White House: We Need to Raise the Minimum Wage

Posted: Aug 02, 2013 11:30 AM

Here’s an idea. Why doesn’t the White House just repeal Obamacare? I mean, is there any other federal statute on the books hurting small businesses and ordinary Americans more than the president’s health care law? On Thursday, Messrs. Lee, Rubio and Cruz made a series of powerful arguments on the Senate floor about why the Affordable Care Act must be fully repealed, and I encourage you to watch the colloquy in its entirety if you have some time. But given the fact that the president will never repeal his “signature” legislative achievement, the most effective way to help hard-working families rise today, I think, is for Republicans to champion pro-growth economic policies -- not to pass more minimum wage laws. And yet:

It’s hard to think of a more destructive policy that disproportionally hurts young people and minorities (which is presumably who the president is trying to help here) than raising the minimum wage. Ed Morrissey addressed this very issue in his Fiscal Times column a few months back:

Consider what happened when Congress last passed a minimum-wage increase in 2007. At that time, overall unemployment was 4.7 percent and the job market favored workers. Among those between 16 and 19 years of age, the jobless rate was 15.3 percent, on the lower end of the range seen during the previous four years, the highest rate of which had been 19.0 percent in June 2003 during the previous recession.

By July 2008, overall unemployment had jumped to 5.8 percent due to the then-moderate recession that had begun in December 2007, but youth unemployment rocketed upward by more than five full points to 20.7 percent. As the wage floor stepped upward to its present level by July 2009, the youth unemployment rate rose to 24.3 percent. And while the overall unemployment rate has declined from 9.5 percent at that time to 7.9 percent now (albeit with a plummeting workforce masking the true nature of chronic unemployment), youth unemployment remains at nearly the same level as in July 2009, at 23.4 percent.

Why has this been the case? When forced to pay more for labor, businesses will insist on getting more value for their money – experience and proven skills, even in entry-level positions. Younger workers never get a good chance to earn their stripes. That has long-term implications for their ability to earn in the future, as well as the social costs of high unemployment and restlessness of youth.

Worse yet, it’s the small business owners who get squeezed the most by this economic vise. The wealthy CEOs to whom Obama refers run companies large enough to dissipate the increased costs of minimum-wage hikes by balancing out cost reductions through economies of scale that aren’t available to mom-and-pop businesses. That puts smaller businesses at a competitive disadvantage that benefits the very CEOs that Obama scolded in his address.

The emphasis should be on working to repeal laws and statutes that suffocate job creators and hamper small businesses, right? At the same time, it’s important to remember that minimum wage jobs cannot and should not be a permanent way of life. These kinds of positions (in theory) should be sought after only by young Americans hoping to gain the skills and experience they need to rise. Strangely, of course, the White House seems to imply that every single person working a minimum wage job is consigned forever to a life of misery, poverty and economic stagnation. Not true. In fact, less than three percent of all workers in the United States are working full-time today and earning a federal minimum wage. And roughly two-thirds of those who are will likely earn a raise in the first year of employment without government assistance.

If the U.S. had a booming and robust economy, perhaps raising the minimum wage wouldn’t even be a White House priority. Why? Because there would be so many good jobs and so much room for advancement that Team Obama's latest misguided push would almost be unnecessary. Regrettably, though, that’s not the case given the policies this president has championed -- and given also that the monstrous legislation bearing his name is still on the books and probably will be forever.

As Mike Lee recently quipped, there are only three certainties in life: “death, taxes and entitlements.”

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