The Purpose of This Bl;og

By and large, liberals are very decent, kind, and compassionate people who genuinely want what is best. This should be kept in mind as we explore the Law of Unintended Negative Consequences near invariably resulting from Leftist big-hearted solutions to societal problems.

Wednesday, July 10, 2013

Obamanomics--Income and Minimum Wage

Income Levels

In September of 2009, Obama promised that "many middle-class families will see their incomes go up by about $3,000.00 because of the Recovery Act, getting back much of what they lost due to this recession." (See HERE)

That would have been very nice.

However, real median household income has dropped each year that Obama has been in office--from about $52,000 to $50,000. (See HERE)

So, instead of an increase of $3000.00, Obamanomics produced the Leftist LUNC of a loss of $2,000.00.

For a more detailed analysis, please see my articles on "Income Inequality": Equal Pay for Equal Work and Divide Between Rich and Poor.

[Update 10/26/2015: "1 in 2 Workers Make Less Than $30,000 a Year]

Minimum wage:

Minimum wage laws have been around since liberals, like FDR, first enacted them in 1938  (See HERE)

"Over the years, Congress has significantly expanded the coverage and increased the minimum wage rate...Since 1938 the federal minimum wage has been raised 22 times. From 1949 to 1968 the real value of the minimum wage (in 2011 dollars) rose rapidly from $3.78 to $10.34. At $7.25 per hour, the minimum wage today in real dollars is 85 percent greater than the original benchmark, and just below its average for the past 60 years of $7.59. Since the 1970s, the federal minimum wage has fluctuated around roughly 40 percent of the average private sector hourly wage." (ibid.)

Individual states have also enacted minimum wage laws, and they are enforce as long as they exceed the federal requirement.

In July of 2007, as Obama was ramping up his first presidential campaign, he pledged: "I won't wait 10 years to raise the minimum wage. I'll guarantee that it goes up every single year." (Reported HERE) And, while several increase took place in accordance with a 2007 act of Congress 9which Obama had little to nothing to do with), the last raise occurred in 2009, Obama's first year in office. (See HERE) This means that he failed in his pledge over the last three years.

Then, in March of 2013, liberal Democrats drafted legislation to increase the minimum wage by 28% (from $7.25. to $10.10), and to index the minimum wage to inflation, (See HERE) That bill failed, And, now in August of that same year, five years after making his promise (see HERE), President Obama scaled back on the earlier increase and proposed raising the minimum wage to just $9. (See HERE and HERE)

His proposal would effectively raise federal minimums well above all the states except Washington. (ibid.)

One of the intents behind raising the minimum wage was to "addresses the country’s yawning levels of income inequality, which the White House has tried to reduce with targeted tax credits, a major expansion of health insurance, education and other proposals" (See HERE and also HERE)

This seems compassionate.

What makes this intent of interest is the fact that since the last time the minimum wage was increased (i.e. July of 2009, where it went from $6.55 to $7.25), for the first time in decades, income levels in all but one quintile began to decline. Only the very rich got richer, and everyone else got poorer. (See HERE) The Leftist LUNC here, then, is that, in spite of, or perhaps in part because of, the increase in minimum wage, incomes became more unequal.

Another intent was alluded to in Obama's State of the Union address in February of 2013: “Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong, Let’s declare that in the wealthiest nation on earth, no one who works full time should have to live in poverty.” (See HERE)

Again, this seem very compassionate. 

However, as with income inequality, the poverty rate has continued to climb ever since 2009 when the minimum wage was last increased. (See HERE) Again, the Leftist LUNC here is that in spite of, or perhaps in part because of, the increase in minimum wage, poverty has increased rather than decreased.

Even some people on the Left get that the President's current proposal wont work as planned. An article in the Huffington Post suggests that Obama's proposal will have little effect on the poverty level: "A recent report by the Brookings Institute, a nonprofit research organization, has found that a $9-per-hour minimum wage would increase the earnings of low-income households by only 7 percent, jumping to $11,828 from $11,047 on average. Any family of four earning $23,550 or less per year is defined as impoverished, according to the Census Bureau." (See HERE)

Still other liberals believe that a far more cost-effect way to help the poor than increasing the minimum wage would be to raise the Earned Income Tax Credit. (See HERE and HERE)

What some leftist seem to forget is that the jump in minimum wage isn't free. Someone has to pay for the artificial increased cost of labor. During good economic times, the increased cost is often born mostly by low-skilled teenage workers, and this in the form of lay-offs and/or reductions in work hours and/or heightened production expectations. Whereas, during hard economic times, like over the last half-decade, where business have already strained their productivity and profit margins, this cost to teens may well be even higher--which is disturbing given that unemployment today for teens is already more than double the general population (16.3 percent for teens as a whole, and 28.2 percent for black teens). (See HERE and HERE

Granted, depending upon the economic model of choice and the timing and scope of the study, economist are divided over the effects of raising minimum wages on employment and hours worked and the economy (see HERE and HERE and HERE and  HERE and HERE), though most view it as negative. (ibid. See also HERE)

Nevertheless, following the last increase in 2009, not only has income inequality and poverty increased, but the ratio of part-time to full-time jobs has skyrocketed, unemployment has gone up among low-skilled workers, and the workforce partition rate over all has gone down. (See HERE) So, at best, even if these LUNCs can be attributed to other things, increasing the minimum wage had no generally positive economic impact, and at worse it had a negative impact just as most economist supposed.

For a more in-depth analysis, see my Minimum Wage Series. as we;; as these articles: HERE and HERE and HERE and HERE.

For an explanation of why these Leftist LUNCs may occur, please see: Gov: Wrong tool for the Right Job:  Strength in Numbers, Cold Nanny, and The Politics of Compassion, Emotions, Ignorance, Denial, Blame-Shifting. Other explanations will be added as they are posted.

No comments:

Post a Comment