Monday, February 18, 2013

Obama & The The Consequences Of Minimum Wage Laws

Federal minimum wage laws are an affront to capitalism and, in the end, do tremendous harm to the young and to other low skilled workers. They are particularly repugnant in an economy that has yet to recover from a recession now four years past. Yet Obama, in his SOTU address, asked for a rise in the federal minimum wage to $9 per hour, claiming that it would only benefit the economy. This joker shouldn't be allowed to run a lemonade stand. The WSJ addresses Obama's claims. Below that, Milton Friedman and Thomas Sowell explain why the minimum wage laws hurt the young, the unskilled, and,in particular, blacks.

From the WSJ:

In his State of the Union address, Mr. Obama proposed an increase to $9 an hour by 2015 from $7.25, and then indexing the minimum to inflation. "Employers may get a more stable workforce due to reduced turnover and increased productivity," the White House says. No doubt employers are slamming their foreheads wondering why they didn't think of that.

And don't worry about lost jobs. "A range of economic studies," a White House memo assures, "show that modestly raising the minimum wage increases earnings and reduces poverty without measurably reducing employment." Note the shifty adverbs, "modestly" and "measurably," which can paper over a lot of economic damage.

In the real world, setting a floor under the price of labor creates winners and losers. Some workers will get a $1.75 raise. Great. But others—typically the least educated and skilled—will be priced out of the job market and their pay won't rise to $9. It will be zero.

University of California at Irvine economist David Neumark has looked at more than 100 major academic studies on the minimum wage, and he says the White House claim of de minimis job losses "grossly misstates the weight of the evidence." About 85% of the studies "find a negative employment effect on low-skilled workers."

The minimum wage is also an ineffective way to reduce poverty. Most families in poverty don't have someone who works, so making it more difficult to get a job exacerbates poverty. Mr. Obama says that a "family with two kids that earns the minimum wage still lives below the poverty level. That is wrong." . . .

Milton Friedman, in the video below, makes the point that "the [negative] effects [of minimum wage laws] have been concentrated on the groups that the do-gooders would most like to help. The people who have been hurt most by the minimum wage laws are the blacks. I have often said that the most anti-black law on the books of this land is the minimum wage law."

And here is Thomas Sowell on a video labled as "Minimum Wage, Maximum Folly."


Ex-Dissident said...

From the employed unskilled worker's perspective, it might seem like a good idea. He may be thinking that he'll get a raise or wind up collecting unemployment. But the kid who wants to start working, won't get a job. Unfortunately the unskilled worker doesn't get it and won't get it. Eventually, he'll be smashing things up and demanding free stuff.

From Obama's perspective, it is a win-win because it will just create more Socialist voters. From the country's perspective it is a disaster. However, I don't think these world citizens care one bit about this country.

GW, what bothers me the most about this is that it doesn't seem like anyone will be able to stop this destruction of our country.

GW said...

It all comes down to 2014 really. None of this will get through the House as it is currently composed. But if the left takes back the House in 2014, we are completely screwed.

Ex-Dissident said...

Lovely, how comforting to think that we can be screwed worse than we're being screwed now. The dems are just playing nice with our butts for now and using plenty of lube... if they take the house or a significant group of repubs join them, then barb-wired bats, broken bottles, and blow torches will be liberally applied to our tender behinds.