Obama’s Minimum Wage

In his Tuesday State of the Union speech, President Barack Obama, among other spending demands, called for a boost to the Federal minimum wage from the current $7.25/hr to $9/hr.

Obama insists such a wage boost will “take millions of Americans out of poverty.”  However, this 24% increase in hourly wage represents a 24% increase in the cost of labor to an employer or potential employer.  This hinders employment; it doesn’t help it: that 24% is money with which an employer could do a number of other things: more product development, more advertising, more capital plant improvement, all of which lead to more hiring, or more hiring directly.

Worse, a government-mandated minimum wage increase is a permanent drag on employment and on our economy.  The ones who are the most hurt by this thing—the ones who will be laid off because the value of an hour of their work doesn’t reach $9 or those who won’t be hired in the first place, because the job available isn’t worth $9—are those who can least afford the damage.  Our youth, teens and early-20-yr-olds, already are suffering 20%-plus unemployment (almost 38% among black teens, a sharp increase during Obama’s administration), and have done for a number of years.  This is experience and job skills these people are not accumulating, and so future wage gains—even future jobs—they’re denied for that lack of experience/skill.  They’ll always be behind where they could have been had they been employable at a wage an employer could afford (which is based not just on a company’s top line, but also on those alternative uses for the money).

That lack of experience, with its concomitant loss of income potential, virtually locks those folks into their poverty condition—which represents an additional drain on our nation’s resources in the form of higher welfare support costs.

It also represents lost opportunities for our society, our nation, in the form of foregone creativity, productivity, innovation that these folks might have been able to provide had they only been employable early enough in their lives that they could have developed the knowledge base and the skills to generate these.

No, instead, we don’t have enough people employed, so we’ll raise the price of employment.  Yeah.  That’s the ticket.  We’ll go with that.  And we’ll ignore the inherently racist nature of minimum wages (or don’t disparate outcomes apply here?).

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