Obama and the Minimum Wage

Posted: February 13, 2013 by ShortTimer in Barack Obama, Democrats, Economic freedom, Economics, free markets, Government, Milton Friedman, Unintended Consequences

From the NYT:

WASHINGTON — President Obama called on Congress to raise the federal minimum wage to $9 an hour from $7.25 and to automatically adjust it with inflation, a move aimed at increasing the earnings of millions of cooks, janitors, aides to the elderly and other low-wage workers.

And it will do nothing to help anyone looking for a job.

The White House said that the move would have profoundly positive effects for low-income families without unduly burdening businesses or raising the unemployment rate. It cited research showing “no detectable employment losses from the kind of minimum wage increases we have seen in the United States.”

There are always losses as the cost of hiring employees goes up.  Thus employers hire fewer employees, and employees at entry level don’t get the skills they need to get the next rung up on the ladder.

The White House also pointed to companies like Costco, the retail discount chain, and Stride Rite, a children’s shoe seller, that have previously supported increasing the minimum wage as a way to reduce employee turnover and improve workers’ productivity.

As employers, they can increase wages on their own.  This is what Costco did.

As Costco Senior Vice President Jeff Long said recently in support of increasing New York state’s minimum wage, “At Costco, we know good wages are good business. We keep our overhead low while still paying a starting wage of $11 an hour. Our employees are a big reason why our sales per square foot is almost double that of our nearest competitor. Instead of minimizing wages, we know it’s a lot more profitable for the long term to minimize employee turnover and maximize employee productivity and commitment, product value, customer service and company reputation.”

And they’re also a very large business.  Y’know what a raise in the minimum wage does to them?  Nothing.  Y’know what happens to their competitors?  Their competitors have to spend more on employees.  It creates a barrier to entry.  This prevents their competitors from entering the marketplace with the advantages of being able to hire lower-wage workers.  This prevents unskilled workers from getting a stepping-stone job.

This makes life easier for Costco, who get to increase the expenses of their competitors through governmental fiat.  This is crony capitalism for Costco.

It hurts the people it’s supposed to “help”, driving them to unemployment and dependency on the government and right into the hands of political parties that will give them handouts.  The special interests in this case are the big businesses who benefit from destruction of smaller businesses, and the government officials who benefit from manufacturing more unemployment to create more people dependent on government handouts.

  1. Robert Wyatt says:

    There you have it, ANOTHER OBAMA JOB KILLING IDEA……..

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