(/sites/default/files/uploads/2014/01/2055669.jpg)Democrats and President Obama aim to make raising the minimum wage and focusing on growing inequality their main agenda for the 2014 mid-term election campaign. The strategy behind the effort is two-fold: make Republicans defend their opposition to a policy favored by a majority of the public, and increase the turnout of youth and minority voters who lean Democrat, but typically stay way from mid-term elections. Unfortunately, the effort amounts to little more than feel-good populism supported by a host of dubious actors, even as it masks the true nature of the problem.
The dubious actors have familiar names. They include ACORN, the community organizer group that was defunded by Congress in 2009, following a tax fraud scandal, Industrial Areas Foundation, which was founded by radical strategist Saul Alinsky, labor unions such as the SEIU, and other progressive entities like Americans United for Change and the National Employment Law Project. “It puts Republicans on the wrong side of an important value issue when it comes to fairness,” said Dan Pfeiffer, the president’s senior adviser. “You can make a very strong case that this will be a helpful issue for Democrats in 2014. But the goal here is to actually get it done. That’s why the president put it on the agenda.”
The agenda consists of Democrats in Congress and the president getting behind an initiative that raises the minimum wage from the current $7.25 per hour to $10.10 per hour by 2015, and indexes it to inflation. The president is also planning to make a series of speeches on the issue across the nation timed to coincide with minimum wage votes in Congress, undoubtedly led by the Democratically-controlled Senate. In addition, Democrats and their supporters aim to put minimum wage increases on the ballot in several states, including Arkansas, Alaska and South Dakota and New Mexico. The win-win scenario they envision is rousing their base, and just as importantly, shifting the conversation away from the disastrous rollout of ObamaCare, especially in those states where Democratic candidates for office will undoubtedly be put on the defensive because of it. “The more Republicans obsess on repealing the Affordable Care Act and the more we focus on rebuilding the middle class with a minimum-wage increase, the more voters will support our candidates,” said Representative Steve Israel (D-NY), chairman of the Democratic Congressional Campaign Committee.
That may be wishful thinking. While it remains difficult at the present time to determine how much ObamaCare will impact lower-income, or minimum wage voters, Americans who shopped for insurance in the individual market will endure premium hikes in 41 states and the District of Columbia. Those hikes are approximately 41 percent in the average state. Moreover, the brunt of them will be borne by the healthy, young male voters that comprise a substantial part of the aforementioned youth vote Democrats see as critical to their success. That would be the same youth vote whose currently cratering support for Obama (and likely other Democrats by extension) is tied directly to the healthcare bill.
Furthermore, the individual insurance market is only part of the equation. Despite Obama’s unconstitutional delay of the business mandate until after the 2014 election, Americans who get their insurance through their employers will likely get their notification of policy cancellations prior to it, since insurance companies must have time to prepare. According to the the administration’s calculations–made in 2010–as many as 100 million Americans will lose policies provided by small and large businesses. Thus, despite Democrats’ best efforts, it remains to be seen whether the American voter is more attuned to rewarding Democrats for their efforts on the minimum wage and income inequality front, or hammering them for a healthcare bill whose premium hikes could more than offset any wage increases, minimum or otherwise.
The Heritage Foundation illuminates this particular reality with regard to employers. Despite the president’s desire to raise the minimum wage to over $10 per hour for workers, they note that the federal government has already raised the cost of hiring those workers to that level. If the president pushes through his raise to $10.10? ”Coupled with the employer penalty and existing taxes, this would raise the minimum cost of hiring a full-time worker to $12.71 per hour. Employers would respond by eliminating jobs and cutting workers to part-time status, making it significantly more difficult for unskilled workers to get ahead,” concludes authors James Sherk and Patrick Tyrrell.
The American left remains undaunted by such realities. Their arguments revolve around the idea of what a “living wage,” should be, and they have successfully pushed that initiative for decades in cities like Los Angeles, San Francisco, Chicago, and New York. Their attitude is informed by what they believe a worker needs or “deserves” to make, irrespective of a worker’s skill level, experience or productivity. They cite a study by University of Massachusetts-Amherst economist Arindrajit Dube, who claims that raising the minimum wage to $10.10 an hour could help to raise 4.6 million Americans above the poverty line directly, and thin the ranks of the nation’s poor by 6.8 million, over the long term longer-term effects.
Yet even Dube himself was forced to concede that raising the minimum wage wouldn’t be nearly as effective as policies like the Earned Income Tax Credit, food stamps and others aimed at reducing the unemployment rate among those referred to as “high-risk” groups of Americans. “We have to remember that many families in poverty have very little or no connection to the labor market, so of course we can’t expect a wage-based policy like a minimum wage increase to have a very large effect on the poverty,” he noted. “But nonetheless, we find it has a moderate-sized impact.”
It is precisely those people who have very little or no connection to the labor market that may never develop one. Since about 60 percent of Americans living in poverty don’t work at all, raising the minimum wage will make it harder for them to find employment. Even when minimum wages are raised, less than 15 percent of the overall increase will go to people below the poverty line, and less than 33 percent of those receiving minimum wage are families below the poverty line. A majority of families are above the poverty line, meaning a so-called anti-poverty program is largely missing its mark. In fact, data from the Bureau of Labor Statistics (BLS) and the Census Bureau show that most minimum wage workers are overwhelmingly young and part-time, and that their average family income is over $53,00 per year.
Moreover, only 2.9 percent of American workers earn minimum wage. That number is considerably lower than the 4.7 percent of minimum wage workers tallied in 1979, when the BLS began a regular study of minimum wage workers.
And despite Dube’s contentions, when Congress raised the minimum wage 10.6 percent in July of 2009, the ensuing six months saw 600,000 teenagers lose their jobs. The reason for this is simple common sense. Money spent on any wage increase either comes out of the employer’s pocket, that of his customer, or an employee who must be terminated to maintain the status quo. As Forbes Magazine’s William Dunkelberg explains, poorly done studies by agenda-driven research groups can’t obscure basic economics. “The Law of Demand always works: the higher the price of anything, the less that will be taken, and this includes labor,” he writes.
If that were not the case, then why wouldn’t the American left advocate for a minimum wage of $50 per hour, or $100 per hour? Because even they know prices would have to rise commensurately to make such a scheme viable. Even if one talks about the smaller increments Democrats champion, only the numbers change, not the reasoning. That so many Americans fail to grasp this is a testament to the reality that populist rhetoric is no match for basic economics–which brings us to the other part of the left’s agenda, bemoaning income inequality. A single paragraph by Townhall columnist John Hawkins destroys the credibility of those whose central argument revolves around the “zero sum” idea that the rich are richer, because the poor are poorer:
Getting beyond [capitalist policies], shouldn’t there be massive income inequality between someone with rare skills who works 70 hours a week and an unskilled part time worker? Most people say “yes” and even liberals who talk obsessively about income inequality behave as if there should be a difference. Do you see Michael Moore, Barack Obama, or Al Gore refusing to work for more than $20 an hour because they want to show solidarity with poor workers? No, they believe they deserve their money, but those “other people” should have more of their money taken away for the common good. If a CEO should have his pay limited, why shouldn’t Michael Moore make $20 an hour? If Barack Obama thinks fast food workers are so vitally important to the economy, why doesn’t he reduce his salary to the point where he only makes as much as they do? If Al Gore really believes in fighting for income inequality, why doesn’t he refuse to make more than the guy who spends 8 hours a day saying, “Welcome to Wal-Mart?‘”
The answer to Hawkins’ question is simple. Progressivism is about talking the talk of “compassion,” not walking the walk. There has never been a society in the history of the world where wealth redistribution has obviated the need for a cabal of wealthy elitists and their (often bloodthirsty) enforcers who must ensure the so-called equality of the masses, even as they enrich themselves in the process. Despite all protests to the contrary “from each according to his ability to each according to his needs” is, and alway has been, for the little people.
The Obama administration and Democrats might have an iota of credibility regarding income inequality were it not for their embrace of the Federal Reserve’s Quantitative Easing (QE) and Zero Interest Rate Policy (ZIRP). QE has been described by one of its implementers as the ”greatest backdoor Wall Street bailout of all time,” and ZIRP has decimated the ability of Main Street Americans to earn a decent return on their savings. The inability to get decent returns, even as prices for items such as food and fuel increase, amounts to a de facto tax on those who can least afford it.
Nothing fuels the so-called income gap more than this atrocity. Yet Democrats and their Keynesian economic allies remain wedded to this “New Normal” of the weakest recovery since WWII, and 75 percent of all new jobs created in 2013 being part-time and low wage. Add the continuous binge of government spending and regulations to the mix and it become obvious that Democrats exacerbate every problem with wages and income inequality they are ostensibly trying to correct. If voters still buy into the Democrats’ redistributionist economic agenda next November, even as they are expected to forget ObamaCare–which is nothing less than the ultimate realization of it–they deserve everything they get.
Freedom Center pamphlets now available on Kindle: Click here.