The president and many of his supporters have raised the call to bump up the minimum wage 39% over the next few years. It has been touted as a way to release many people from the chains of poverty and boost income. Today though the CBO (congressional budget office) said that the increase could cost the economy around 500,000 jobs. Not a trivial amount and one that is definitely affecting those making minimum wage or just above it. Combined with the ObamaCare job loss and it looks pretty dire for finding work. They also claim that it would raise 900,000 families out of poverty, good for them to get so many people out of poverty while destroying 500,000 jobs. Also, that only holds true if the poverty rate is not changed which it is changed with inflation or at anytime congress decides it is different. With more people making more money chasing the same amount of goods you can be certain that it will not lift anyone out of poverty but it sure will put 500,000 people out of work. Think about how many people were pulled out of poverty from the last wage hike. My guess is about zero, it could have been a few of course.
The administration claimed today that the CBO cannot always be trusted and they make mistakes. Sure the organization makes mistakes sometimes because after it makes recommendations the government sometimes changes policies. And not only that but the current administration held pretty tightly to those CBO numbers about the effects of ObamaCare and the deficit when they needed. This is a case of them playing politics and spinning a bad story for their plan.
Now, most economists agree that minimum wage hikes effect workers and cause some unemployment. It just has to based off of economic rules. The effect's magnitude is the thing in question among all but the most staunch liberal economists. It makes businesses hire few workers and instead buy machines that are now cheaper than labor. It makes firms decide to work and demand more from each individual worker. That's nice to now have to worker harder on those already struggling.
The last thing it will do is cause everyone else to demand a higher wage. Those making 10.10 now will not stand for soon making minimum wage. Instead they will also ask for a new higher wage line with the work they perform. Now we have just inflicted ourselves with higher inflation. The President's goal could be higher inflation to take away the debt burden but what he did was taking those who invested wisely and saved and destroyed that saved wealth so some people can win. I think strongly that the government should not interfere with who wins in the economy and who loses. Especially when it trashes the savings of one group to pay off another. It is shady and should not be done.
If the government passes the hike which it looks like it might. Companies that sell machines to perform tasks might be a good buy. Also, get ready for increased inflation and news of businesses laying off workers and small businesses perhaps closing because of the inability to pay the new higher wage. Mandates are rarely good because they do not take into account the changes in the organic economy and are blind to what might actually be happening.
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