Investor's Business Daily
June 17, 2011
Labor Policy: How amusing to watch Democrats wring their hands over what they can do to get businesses to create jobs, when one of the biggest job killers is the minimum wage they keep hiking.
Recall that it was Democrats who raised the federal wage floor a whopping $2.10 an hour in the middle of the recession. The record 41% increase has led to record unemployment among young people, especially black teens.
Congress started ratcheting up the minimum wage from $5.15 an hour in mid-2007, arguing it would help abate poverty. But retailers looking to slash costs eliminated low-skilled, entry-level jobs rather than pay the mandated increases.
Now 1.5 million fewer teens are working. Last year's unemployment rate for workers ages 16 to 19 shot up to 26% from 2007's 15%.
As for black teens, their joblessness soared to a record 43% after the final raise to $7.25 took effect in mid-2009. It helped put more than half of young black men out of work -- a first.
The president proposes cranking the minimum wage even higher to $9.50. Then he wants to raise it every year thereafter as a "living wage" indexed to inflation.
"Americans believe that if we work full time, we should be able to support ourselves and our kids," he said in his 2006 memoirs. "For many people on the bottom rungs of the economy -- mainly low-skilled workers in the rapidly growing service sector -- this basic promise isn't being fulfilled."
He added: "Government policies can help these workers, with little impact on market efficiency. For starters, we can raise the minimum wage."
Obama perpetuates the myth the minimum wage helps the working poor. In fact, fully 85% of U.S. employees whose wages would be increased by his proposed wage hike either live with their parents or another relative, live alone or have a working spouse. Just 15% are sole earners in families with children.
That is, minimum-wage workers are mostly teens looking for entry-level jobs, not single moms trying to support a family, as Democrats and the media often portray them.
Such hikes in the minimum wage are really just a sop to the unions, who use them as benchmarks in collective bargaining. Studies show that every 70-cent hike in the minimum wage costs some 300,000 jobs, making it harder for the young, low-skilled workforce to find a job and gain workplace experience. These are among Obama's core constituents.
"It may be true -- as some economists argue -- that any big jumps in the minimum wage discourage employers from hiring more workers," Obama argued before the recent hikes went into effect.
"But when the minimum wage hasn't been changed in nine years and has less purchasing power in real dollars than it did in 1955, so that someone working full time today in a minimum-wage job doesn't earn enough to rise out of poverty, such arguments carry less force."
That said, Obama hopes to tie the wage to inflation, adjusting it higher each year based on the cost of living. Three states -- Washington, Oregon and Florida -- have already tried that, with disastrous results.
In Washington, for one, teen unemployment skyrocketed by 58% since indexing began in 1999 -- 24% higher than the average of nonindexed states, according to the Employment Policies Institute. Oregon and Florida have also suffered above-average joblessness.
Short of rolling back recent minimum-wage hikes, Washington could at least create a separate, low wage for teens of $5 an hour to help put the million-plus young workers back to work.