T.O.T.N (Thoughts On The News) 17 Feb 2013: Minimum Wage

The WSJ Opinion Page has a good article on Obama’s SOTU (State Of The Union) proposal to raise the minimum wage from $7.25 to $9.00 per hour.  It has facts (what a novel idea), but as a friend often reminds me, “don’t confuse me with the facts”.  I will try to confuse you anyway.

The article speaks well for itself.  Following are extracts:

  • February 15, 2013, 6:58 p.m. ET

The Minority Youth Unemployment Act

A higher minimum wage will hurt Obama’s most loyal supporters.

“In the real world, setting a floor under the price of labor creates winners and losers. Some workers will get a $1.75 raise. Great. But others—typically the least educated and skilled—will be priced out of the job market and their pay won’t rise to $9. It will be zero.”

“…most minimum-wage earners are not the primary bread winner. Nearly 40% live with a parent or relative. The average family income of a household with a minimum-wage worker is about $47,023—which is far above the poverty line of $23,550 for a family of four.

Mr. Obama didn’t even tell the whole story about parents raising a family on a minimum-wage income. A full-time minimum-wage worker earns roughly $15,000 a year. But that worker also receives a cash supplement from the earned income tax credit of roughly $5,000, and many states provide benefits on top of that to reward working. That doesn’t count government benefits like food stamps, Medicaid, child care and more. According to data from the Employment Policies Institute, about two of every three minimum-wage workers also get a raise within one year.

The damage from a minimum wage hike depends on the overall labor market. If the job market is buoyant, as it is in the fracking boomtown of Williston, N.D., fast-food workers may already make more than $9 an hour. But when the jobless rate is high, as it still is in California and New York, the increase punishes minority youth in particular.

That is what happened during the last series of wage hikes to $7.25 from $5.15 that started in July 2007 as the economy was headed toward recession. The last increase hit in July 2009 just after the recession ended, and as the nearby chart shows, the jobless rate jumped for teens and black teens especially. For black teens, the rate has remained close to 40% and was still 37.8% in January.”


“Mr. Obama’s economists know all this, but then the minimum wage has nothing to do with poverty or unemployment. It’s a political play to reward unions and box in Republicans. The minimum wage polls well because Americans naturally want everyone to make more money, and the damage in forgone jobs isn’t obvious.

It’d be nice to think that some Republicans, even one, would make the moral case that the minimum wage hurts the poorest workers. But both Presidents Bush, 41 and 43, went along with increases and so did the Newt Gingrich Congress in 1996. Mr. Obama knows that history. Republicans may fold again to take the issue off the table in 2014, but it’s a tragedy that those who will suffer the most are Mr. Obama’s most ardent supporters.”

[Following are links to the full article.  The first link may require a WSJ digital subscription.]


The next link should be good for 7 days from 17 Feb.

WSJ.com – Opinion: The Minority Youth Unemployment Act

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