He also is pushing another policy that would increase […]
I like your P.P.S. especially.
Henry
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http://pulgarias.wordpress.com
In other good news, two big bond issues were massively defeated in Utah. In my town, the incumbent mayor was soundly defeated by a write in candidate.
$9 yes, but I think that the rest of the world will continue to buy American products.
I can just picture the average Sri Lankan living on $6k a year thinking: “Look! That new American therapy that will likely save my wife’s life if I sell one of my farm fields has just become a tad bit more expensive compared to the next non-American competitor. But I will continue to prefer the American product because that helps that poor $9/hr American chap ascend from the top 15% of worldwide wealth to the top 13%. My wife’s life and farm may be at stake, but I cannot let my dear $9/hr American down. I’ll buy the more expensive American solution — for sure!”.
Ah. Did I mention that the American therapy not only became a little bit more expensive, but also a tad bit inferior to the next competitor’s – because the American executive, burdened with extra taxes decided to add just a tad bit more of “screw the stress of being best” into his/her life mix and play a little more golf, a few more games of bridge, a little more time at home with his/her family, a bit more frequent visits to the yoga relaxation institute, and a little less of the inevitable stress inherent in top performance. The difference in his motivation level is not much. Who quits his job because of a puny 3-4% tax increase anyway? But guess what? The margin of advantage of the American product compared to the next best foreign competitor was itself about 3-4%. The slight decrease in motivation erased that margin, sales in the non-linear world of market share vs. value are plummeting, there is less money to fold back into R&D and the company enters a death spiral trajectory. The company’s decline eventually takes everyone down, from the 2M executive to our the $9/hr top 15% of world prosperity poor American chap. That is the net and overriding effect of using the polling both to flatten the effort-reward curves.
Ahhh those little understood but omnipresent metaphysical forces that will guarantee the American eternal top-of-the-world standard of living.
Enjoy the short years of the great VoteNRedistribute smorgasbord. But look for a salvage boat, because it will not last long. Americans seem to have finally figured out how democracy works — in the short term, i.e. you mark an X on the ballot and it rains goodies. They seem to have a problem understanding exponents though, and the deterministic trajectory to decline once your growth trendline falls below the world growth average. BTW, the current long term world growth trendline is around 4-5% with no sign of abating. If anything, history shows that human development keeps accelerating. Good luck America and your newfound HopNChange. You finally found the gem that most of the rest of the world discovered long ago. Oh, but you are the most prosperous nation on earth? Ahhh that’s just coincidence.
Dan:
In your unfriendly interview with Yahoo, in which you stayed impressively calm, you might have mentioned that many of the businesses that employ at minimum wage levels, like McDonalds and Walmart, sell to the poor. If the minimum wage is increased, their prices will have to reflect increased labor costs.
Reblogged this on Public Secrets and commented:
I quote the New York Times from (I believe) 1987: “The ideal minimum wage is zero.” Every time the government raises it, it hurts those newly entering the workforce and those with fewer skills. Why do progressives hate workers?
As a citizen of Colorado, I was very relieved to see logic prevail on the 66 issue despite the non-stop pro-66 TV commercials for the last few weeks.