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Posts Tagged ‘minimum wage’

Increasing Minimum Wage Killing Jobs

Posted by Steve Markowitz on May 17, 2016

Discussions relating to raising the minimum wage inevitably include to the issue of “fairness”.  Those in favor of raising it point out that the minimum wage is not a “fair wage”.  Once this emotional claim is made, those who oppose increasing in the minimum wage are pegged as unenlightened and against allowing the lowest wage earners the opportunity to make a reasonable living.  Economic realities tell a different story.

Wendy’s is a large fast food chain with approximately 6,000 restaurants nationwide.  They have historically started employees at the minimum wage.  They recently announced steps to offset the cost increase due to the increased minimum wage and it is not good for workers.

According to Investors Business Daily, Wendy’s is replacing many of its order takers with an automatic kiosk system.  This action should surprise no one with a basic understanding of economics.  Not only does the new minimum wage increase the cost the labor, but with government inflicted artificially low interest rates, the cost of capital has decreased.  This decreases the cost of capital equipment at the same time the new minimum wage will increase the cost the labor.  Wendy’s response to the increased minimum wage will be duplicated by many in the service industry across the Country.

The political elitists who are behind the increased minimum wage will not be negatively impacted by the coming loss of lower paid jobs in America.  Their political positions could even improve with the additional votes they likely will receive from those who believe the increased minimum wage helps the working poor.  Further, with more Americans being unemployed these same political elitists can then offer handouts in exchange for future votes.  It’s a nice, but unholy, gig if you can get it.

There is another group of crony capitalists who will benefit from the increased minimum wage.   Large corporations who do not employee lower paid American workers will benefit by the increased wage pressures placed on upstart competitors who might try to make a better mousetrap.


Posted in economics | Tagged: , , , | Leave a Comment »

Failure of the Minimum Wage

Posted by Steve Markowitz on February 5, 2014

One of the favored economic policies promoted by the Progressive Left has been the minimum wage.  It is also one of the best examples of the failure of interventionist policies in complex economies to obtain the desired goals.

The Left promotes the minimum wage, as it often does so many of its favored programs, with hard to define words such as “fairness”.  On their face these emotion-based arguments have strong attraction.  What could be fairer than raising wages of the lowest paid American workers?  If that emotion does not convince one, then the Left resorts to voodoo economics indicating that by paying more to these employees will increase their spending and then result in even more overall economic growth.  If only it was so simple.  If this logic had merit, then why not raise the minimum wage to $30 an hour?  Would that not lead to still greater growth?  The answer is obvious.

In earlier days of the minimum wage the Left’s argument could not be summarily dismissed.  Today, with the benefit of history, this argument is dead.  History has proven that the minimum wage has not lifted real wages for lower paid Americans.  In addition, a strong argument can be made that increasing the minimum wage results in less unskilled Americans, those most likely to be paid a minimum wage, to be employed.  For example, raising the cost of less skilled employees without increasing sales commensurately forces companies to employ fewer of these unskilled employees.  Eliminating this first stepping stone on the job growth path brings with it longer term consequences for those least fortunate in our society.

Placing a nail in the coffin of the argument relating to the overall benefit of increasing the minimum wage is the data included in the chart below plotting the real-time minimum wage over the past eight decades.  As indicated, while the minimum wage has increased throughout this period, the inflation adjusted minimum wage has been decreasing since the late 1960s and has been nearly stagnant in the past 20 years.

The graph does not indicate cause-and-effect.  However, it does indicate there is more at play with decreasing real earnings for Americans.  Dictating an increased minimum wage has proven ineffective in remedying the negative trend.  Add to this the fact that the percentage of Americans employed is at an historically low rate and we have a dangerous trend.  Expecting real improvement via government edict is akin to the belief in alchemy.

Why have middle and lower paid Americans lost ground in recent decades?  This is a complex issues that chapters could be written about.  However, it is likely that any unbiased study will confirm that governmental interventions in the economy have played a role in this negative result.

Posted in economics | Tagged: , , , | Leave a Comment »

Obama Offers Political “Gifts” at State of the Union Address

Posted by Steve Markowitz on January 28, 2014

Tonight Pres. Barack Obama made his second State of the Union Address of his second term.  What a difference a year makes. Last year’s State of the Union address came shortly after Obama’s reelection when had at least a partial mandate to govern.  This year, most certainly aggravated by the Obamacare debacle, the President’s political capital is nearly spent with even some Democrats distancing themselves from the resident.

The Wall Street Journal released the results of a recent poll indicating that Americans are dissatisfied with Obama’s policies and lost faith in his leadership skills.  That poll concluded:

  • Since the 1930s, only George W. Bush had lower poll numbers going into is six year in office.  Obama is now in very special company!
  • More poll respondents want the President to focus on job creation and early childhood education compared to those favoring increasing the minimum wage.
  • Over 50% of those polled disapprove of Obama’s job performance.
  • Approximately 60% of those polled indicated they were worried or pessimistic about Obama’s performance during the remainder of his presidency.
  • 75% of poll respondents believe that the President should place a high priority on reducing the federal budget deficit.
  • Over 70% of poll respondents expressed dissatisfaction with the overall economy.
  • Only 34% of those polled view Obamacare is positively.

Given the unpopularity of Obama and his policies one would think that the President would reach across the aisle in an attempt seek common ground.  That is not the case with Obama saying during the speech:  The President called for “a year of action“, specifically saying: “That’s what most Americans want – for all of us in this chamber to focus on their lives, their hopes, their aspirations.”  Further, Obama vowed to around Congress to pursue his agenda stating: “Wherever and whenever I can take steps without legislation to expand opportunity for more American families, that’s what I’m going to do.”    In other words, Obama will use executive orders to bypass Congress.  This is a similar tactic used by autocrats throughout history, most turning out badly for the people.

You have to give it to Pres. Obama, he sure has gall.  The massive government interventions he’s already pursued including the stimulus package, green energy “investments” such as Solyndra, cash for clunkers, Obamacare, etc. have been dismal failures.  Still he calls for “a year of action“.  That is nothing more than doubling down on losses.

While Obama has been president for over five years, he continues to act as if he was in campaign mode, not surprising given his background as a community organizer.  The President is an expert in the tactic of obtaining political advantage by promoting popular, but unsound, programs that he knows Republicans cannot support.  One example is his call for increasing the minimum wage.  The Left throughout modern history has used this voodoo economics as a way to supposedly create instant prosperity. This bogus claim raises an interesting rhetorical question:  If merely increasing the minimum wage could create real wealth, then why stop at $10 an hour?  Why not triple it?  The answer becomes self-evident.

In addition, Obama recent sound bites include the ills of the growing income disparity in the United States.  While excess concentration of wealth in a small minority of the population is ultimately a drag on an economy, it cannot be eliminated by government edict.   Obama does not discuss the causes for this inequity, but instead focusing on the more populist demonizing it.  He purposely evades this important issue since that the income disparity has increased during his presidency.  The Progressive policies of bailouts, crony capitalism, and artificially low interest rates mainly benefited wealthiest of Americans who have taken advantage of the resulting equities’ bubble to increase wealth.  The answer to this challenge is not for the government to redistribute wealth, as Obama would promote, but instead to eliminate the governmental programs that feed the growing disparity.

Congressman Stephen King, Republican from Iowa, was recently interviewed by CNN host Chris Cuomo.  Cuomo, a card-carrying member of the Progressive media, attempted to pull at the heartstrings of King (and is audience) to promote Progressive policies including increasing the minimum wage.  King stood tall and responded articulately concerning problems that come along with the governmental redistribution of wealth, as seen in the video below.

Politicians on both sides of the aisle attempt to maintain power by taxing some and rewarding others.  Democrats use social programs supposedly in an effort to cure the ills they see in society.  The recipients of their handouts include those on entitlement programs, unions, government employees, and companies that support the liberal agenda.  Republicans historically promote interests of the military-industrial complex and large businesses creating their own version of crony capitalism.  With their ability to print money, these politicians promote their pet programs as including no cost, their versions of alchemy.

The Tea Party is a grass roots movement whose main theme revolves around fiscal responsibility.  This focus allowed them to make enemies in both the Democratic and Republican Parties.  Little wonder; should a movement succeed in taking away the politicians’ ability to hand out candy to constituents and their chances for reelection decrease significantly.  Unfortunately this is the main motivation of those in Washington.


Posted in Politics, President Obama | Tagged: , , , , , , , | Leave a Comment »

San Francisco’s Minimum Wage Kills Subway’s Footlong

Posted by Steve Markowitz on March 29, 2012

On January 1, Leftist politicians in San Francisco increased that city’s minimum wage to $10.24 per hour.  This week, Subway reacted to this artificial market intervention with local franchises opting out of a Subway special, the $5.00 dollar Footlong sandwich, as reported by NBC.  It seems that the new minimum wage has made it uneconomical for Subway to offer the special.

Anytime the government gets involved in intervening in the markets, it it does so by offering advantage to some at the expense of others.  While in the short-run some workers will receive increased pay, it comes at the expense of increased food prices in San Francisco.  So the world turns.

Posted in economics, Governmental Intervention | Tagged: , , , , , | Leave a Comment »

Minimum Wage in Greece to be Decreased by 20%

Posted by Steve Markowitz on February 7, 2012

Much of the press concerning the Greek financial crisis focuses on the possibility (probability) that it will default on its debt.  However, a Greek default is but the canary in the mine.  Through fiat (paper) currencies, Greece and other countries have created huge debt obligations that are nothing more than forward taxes on future generations.

History has proved that the cycle for fiat currencies is predictable and repetitive.  Countries initially become successful due to the hard work of its people and/or the export of goods and services.  As countries become more affluent, their governments grow and increase services/handouts to their citizens.  In order to maintain and/or increase their power, these governments then make even more promises to citizens for increased handouts.  Their ability to print money enables such governments to increase benefits to unsustainable levels.  Initially these countries can borrow additional funds pay the promises.  However, at some point they cannot pay back the debt and default becomes inevitable.  This is the situation Greece now finds itself.  Other Western countries are also approaching this endgame.

Not only is Greece the canary in the mine for the end of the debt super cycle, but also evidences the flawed social and economic policies of modern Progressive governments.  Greece is caught in an unforgivable conundrum.  It cannot afford to pay back its debt unless its government’s tax receipts grow substantially, an impossible scenario given the amount of current debt.  Greece therefore requires a bailout by European creditor countries.  However, these countries will not bail out Greece unless it accepts extreme austerity measures that include cutting back on government spending and services.  Progressive governments cannot maintain power should they accept the demanded austerity measures.  In addition, these measures are contractive and will further decrease Greece’s tax receipts resulting in even less money available to pay back the debt.  This is sometimes called the death spiral for good reasons.

One of the austerity measures being demanded by Greece’s creditors is a 20% cut to its workers’ minimum wage.  This demand by the European Union is being made so that Greece will become more competitive versus the northern European countries whose workers are more productive, specifically Germany.  This is a remarkable demand from the Progressive governments of Europe.  It is a clear admission by Leftist economists that artificial minimum wages are a drag on a country’s productivity.  This is a reversal of a 100 year old Progressive axiom that a government created minimum wage stimulates the economy and helps those at the lower end of the economic scale.

As Sir Walter Scott so well said: “Oh what a tangled web we (Progressives) weave, When first we practice to deceive.”

Posted in Debt, Greece | Tagged: , , , , , | 1 Comment »

Progressives Ruin America Samoa

Posted by Steve Markowitz on June 2, 2010

As this Blog’ travels have progressed, we are seeing increased input from readers, which adds substantial intellectual assets to important issues facing this country and the world.   We are pleased to today post a brief comment from Chris in response to May 22’s posting, “Free Trade and WTO Subsidies” submitted by another reader, Carl.

Chris also submitted the link below to an article relating to a tragedy caused by Left-wing do-gooders in America Samoa.  Here the Progressives forced the island to significantly increase its minimum wage rate for the purported purpose of increasing the plight of Island workers.  But once again their meddling in the markets backfired forcing employers to leave the Island thereby significantly increasing its unemployment rate.

Wall Street bankers are rightfully hauled in front of Congressional committees to explain actions that harm the common folks.  Why are Progressives in government given a pass when they create a mess like the one in Samoa that has caused tragedies for the locals?  The answer is simple.  Both the private and public sectors make errors that harm people.  However, when the errors come from the private sector people have remedies they can seek.  When the government causes the harm it is but an excuse to create more government.  How convenient!

Thanks Chris for sharing this great example of government meddling gone bad.

Chris says:

Steve, I thought you and some of your readers would be interested in this article from the WSJ regarding jobs in America Samoa. Yet another example of the negative consequences of government on the free market economy and people’s lives.

Instead of removing or fixing the law (removing minimum wage restrictions) that caused the problem in the first place, the government solution is to pass yet another law (while using our tax dollars/subsides!!!) to minimize the damage caused by the first law.

WSJ – America Samoa

Posted in Econ 101, economics, Government Ineptness, Progressives, Supply and Demand | Tagged: , , , , , , | Leave a Comment »