Santa Obama’s $9 minimum wage: good propaganda, bad economics
By Raymond Thomas Pronk
Presidential economic policies like the proverbial “road to hell” are often paved with good intentions.
In his 2013 State of the Union address, President Barack Obama said:
“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. Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full time should have to live in poverty and raise the federal minimum wage to $9 an hour. This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets.”
Why not increase the minimum wage to $18 per hour and win America’s war on poverty?
What are the economic consequences or impact of a $9 minimum wage on young high school and college students seeking employment? A decidedly negative impact if economic history is any guide.
The large increase in teenage unemployment is partly driven by the increase in the minimum wage. When the minimum wage rate was increased in July 2008 from $5.85 to $6.55 there was an upward spike in the teenage unemployment rate to greater than 20 percent. When the minimum wage was again increased in July 2009 from $6.55 to its current rate of $7.25, there was another upward spike in the teenage unemployment rate to greater than 25 percent. This rising trend of upward spikes in teenage unemployment rates after an increase in the minimum wage is reflected in the following chart.
Unemployment rate or percent of 16-19 years from 1948 to present
Source: Bureau of Labor Statistics, Department of Labor
David Neumark, professor of economics at the University of California, Irvine and William L. Wascher, deputy director in the Division of Research and Statistics at the Federal Reserve Board, in their book, “Minimum Wages,” provide a comprehensive review of the evidence on the economic effects of minimum wage laws. They concluded that such laws reduce employment opportunities for less-skilled workers, tend to reduce their earnings and are not very effective in reducing poverty.
If Congress passes an increase in the minimum wage to $9 as proposed by Obama, young, inexperienced, low-skill workers, especially blacks and Hispanics, will again be hurt for they will not be hired by businesses who cannot afford to pay them the higher mandated minimum wage. This will be reflected in yet another spike upward in the teenage unemployment rate that might exceed 30 percent.
Furthermore, young American citizens, especially blacks and Hispanics, will face stiff competition from the more than 11 million illegal aliens who predominantly seek low-skilled jobs. Obama and progressives in both the Democratic and Republican parties want to grant these illegal aliens immediate legal status to work in the U.S.
Obama is repeating the past economic policy mistakes of progressive presidents from both political parties such as Hoover, Roosevelt, Truman, Johnson, Nixon, Carter and the Bushes in mandating higher than free market wage rates. These well-intentioned but massive government interventionist economic policies lead to prolonged depressions and recessions with high unemployment rates, especially for young, inexperienced, low skilled and minority workers.
Thirty years ago the black economist, Walter E. Williams, explored the effects of federal and state government intervention into the economy, including minimum wage laws, in the PBS documentary, Good Intentions, based upon his 1982 book, “The State Against Blacks.” Those favoring a rise in the federal minimum wage would be well advised to view this video together with “Milton Friedman on the Minimum Wage” on YouTube before advocating an increase in the minimum wage.
For young American citizens an entry-level job paying a lower competitive market wage rate is preferable to no job at a higher government mandated minimum wage.
Good intentions are not enough. Results measured in jobs created count.
Raymond Thomas Pronk is host of the Pronk Pops Show on KDUX web radio from 3-5 p.m. Fridays and author of the companion blog http://www.pronkpops.wordpress.com/
Digital Age-Why is Coolidge the Forgotten President?-Amity Shlaes
Sumner’s Explanation of The Forgotten Man – Revised for the 21st Century
Sumner’s Explanation of The Forgotten Man – Revised for the 21st
By Joshua Lyons 9/25/09
As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed – with the praise of Y – to remedy the evil and help X.
Their law always proposes to determine what C shall do for X or, in the better case, what A, B and C shall do for X.
As for A and B, who get a law to make themselves do for X what they are willing to do for him, we have nothing to say except that they might better have done it without any law, but C is forced to comply with the new law.
All this is done while Y looks on with glee and proclaims that A and B are so good for helping poor X.
A is the politician
B is the humanitarian, special interest, do-gooder, reformer, social speculator, etc.
C is The Forgotten Man (i.e. you, me, us)
X is the downtrodden, the oppressed, the little guy, the misunderstood, etc.
Y is the Mainstream Media
In other words…
As soon as THE POLITICIAN observes something which seems to him to be wrong, from which THE DOWNTRODDEN is suffering, THE POLITICIAN talks it over with THE HUMANITARIAN, and THE POLITICIAN and THE HUMANITARIAN then propose to get a law passed – with the praise of THE MAINSTREAM MEDIA – to remedy the evil and help THE DOWNTRODDEN.
Their law always proposes to determine what THE FORGOTTEN MAN shall do for THE DOWNTRODDEN or, in the
better case, what THE POLITICIAN, THE HUMANITARIAN and THE FORGOTTEN MAN shall do for THE DOWNTRODDEN.
As for THE POLITICIAN and THE HUMANITARIAN, who get a law to make themselves do for THE DOWNTRODDEN what they are willing to do for him, we have
nothing to say except that they might better have done it without any law, but THE FORGOTTEN MAN is forced to comply with the new law.
All this is done while THE MAINSTREAM MEDIA looks on with glee and proclaims that THE POLITICIAN and THE HUMANITARIAN are so good for helping poor THE DOWNTRODDEN.
The preceding commentary was based on William Graham Sumner’s explanation of The Forgotten Man.
The Truth about the Minimum Wage
Obama: “Raise Minimum Wage to $9 an Hour” – SOTU 2013
More on Minimum Wage
Obama’s $9/Hour SOTU Minimum Wage
Milton Friedman on Minimum Wage
Power of the Market – Minimum Wage
Williams with Sowell – Minimum Wage
The Job-Killing Impact of Minimum Wage Laws
“Good Intentions” by Dr. Walter Williams
Dr. Walter Williams’ 1982 PBS documentary “Good Intentions” based on his book, “The State Against Blacks”. The documentary was very controversial at the time it was released and led to many animosities and even threats of murder.
In “Good Intentions”, Dr. Williams examines the failure of the war on poverty and the devastating effect of well meaning government policies on blacks asserting that the state harms people in the U.S. more than it helps them. He shows how government anti-poverty programs have often locked people into poverty making the points that:
- being forced to attend 3rd rate public schools leave students unprepared for working life
- minimum wages prevent young people from obtaining jobs at an early age
- licensing and labor laws have had the effect of restricting entrance of blacks into the skilled trades and unions
- the welfare system creates perverse incentives for the poor to make bad choices they otherwise would not
Dr. Williams presents the following solutions to these problems:
Failing Public Schools – Give parents greater control over their children’s education by setting up a tuition tax credit or voucher system to broaden competition in turn revitalizing both public and non-public schools
Minimum Wages – Remove the minimum wage from youngsters to give more young people the chance to learn the world of work at an early age instead spending their free time idle an possibly falling into the habits of the street
Restrictive Labor Laws, Jobs Programs – Eliminate government roadblocks that prevent new entrepreneurs from starting their own business
Welfare Programs – Enact a compassionate welfare system such as a negative income tax which would remove dependency and dis-incentives for the poor to get themselves out of poverty
Scholars interviewed in the documentary include Donald Eberle, Charles Murray, and George Gilder.
Good Intentions 1 of 3 Introduction and Public Schools with Walter Williams
Good Intentions 2 of 3 Minimum Wage, Licensing, and Labor Laws with Walter
Good Intentions 3 of 3 The Welfare System and Conclusions with Walter Williams
Government Intervention and Individual Freedom | Walter Williams
Obama: “Time to Pass Immigration Reform” – State of the Union 2013
Contrasting Views of the Great Depression | Robert P. Murphy
Why You’ve Never Heard of the Great Depression of 1920 | Thomas E. Woods, Jr.
Uncommon Knowledge: The Great Depression with Amity Shlaes
Calvin Coolidge: The Best President You’ve Never Heard Of – Amity Shlaes
Amity Shlaes, Author, “Coolidge”
Keep Cool With Coolidge, Not Obama: Obama Reveals His True Hatred of Business
Obama Wants $9 Minimum Wage…
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