Obama’s Minimum Wage Increase May Wipe Out 600,000 Jobs for Young Adults, Minorities


The perverse part of the rule of O is that his economic policies have done the most damage to the economic prospects of his own base. The part of his base that isn’t working off government grants at non-profits or green energy ecoscam factories.

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.

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.”

During the last series of wage hikes to $7.25 from $5.15 that started in July 2007 as the economy was headed toward recession. The last increase hit in July 2009 just after the recession ended, and as the nearby chart shows, the jobless rate jumped for teens and black teens especially. For black teens, the rate has remained close to 40% and was still 37.8% in January.

A study by economists William Even of Miami University and David Macpherson of Trinity University concludes that in the 21 states where the full 40% wage increase took effect, “the consequences of the minimum wage for black young adults without a diploma were actually worse than the consequences of the Great Recession.”

William Dunkelberg, chief economist for the National Federation of Independent Business, says that after the July 2009 increase 600,000 teen jobs disappeared in the next six months even as GDP expanded.

Obama’s economic cluelessness causes him to think of business and wages as separate entities. The idea being that he can raise one without affecting anything except how much money all the business owners use to buy gold plated yachts. In the real world, the minimum wage affects the cost of doing business which affects the number of available jobs, the capital available for expansion and the cost of living.

A bakery that raises the minimum wage then turns around and raises the price of bread so that the wage hike goes out the door in the added cost of bread and everything else that the workers buy. It’s a treadmill in which everyone has to run just as hard to stay in place while the variables only appear to change.

 

 

  • kafir4life

    In the hardest hitting interview that President Benghazi Obama has done in quite some time, being grilled by the attack dog David Letterman, when asked if He helps His kids with their homework. Benghazi informed the inquisitor and the nation that He couldn't help with math beyond 7th grade, or any other subject (science, history, etc.) beyond ninth grade level. For the first time, I believe Him.

  • Mary Sue

    aribitrarily raising the minimum wage, sure fire vote getter. Also sure fire job loser. But wait, that gets more people on food stamps/welfare! That must be it!

  • Nabuquduriuzhur

    This is one of the few areas of blindness of the Republicans. They forget that the economy is dynamic, not static. This is an area where they do what the Democrats typically do— ignore the historical precedent in favor of ideology. This is not appropriate: let the Democrats ignore how things work.

    From National Wave of Foolishness (used by permission— I wrote it, so I'm giving myself permission…):

    "25.3 Minimum Wage

    There is an insane idea that the lower the wages are, the better it is for business.

    The opposite is true in actual practice— until wages actually start impacting the product's price. Sound strange? It’s not. Whenever the minimum wage goes up, it sparks economic activity for the state that the increase occurs in. This has happened every time that wages are raised in a state or the nation in the last 50+ years.

    Why? Because the economy is dynamic, not static. If people have more money, they buy more services and goods. With that resulting greater demand, more people are employed to meet the demand. Those people in turn hire persons, who in turn spend their money on goods and services, and so on. The economy expands.

    When wages drop, such as with illegal immigration depressing wages, the reverse happens, with the economy shrinking due to fewer people being able to afford goods and services. The demand for goods and services that individuals and businesses would have bought before the income decreased is reduced, so the people and businesses they would have bought them from produce fewer goods and services to meet the reduced demand. People are laid off.

    Republicans don’t seem to understand this any better than Democrats.

    Many Republicans pooh-pooh the notion of "living wage", apparently living in the past. (Democrats don't believe in it either or they wouldn't push policies that destroy the high-wage jobs such as exporting our industry overseas and allowing every person into the U.S. that wants in to sneak in, which depresses wages). Wages have crashed in their buying power, with the average wage being almost twice in 1973 what it is now when adjusted for inflation (Bureau of Labor and Statistics). When one factors in the explosion in rents and housing prices, even with the adjustments of the housing bubble bursting in 2008, many workers in the U.S. spend 3/4 of their income just on housing. Does that sound like they are making a "living wage?" That alone constitutes a crisis.

    Why did wages crash? This was covered in 2.1.1.

    The average Republican and Democrat pundit knows too little about economics below their privileged level to notice that every time the average wage in the U.S. goes down (adj. for CPI), economic activity drops as well.

    But what do we hear from Republicans? Frequent whining about "wages." It's inconsistent with the message of wanting the economy to thrive. It's impossible to have a strong economy for more than a short period with low wages. It simply doesn't work. "

    • Ron

      Gee whiz professor, well in that case, why not just raise the minimum wage to 100$ an hour?

      Explanation for all of the above gobbledegook:

      When someone forces you to pay 10$ for 5$ work, then 10$ effectively has the value of 5$. But it takes time for this knowledge to propagate through the system, so the little thieves benefitting from this racket run about spending quickly before the market adjusts.

      Try to imagine someone pumped up on amphetemines, for a short time he is more productive until his body recognizes the imbalance and adjusts in down state. Same thing.

  • Nabuquduriuzhur

    Why? If people have no money, they can't buy. If they can't buy, the economy slows or crashes. It is that simple.

    Keep that in mind the next time some "genius" talks about a "jobless recovery", which is impossible, or "wages being too high".

    And yet you still have i—-s in the Republican Party saying how "great" it would be to get rid of the minimum wage. Great for whom? Even the businesses would suffer. The first thing that would happen would be that wages would drop— remember what's happened to the average morals in employers— and because employees could not buy like they could before the wages dropped, the goods and services they previously would have bought would no longer be bought in the amounts they had been bought in before the wage drop. That means less jobs in those producing the goods and services, and those people buy fewer goods and services and so on. The economy would slow down and everyone in it would suffer. Remember, the economy is dynamic, not static. How is an economic slowdown "great?"

    Speaking of “jobless recovery,” an economy cannot have a recovery without an increase in jobs. One cannot increase the amount of goods and services without an increase in hiring, even with imported goods— ships and trains and trucks have to move the goods, customs has to inspect them, someone has to ship those imported goods to those who bought them, someone has to do the work in retail to sell them and so on. No increase in the demand for goods and services, no jobs increase, no recovery.

    Take this example of the wage silliness, which is based upon a real example of someone who complained a few years back to a regional conservative pundit: a restaurant claims to have gone out of business due to the minimum wage increases of 40% in a ten year span.

    Let's analyze that claim. (I note in passing that I got my start in restaurants.)

    Since labor in a restaurant is normally a maximum of 10% of the total monthly costs (and usually less), the owner was complaining that a total business costs increase of a maximum of 4% caused the business to close.

    Seems to me that there was something else wrong.

    So, what was the real problem? Not enough customers due to exorbitant prices? Or bad location? No one knew about the restaurant? Something else, like bad food? Other prices went up, like energy? Service was poor? This last is very common in restaurants and tells the customer "don't come back," such as when a waiter/waitress doesn't show up for 20+ minutes at a time, the staff forgets about a customer, or a fast food place doesn't have a person at the counter within a minute of a customer coming in. I got my start in restaurants and I've known some very good restaurant owners and some outright flakes. What was striking was that the flakey owners used to complain constantly about the "workers" and not being about to get "good" workers.

    Personally, I thought a good worker was one who showed up on time, did the job well, worked hard and was honest and courteous.

    All too often the flakes would hire someone just like themselves, passing over the good workers. It was almost funny to hear the complaints. And yet it wasn't funny, because so many businesses do exactly the same sorry practice."

  • Terri

    Have any of you checked out the recently revised EEOC enforcement manual? Interesting scenarios explained where you can be fined for not hiring an individual with a criminal background. Google it, I got a few laughs out of it especially the names they use for their scenarios.