Saturday, January 25, 2014
Not wanting to fight the election of 2014 defending the Affordable Care Act, President Obama has decided to attack on another front by advocating an increase in the minimum wage.
Claiming he wants to create jobs, he is once again pursuing a policy that destroys them. Excessive regulation, tax policy, and the Affordable Care Act itself, all belong to the same genre.
Increasing the minimum wage benefits one group of workers (those who keep their jobs) at the expense of another (those who lose theirs.) The latter group typically includes the unskilled, particularly teenagers and African-Americans. Let down by the school system, their only hope is on-the-job training.
There is a certain exquisite irony here. The generation that voted overwhelmingly for Obama, already forced to buy health insurance that it did not want, will now find it more difficult to obtain that all-important first job.
A preview was provided when SeaTac raised the city’s minimum wage to $15 per hour. Not only were jobs lost because a hotel closed its restaurants, but new jobs will not be created in a previously planned hotel that will not be built.
President Reagan, concerned about a minimum-wage law inherited from Carter, did not want to expend political capital repealing it, and tried to mitigate its effects by keeping it unchanged.
His economic policies caused the market wage to rise above the minimum wage, and fast-food chains reported that they had to pay above the minimum to attract enough help. The teenage unemployment rate was close to the overall rate. The law had become redundant.
But it remained there, a ticking time bomb waiting to explode. And explode it did.
In 2008, just as the economy entered the deepest recession since World War II, causing the market wage to plummet, the Democrats permitted the minimum wage to rise, and unemployment among teenagers and African-Americans soared.
Obama is using the same playbook as the one used for, “If you like your plan, you can keep it.”
We hear an increase in the minimum wage would reduce unemployment. It increases it. We hear it would reduce income inequality. Those who keep their jobs are better off, while those who lose theirs are worse off. It does the opposite.
Believers in free markets and limited government must be forceful in pressing these arguments.
Ironically, bad economics sometimes makes good politics, and 63 percent of the electorate believes the minimum wage should be increased.