Have you ever heard of this easy six-step process? 1) Pick an emotional issue with an associated “victim” group; 2) Inform them how much you care and how they are being oppressed by other Americans; 3) Propose a government program to fix the “crisis” that either spends taxpayer money, redefines rights or forces the “oppressors” to transfer their earnings; 4) Pay no attention to possible unintended consequences; 5) Label all who propose alternative ways to deal with the issue as “haters”; 6) Repeat step five after your program is established and someone suggests we need to scale it back because we’re broke.
Sadly, this formula is used by many liberals today. But, even sadder is the fact that it is extremely effective because many of our fellow citizens have lost their ability to think critically. Plus, it is hard to compete with politicians acting like Santa Claus promising free stuff from the government.
But there are consequences to this recipe. First, we create further dependence on government and go deeper into debt while the problem is not actually fixed. Second, our nation becomes divided. Politics of division rely more on insults than civil discourse, and leads to greater and greater animosity. So, instead of a “United” States, we are becoming more polarized.
Chief among the users of this political strategy is President Obama. No matter the issue, our President always seems to be there with a wedge. He is truly the most divisive president of recent memory; often resorting to name-calling or making fun of his political opponents, rather than reasoned dialogue. While this works with a sympathetic press, it is anything but presidential or healing.
One of his favorite divisive issues is class warfare, often using it whenever he gets into trouble. For example, reacting to the difficult rollout of ObamaCare and declining poll numbers, the President has attempted to shift focus to the minimum wage. According to him, since the rich are becoming richer at the expense of the poor, we need to support a bill to increase the federal minimum wage from $7.25 to $10.10 an hour. But, will this work or simply create more division?
Some argue that raising the minimum wage is good for business and the economy, because “when poor workers have more money to spend, they spend it” according to a recent report from the Huffington Post. The authors then added, “When consumer demand goes up, businesses thrive, earn more profits, and create more jobs.” The article then cites a few studies to validate this connection between a higher minimum wage and more jobs.
However, there are several factors to consider. First, a government mandated increase in wages is not an increase of economic activity, but simply a transfer of money from one hand to another. That is, when the boss is forced to pay higher wages to their employees without a corresponding increase in productivity and wealth creation, there is zero net economic gain. Why? Because employers spend money when they have “more money to spend” just like employees do.
Second, employers know best. They are aware that happy workers lead to fewer turnovers and more productivity. So they will pay wages to maintain the best balance between keeping employees content and the business competitive. This is how the market works.
Employers also know better than the government when they can afford an increase in wages; especially in an anemic economic recovery with low profit margins to work with. Plus, if increasing the minimum wage really created more jobs, employers would know this as well and would enthusiastically support the President’s proposal; but employers generally oppose such mandated increases.
Third, studies on the minimum wage must be closely scrutinized. You can find a study that will “prove” your point no matter what your political persuasion. But, the most “conclusive” studies cited by the Huffington Post article claim “raising the minimum wage had no impact on employment.” If this is true, it directly contradicts the fundamental claim that a hike in the minimum wage will create more jobs.
So, I’m forced to rely on common sense and economic law. A hike in wages (especially without a corresponding rise in productivity) raises the cost of workers, which makes companies more likely to fire than hire. Therefore, unemployment remains static or rises, and the poor are hurt with fewer opportunities. This is Econ 101.
However, if increasing the minimum wage really does stimulate the economy, then why argue for only a $10 minimum? Why not raise it to at least $30 an hour? This would essentially eradicate poverty by catapulting all entry-level workers into the middle class, while dramatically stimulating the economy.
You see, it doesn’t make sense.
Capitalistic market forces in a competitive environment are the best arbiters of wages, not the government. So, be very cautious of Santa Claus politicians who pit one class of citizens against another and then promise something like an increase in the minimum wage. Regardless of their intentions, the results will not be increased jobs, only increased hostility between Americans.