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Tag Archives: Minimum wage

Dear Mr. President

During the State of the Union address, President Obama stated, “Americans understand that some people will earn more than others, and we don’t resent those who, by virtue of their efforts, achieve incredible success” [1]. Now, while I don’t expect the President of the United States to respond to a mere plebian like me, I still have some questions about what he meant by this statement.

Mr. President, you state that Americans understand that some people will earn more than others. I assume that means that you also think Americans have at least a rudimentary understanding of skilled labor versus unskilled labor and the value of experience. Why, then, Mr. President, do you advocate for paying unskilled laborers in minimum wage positions the same wage as someone that has a job that requires a college degree? In your opinion, why should an unskilled 16-year old starting at McDonalds earn as much as a lab technician or Head Start teacher with a bachelor’s degree? How is it equitable to have someone invest in an education just to earn what a completely unskilled laborer can earn?

Mr. President, I’m also confused by your assertion that you don’t resent those who achieve incredible success. This seems to be quite at odds with some of the things you and your campaign said about your opponent, Mitt Romney, in the last election. If you don’t resent people for working hard and being successful, why would you try to bully them into releasing their tax information to the public to make them look bad? At the time, Mr. President, it sure seemed like resentment of Romney’s wealth and success played a big part in your strategy to win a second term. How do your friends in the Occupy Wall street movement feel about your newfound acceptance of people who are incredibly successful?

Maybe, Mr. President, if you get a minute, you could give us some clarification.

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Posted by on January 30, 2014 in Economics

 

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If Wishes Were Horses

Last week brought us the State of the Union Address, the annual accounting that our President is required to give before Congress about the condition of our country. Instead of being frank and declaring that the state of our union is not so great, the President instead chose to prevaricate, embellish, distract, misrepresent, and bend the truth back and forth until it snapped.

He claimed that corporations are doing a booming business, with profits that have “skyrocketed to all-time highs” [1]. I’m sure this came as a great surprise to companies like Kodak, Hostess, US Airways, and those like them who have recently declared bankruptcy, as well as all the other businesses who are laying off workers and lowering wages to stay afloat.  He also claimed that raising minimum wage will cure poverty, that women still don’t earn as much as men and that he is going to fix it, and that universal pre-school will be what saves our failing education program.

In reality land, however, raising minimum wage is not an effective solution to treat poverty, for more reasons than we have time to discuss. Women already do earn equal pay [2], and there is no evidence that pre-school makes a long-term difference in academic performance in children [3]. In fact, most of his proposed “reforms” lacked verifiable facts to back them up, and read like a far-left political platform.

Obama’s “Santa Claus Platform,”[4] as Rand Paul describes it, is much like what goes on at Santa’s North Pole. It promises something for nothing, it’s more about warm feelings and pleasant fiction than reality and facts, and the free labor and goods are imaginary. Much like the generosity of St. Nick, Obama’s promises that his plans will not cost us “a single dime” [1]. And if you believe that, I’ll cut you a deal on this bridge I own in Brooklyn.

 
 

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Raising minimum wage is minimally sage

When the siding on your house has dry-rot, giving it a few heavy coats of paint might make it look better for a little while, but it won’t make the underlying issue go away. Raising minimum wage to alleviate poverty is the same kind of solution, one that looks good on a superficial level, but ends up not really fixing the problem, and here’s why.

Labor is a tradable commodity, and just like any commodity, labor can vary in value. It takes more skill to be a doctor than a store clerk, so their labor has a higher value. Minimum wage is the base price that the government has placed on unskilled labor.

Labor and its price are part of a giant economic system that also includes all the goods we buy. When the government artificially raises minimum wage, all the other parts of the economy are forced to shift to accommodate the change. Employers that provide minimum wage jobs, such as factories, restaurants, and stores, have to pay more for their labor, and so they must either raise the prices or hire fewer workers in order to maintain profitability. Unemployment goes up and consumers, which include minimum wage-earners, must now pay more for goods and services. Once prices finish adjusting, the larger paychecks for unskilled laborers will not end up stretching any further than they did before minimum wage was raised.

Also, when minimum wage is raised, skilled workers do not receive a boost to the price of their labor, but still experience the raised prices of goods and services. They can’t buy as much with their paychecks as they could before, which means their higher-value labor is now worth less than it used to be.

To raise a worker’s income, the only real solution is to raise the value of that worker’s labor, and that can’t be done through raising minimum wage.

 
 

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