Sunday, March 17, 2013

Minimum Wage Equals Maximum Stupidity!

During his State Of the Union speech, President Obama stated that he would work to raise the Federal Minimum Wage from $7.25 to $9.00 per hour.  Sounds fair, doesn’t it?  After all, it makes it possible for some workers to take home more money from their job.  We all want more money to spend, don’t we?  But, does it make economic common sense?

Many economists have said that raising the minimum wage is really a job killer not a panacea to the low wage worker.  Raising the minimum wage for a full-time worker would put an additional $70 in his pocket for the week, based on a 40 hour week (less when you deduct taxes).  It would amount to a total raise of $3500 for the year (for 50 weeks), still way below the poverty line for a family of four.  So it is not the great equalizer that Obama alluded to when he mentioned that increase at the State of the Union speech to rapt applause from the Democrat politicians in attendance.

The only reason to propose this increase is for political purposes not for economic purposes. It is a feel-good liberal proposal showing how “compassionate” they are for the poor.

Now, let’s get down to reality.  Every time the minimum wage has been raised in the past, it caused less employment for teenagers and others looking for part-time work, and for other the low-skilled workers.  It is particularly more damaging to black and Latino workers.  Businesses that normally hire those type of workers, in order to cut costs, will not hire more workers or will cut back on the hours of existing employees, or might even lay off workers.

If the minimum wage is raised to $9.00, it will create an upward surge of wage rates at or above the $9.00 rate, thereby making an employer have to absorb those extra costs including FICA taxes and Medicare taxes, or raise his prices which might, in some cases, hasten the demise of his business.  Then everyone loses, including the minimum wage worker.

Remember, a worker doesn’t get paid for the time he works, he gets paid for the value he brings to the time he works.  In other words, is a workers production worth it to the company or organization to pay you the amount they pay you? If not, they won’t hire you or keep you on the job.

Most workers who start out at the minimum wage, spend only a short time at that wage, with some exceptions, and if their job performance is deemed beneficial to the company who has hired him/her, that worker will be promoted to a better paying position.  The free market place should determine what the wage should be, not the government.

If the minimum wage is too high, many low-skilled workers will not be able to be hired, and therefore, he will be “punished” by the actions of feckless politicians.  Therefore, I contend that raising the minimum wage equals maximum stupidity.  It makes no economic commonsense, it only strokes the egos of politicians looking to get re-elected and to be looked upon as being compassionate to the poor.

Conservative commentary by Chuck Lehmann  

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1 comment:

Joe Zoref said...

According to a liberal, hard work has a future payoff, laziness has a payoff right now. The Democrats know the facts about raising the minimum wage, but they refuse to admit that raising the minimum wage is not good for teenagers and for part-time workers, but it is good for them appearing to be helpful to the poor. It's all symbolism over substance as they try to appeal to their "low information" voters.