Filed under: Capitalism, Economy, Freedom, Politics, Regulation | Tags: Milton Friedman, The Minimum Wage Folly, Unemployment for the Low-Skilled
The myths of the minimum wage persist because they sound good — not because they do good, they don’t. Ideally, there would be no minimum wage, and if you wanted to hire your neighbor’s 12 year-old kid to rake the leaves, and he wanted to do it for whatever pay you agreed upon, you would not be subject to government control. The minimum wage hurts the very people it was presumed to help.
Filed under: Capitalism, Democrat Corruption, Domestic Policy, Economy, Freedom, Politics, Progressivism, Regulation, Taxes | Tags: 347000 Just Gave Up, Labor Force Dropouts, Stagnant Employment
Five years of promises to create more jobs, and the unemployment rate went down to 6.7% from 7.0%. Isn’t that a good thing? It sounds like a good thing. The only reason that the unemployment rate dropped is because more Americans dropped out of the labor force and gave up looking for work. The labor participation rate just dropped to a fresh 35 year low, hitting levels not seen since 1978.
91.8 million Americans have dropped out of the labor force. That’s an astounding number of people who cannot find a job. The U.S. produced only 74,000 net new jobs in the month, because 347,000 gave up. Once people stop looking for work, they are no longer counted among the unemployed.
But, but, but what about the stock market, aren’t corporations getting rich? The Federal Reserve is keeping interest rates artificially low, and flooding the marketplace with borrowed money. The employment ratio of the employment population to rebound signals how well the economy is luring Americans into the labor market. The ratio remains barely above its post-recession low of 56.2% in July 2011.
American business has told us many times why they aren’t hiring. Uncertainty — they don’t know what the Obama administration is going to do next. Nobody seems to have noticed that every time Obama promises to do something about jobs and tackling unemployment, with the other hand he is doing something to destroy jobs. With this new report on stagnant unemployment continuing on and on, the administration’s remedy is to raise the minimum wage and extending jobless benefits.
Innumerable studies have shown that raising the minimum wage is simply an unemployment program for young people. The unemployment rate for teenage Americans is 34%. The unemployment rate for Hispanic teenagers is 48%, and the unemployment rate for black teenagers is 60%. Yes the usual whine from the left is that “nobody can support a family on the minimum wage.”But that’s not what the minimum wage is for. It’s for beginners.
Statistics show that minimum wage workers are not the prime earner in a family, but usually teenagers in their first job. 97 percent of workers make more than the minimum wage. The average family income of a minimum-wage worker is $53,000 a year. Minimum-wage jobs are starter jobs, not a permanent class of people. Two-thirds of minimum-wage workers earn a raise within a year. As they learn how to work they can command higher wages. Very few single parents are working full time in minimum wage jobs. Raising the minimum wage is not a way to help poor people.
Extending jobless benefits works to keep the unemployed from looking hard for work. The more you extend benefits, the more people get along on the benefits and refuse jobs that do not measure up to their expectations. It is not a way to help the unemployed.
Those are two ways the administration works against what they profess to want. Actions by federal agencies also work to create uncertainty. ObamaCare is a prime example and is destroying jobs right and left. The cost of ObamaCare is causing many companies to shed workers.But actions by the EPA, regulations shutting down the coal industry for no reason, banning products, increasing the cost of energy are all actions that kill jobs because they affect the cost of doing business.
Businesses like Gibson Guitars, attacked by the administration for importing wood for frets according to the laws in place, and accused of environmental crimes. Fast food restaurants ordered to display the nutritional value and calories of each ingredient must re-do their menus and signage. The federal government’s drive for more control raises the cost of doing business in multiple ways. When you see more people drop out of the workforce, look for regulatory excess and new ways to raise the cost of doing business.
The cure for unemployment is growth of the economy, and freedom is the fuel for growth.