Why raising the minimum wage may be Obama's worst idea yet

A nine dollar per hour minimum wage will only spike unemployment and raise prices, hurting those it is intended to help. Photo: Associated Press

WASHINGTON, February 22, 2013 — As a supplement to the recent state of the union speech, the white house released a document titled “The President’s Plan for a Strong Middle Class and a Strong America.”

Under the bullet “Reward hard work by raising the minimum wage to $9 an hour,” the plan calls for an increase in the minimum wage, for both direct and tipped (restaurant servers etc.) wages and tying that wage to inflation.


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One of the “leading economists” that Obama quotes as being supportive of the hiked wage is Joseph Stiglitz, who chairs the Socialist International Commission on Global Financial Issues. Stiglitz is a Nobel Prize winning economist who sits on the boards of several of billionaire George Soros’s companies, and is perhaps best known for his efforts promoting an economic theory called the “third way”.

Stiglizt was the chairman of the White House Council of Economic Advisers under Bill Clinton, who in his 1998 State of the Union address declared, “We have moved past the sterile debate between those who say government is the enemy and those who say government is the answer. My fellow Americans, we have found a third way.”

The third way calls for business and government to join hands as partners, an idea promoted by Mikhail Gorbachev after the Soviet Union collapsed, as a way of governing that would be neither capitalist nor communist, but something in between.

While knowing the source of his agenda is important, knowing the past results of a minimum wage hike are even more so. Even in our recent past, as the minimum wage was raised three years in a row, from $5.15 per hour to $7.25 per hour, youth unemployment surged from 10.5 percent to 18.5 percent.


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Business owners have had to compensate for that increased cost of labor by demanding more efficiency. That efficiency comes with experience in a given field of work. They are no longer able to bring in a young kind for five bucks an hour and teach him on the job, raising his pay as he becomes more valuable to the company.

At nine dollars per hour, they will demand the experienced worker who is able to step directly into a position and be productive.

A high minimum wage also inhibits new businesses, small businesses specifically, from ever getting off of the ground. Gone are the days when you could sit down with potential employees, lay out a plan that will be tough for everybody at first, living on top ramen in mom’s basement, but with a huge potential upside should they work hard and grow the business.

For existing businesses that are often considered stepping stones for youth in their young professional lives, (such as flipping burgers) where they learn what working is all about, the effect will be somewhat different. I will just call that the “death of the dollar menu” and let you figure it out.

Most Americans are well aware of the financial struggles of Europe right now, and how Germany is all that is holding the whole thing together. Germany has the lowest unemployment, the highest average wages, and …

No minimum wage.


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Mike Shortridge

Mike is a former Marine who served in the Middle East. He is disgusted with both the Republican and Democratic parties, seeing them as two heads of the same beast. He writes from the conservative perspective, with a focus on making complex subjects easy to understand.

 

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