Let Democrats Boost the Minimum Wage, Let Them Own It

President Obama may have thought he was being both kind and clever when he surprised everyone with his State-of-the-Union call for a hefty boost in the federal minimum wage.

The president might have believed it when he said raising the minimum from $7.25 an hour to $9 an hour “could mean the difference between groceries and the food bank; rent or eviction; scraping by or finally getting ahead.” He certainly knew that, politically, it was useful to frame the issue as fairness for breadwinners when he declared that “in the wealthiest nation on Earth no one who works full-time should have to live in poverty.”

Actually, in the most indebted nation on Earth, which happens to be the nation over which Obama presides, the relatively few full-time workers who earn minimum wage are eligible for a host of government subsidies and benefits, and usually spend little time at the bottom of the wage scale. But why let cold practical detail get in the way of an emotional and politically winning argument?

Obama’s fellow Democrats and their allies in organized labor were thrilled with his proposal, as he knew they would be. For them, the only negatives were that the president did not tip them in advance, and that he might have asked for an even bigger boost in the minimum before indexing it to the inflation rate. Sen. Tom Harkin, D-Iowa, and Rep. George Miller, D-Calif., have already proposed moving the new baseline to $10.10 an hour.

Republicans saw the president’s proposal as a cynical play to his political base. Obama undoubtedly expected this reaction too, and I am willing to bet he was counting on it. The president is likely to succeed in pushing a wage boost past the fractured and underachieving GOP in Congress. This will give him and his party a nice political victory in the run-up to the 2014 elections. Plus, the proposal allows Obama and the Democrats to portray themselves as the defenders of the downtrodden, while presenting Republicans as villainous lackeys of the rich, lacking only oiled handlebar moustaches.

My advice to Republicans: Don’t show up for the casting call in Obama’s melodrama.

Let Democrats boost the minimum wage. Let them hike it as high as they want. Why stop at $9 or $10 an hour? It really takes something like $20 an hour to support a family of four in reasonable comfort in most of the country, and more in some places. If Democrats are going to get their minimum wage boost anyway, let them own it. This way an entire generation can see what comes of it.

Don’t filibuster a minimum wage increase in the Senate; let it pass with mostly Democratic votes. Don’t bottle it up in some House committee; let it reach the floor, and let enough Republican representatives take a strategically timed walk so Democrats can have their way. To be really Machiavellian, encourage the most free-spirited Democrats you can find to offer amendments to make the minimum as high as possible.

This proposal is terribly cynical and unspeakably cruel. I realize this. But a minimum wage increase is going to happen anyway, and if the least-skilled workers must bear the inevitable price, let’s at least get the benefit of a political lesson in labor economics.

Democrats and allied economists argue, without any logic, that jobs do not disappear when the wage floor is raised. To some extent they are correct, but mostly this is because the jobs simply move – offshore. Other jobs are automated out of existence, but the change is usually gradual enough that most people do not connect the automation and the wage increase.

This is why I would like to see a sudden and dramatic shift. Soon, many of us will find nearly all of the baggers and most of the cashiers gone from our supermarkets, replaced by self-checkout stands. The exception: high-end stores frequented by the affluent. A few people can afford to have someone else bag their groceries, no matter what the cost.

Stock clerks and produce handlers will disappear, replaced with pre-packaged product. We will walk up to a fast-food counter and order our own meal on a terminal, which might be programmed to electronically ask if we would like a side order of fries.

In many parts of the country, part-time and vacation jobs for students will become nearly extinct. High schoolers in inner cities simply lack the skills to justify the higher wage, while their counterparts in well-off suburbs are too overscheduled with academic and extracurricular activities to hold down a paying job.

This process has been playing out for years. Teen summer jobs have declined steadily since the millennium. Even with only 36 percent of their age group active in the labor force, 18- and 19-year-olds currently face an unemployment rate of 28 percent, according to Labor Department statistics. For African-American males in that age bracket, the unemployment rate is a heartbreaking 40 percent.

A higher minimum wage will give us fewer jobs, but it will give us a lot more unpaid internships, which are palatable only for children of well-off families. It may also give us more positions in drug gangs and other forms of organized crime. If you can’t get a legitimate job in your neighborhood and your little sister is hungry, when somebody offers you a few hundred dollars to deliver a package, do you turn it down?

We will get more graft and political patronage, as politicians trade much-needed, taxpayer- funded paychecks for votes. We’ll get more people dependent on government benefits, too.

Minimum wage jobs are gateways to the work force; they are not destinations. Without them, the doors to honest work and self-respect will stay closed to more Americans, primarily the least fortunate.

On some level, people know this will happen. The main purpose of a labor union is to set a minimum wage for a particular workplace or occupation. If it worked, we would all be flocking to join unions. But fewer than one private sector worker in 10 today belongs to organized labor. It is not because people do not know how to unionize; it is because they have seen one industry after another fall victim to bloated, uncompetitive costs, taking union workers’ jobs with them as they crumble.

Like most Republicans, I would hate to see all this avoidable damage happen. One of my greatest pleasures as an employer is to offer work to someone who wants and needs it. I don’t pay minimum wage, either; my firm pays well above that. But I require a level of skill, even from entry-level employees, that most minimum-wage earners do not have.

Why should Republicans let Democrats cast them as the bad guys for wanting to see people get paid what their work is worth in the marketplace, in order to create career paths that start with sustainable minimum-wage jobs? If Obama and the Democrats want to peddle the line that workers’ value can be raised by government fiat, let them – and let them take responsibility when we all have to get in line at the checkout counter, twiddling our thumbs while the shopper in front of us searches for that elusive bar code.

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About Larry M. Elkin 564 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

1 Comment on Let Democrats Boost the Minimum Wage, Let Them Own It

  1. I’m not sure why this is such a hot button issue for us. Is keeping people in poverty really what we stand for as a nation? Australia’s minimum wage has been designed to keep up with inflation..Their rate is $17 p/h if I recall. A living wage. Our minimum wage has been kept so low it’s almost equivalent to indentured servitude. Bear in mind that a $7.25 an hour McDonald’s worker earns almost enough to buy a crap-burger, fries and shake (if he didn’t have taxes)after working an hour. For a normal human being, working 8 hours and expecting to eat 3 meals a day, and allowing a gallon of gas to get back and forth to work, this sub-human will work 1/2 a day just to survive. Forget cigarettes, or healthcare or supporting a family…Again, I ask, is this what the ‘in God we trust’, ‘Bible thumping’ USA really wants for its citizens? Something stinks here..and it’s not the French fries. If you ask me, the extra $1.50 is long overdue. Cheap help has been screwed over as the cost of living has left them in the dust..

    But, before I go all bleeding-heart libtard here, what about the ‘job creators’? Who’s looking after them? Who will cry for the demise of the job creators?

    Well nobody. I actually looked up labor costs and worked up a spread sheet and found that for most cheap labor, the actual cost passed on to the customer to cover this pittance is pretty low..Something on the order of 1% increase…And if you are a Costco, with labor costs being only 1% of sales, then a $1.50 increase doesn’t amount to spit.

    But, you say..I didn’t mean those big honking box stores..I meant the Jack-in-the-Boxes, the diners..The mini-markets. Yeah, well, in fact the cost really does actually bump your product by about 1%, and if that’s enough to put you out of business, then you’re long overdue to find a real career anyway. Or maybe a $9.00 an hour job at a competitor…Isn’t that what capitalism is all about? The Darwinian survival of the fittest? But if you are anything like the In-N-Out-Burger we stopped at today, with 20 cars in line and by the time we hit the cashier 4 minutes later, there were 20 more behind us, adding 1% to a burger will not phase you at all.

    Enough frigging whining. Pay them their ludicrous $1.25 … BTW, did I mention that there are many places already paying $10.00 p/h? Yup! Won’t affect them at all.

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