Economically Illiterate President Proposes Raising Teenage Unemployment Rate in Perpetuity

If we had an honest press that is the headline we would be reading today.

It is an unfortunate symptom of our times that we are forced to live under a president whose one great talent is to be able to shovel more horse manure in a single speech than most stable boys do in a lifetime.  But he has really outdone himself with his latest proposal that he put forth in the state of the union address to tie the minimum wage to inflation.

If there is one thing that economists of all stripes agree upon it is that wage and price controls do not work.  You don’t even have to be an economist to understand this because basic logic is enough to tell you that in the absolute best case scenario, if things go absolutely perfectly, they will do no harm.  The reason for this is very obvious.    If you set the wage below or at the market price for the work being done then the wage control has no effect.  If you set it higher then people lose their jobs (or are never hired) and lots of other pernicious measures are put in place to make up for the distortion in the economy.  Some may make more but the price for that is that others lose their jobs and/or their co-workers make less than they would otherwise.  Other effects are that low skilled workers are priced out of the market and that inflation is used to make up the difference so that the putative wage gain is much less than imagined if not non-existent.   Yet another downside is that pricing signals are distorted so that no one has a true picture of what anything costs.  That is essentially what did the Soviet Union in and has done for one South American banana republic after another.

All of this is why even the politicians who support a minimum wage have always been careful to make sure it is not tied to inflation… and that it essentially becomes moot over time.  But as in so many other areas, Obama believes his own BS and is too naive and economically illiterate to understand that raising the minimum wage and the folderol that always accompanies it is just for show.

It doesn’t exactly take a rocket scientist to understand that if you have a job that you can afford to pay $4 to have done, but the minimum government mandated rate is $6, then no one will be hired to do the job or at the very best other areas will have to be robbed to make up for the loss.  But  even as simple and obvious as this reasoning is it is completely beyond Obama and those who support him.  It is important to note that he managed to maintain this level of ignorance despite having an Ivy League education.

The last time this sort of madness descended upon Washington and they raised the minimum wage I was running a start-up business.  We employed three teenagers who would come in after school and help us with the rush to get the orders out before they had to be delivered to shipping.  As a consequence of the mandated pay raise we fired 2 of the teens and kept the third one.  Of the two that we fired one ended up pregnant and the other went to jail — both before they finished high school!  The one that we kept went on to become a manager for us and is now gainfully employed and raising his own family.   Quite a feat in a social democracy like the US these days!

In this case the cost of the rise in wages was a huge one.  Not only did it price unskilled labor out of the market but it removed a chance for kids starting out to learn the skills they would need to acquire in order to prosper and be productive citizens.  I am not saying that no ill would have ever befallen these two teenagers had they remained in our employ, but the opportunities for them to get in trouble would have been more limited and they would have had good role models to show them what is required to get ahead.  As it was, they were left with too much idle time, too many temptations and no vision of the future.  But hey, if they had a job it would have paid a bit more!  YAY stagnation and despair!

All of this is why, contrary to the very shallow understanding that the left has, a minimum wage is one of the principle instruments that cause more of a gap between the have and have nots.  If you can’t get on the first rung of the ladder then obviously you will never climb out of poverty.  What a minimum wage effectively does is remove the bottom rung on the ladder to success.  If you can’t make the leap to the next rung all in one go then the hell with you…

The other measure we took to mitigate the effects of the wage increase was to delay or deny raises to those who had earned them in order to pay those who had not.  Seeing as this is the principle governing philosophy of the Democratic party it is easy to understand why the president embraces raising the minimum wage.  Every action the left promotes has the effect of punishing those who are successful and responsible and rewarding those who are not.  These perverse incentives are why socialism always fails in the end — even more so than the cliche’ about running out of other people’s money.  It is not the money they run out of so much as the people — people who are productive and who eschew being handed things simply because they live and breathe and take up space on this good green earth.  Those people and their virtues are the REAL currency that makes nations wealthy.  Wealth and prosperity are just the downstream effects of their being allowed to pursue their own interests and to live freely.   If you convince too many people that they are entitled to things they have not earned then only suckers try to earn anything.  No country can survive such a state of affairs for long.

But putting all of that aside, even if one were to be batshit crazy enough (and economically illiterate enough) to believe that tying the minimum wage to inflation is a good idea then the absolute worst time to do it would be during a recession or when unemployment is high.  Only some sort of naive and buffoonish jack-a-knapes would propose such a thing… and unfortunately that is exactly the sort of man we have as president right now.


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