Cato Institute - minimum wage hikes share blame for economic problems

[barryr]

Some might want to remember this the next time a politician with no economic sense or knowledge looking for votes thinks this is a good idea.

Minimum Wage Hikes Deserve Share of Blame for High Unemployment
Posted by Daniel J. Mitchell

Even though the Obama Administration claimed that squandering $800 billion on so-called stimulus would keep the joblessness rate below 8 percent, the unemployment rate today is almost 10 percent. There are many reasons for the economy’s tepid performance, including a larger burden of government spending and the dampening effect of future tax rate increases (tax rates will jump significantly on January 1, 2011, when the 2003 tax cuts expire).

A closer look at the unemployment data, though , suggests that minimum wage laws also deserve a big share of the blame. In this Center for Freedom and Prosperity video, a former intern of mine (continuing a great tradition) explains that politicians destroyed jobs when they increased the minimum wage by more than 40 percent over a three-year period.
Mr. Divounguy is correct when he says businesses are not charities and that they only create jobs when they think a worker will generate net revenue. Higher minimum wages, needless to say, are especially destructive for people with poor work skills and limited work experience. This is why young people and minorities tend to suffer most – which is exactly what we see in the government data, with the teenage unemployment rates now at an astounding (and depressing) 26 percent level and blacks suffering from a joblessness rate of more than 15 percent.

In a free society, there should be no minimum wage law. From a philosophical perspective, such requirements interfere with the freedom of contract. In the imperfect world of politics, thought, the best we can hope for is that politicians occasionally do the right thing. Sadly, the recent minimum wage increases that have done so much damage were signed into law by President Bush. It’s worth noting that President Obama’s hands also are dirty on this issue, since he supported the job-killing measure when it passed the Senate in 2007. When the stupid party and the evil party both agree on a certain policy, that’s known as bipartisanship. In the real world, however, it’s called unemployment.

http://www.cato-at-liberty.org/2010/06/15/minimum-wage-hikes-deserve-share-of-blame-for-high-unemployment/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Cato-at-liberty+%28Cato+at+Liberty%29

[snowspot66]

In a free society, there should be no minimum wage law. From a philosophical perspective, such requirements interfere with the freedom of contract.


Yeah that will work just great.....

[mhgaffney]

All lies.

I hope some hacker takes you down.

[Rohirrim]

Yep. Blame the poor. Those assholes destroyed the economy.

[DBruleU]

All lies.

I hope some hacker takes you down.

WTH does that mean?

Yup, I disagree with you, so I hope you are shut down completely. Wow...gaff is just like his ME counterparts.

[DBruleU]

Yep. Blame the poor. Those a-holes destroyed the economy.

That doesn't even make sense. Blame the poor? Blame the retarded politicians who instituted such crap.

[TonyR]

I agree that the minimum wage was increased too quickly but completely disagree that there shouldn't be a minimum wage.

[watermock]

Idiot.

The Yang or whatervr the **** it's called is 50% undervalued and controled by the reds.

[That One Guy]

I see two things at play... the increase in the minimum wage was to try to bring the lowest paid in line with everyone else but in reality, it pushes wages higher everywhere as a "minimum wage" job comes across as being beneath some people.

Second, I think people's standards of living are rising too high in this country. Many people are too good for lower income housing like trailers and everyone needs a nice car. 80s and early 90s cars aren't on the roads very much anymore the way older yet still running cars were in the past. Just an example of people's standards being beyond their means.

We can't have a population where everyone is in the middle class. It defies logic as there's no middle if everyone's there and someone's gotta be on the low end of the scale doing the crappy work.

[The Lone Bolt]

We already tried an economy without a minimum wage. It was a disaster, far worse than the effects the CI is claiming.

[cutthemdown]

I know some people who went to a few less summer high school help because of the min wage increase in Calif. It's hard to pay a HS student that much when they are filling menial labor and entry level positions.

[cutthemdown]

Still though I don't believe that is why economy is in recession. It's only one of the reasons young people, HS, minorities have maybe 3-5% more unemployment then they would.

But if they changed it that could just lead to more minorities and HS getting jobs and a then a cooresponding number of higher paid workers let go. Every ying has a yang.

[watermock]

We are ina depression,yet Obama keeps doling out checks.

[Popcorn Sutton]

At the bottom of that article is another very interesting one:

http://www.cato-at-liberty.org/2009/11/19/dont-blame-obama-for-bushs-2009-deficit/

Some critics are lambasting President Obama for record deficits. This is not a productive line of attack, largely because it puts the focus on the wrong variable. America’s fiscal problem is excessive government spending, and deficits are merely a symptom of that underlying disease. Moreover, if deficits are perceived as the problem, that means both spending restraint and higher taxes are solutions. The political class, needless to say, will choose the latter approach 99 percent of the time. A higher tax burden, however, simply means that debt-financed spending is replaced by tax-financed spending, which is akin to jumping out of the frying pan and into the fire, or vice-versa.

In addition to being theoretically misguided, critics sometimes blame Obama for things that are not his fault. Listening to a talk radio program yesterday, the host asserted that Obama tripled the budget deficit in his first year. This assertion is understandable, since the deficit jumped (http://www.cbo.gov/ftpdocs/107xx/doc10708/11-06-mbr.htm)from about $450 billion in 2008 to $1.4 trillion in 2009. As this chart illustrates, with the Bush years in green, it appears as if Obama’s policies have led to an explosion of debt.

http://www.cato.org/images/homepage/200911_blog_mitchell1.jpg

But there is one rather important detail that makes a big difference. The chart is based on the assumption that the current administration should be blamed for the 2009 fiscal year. While this makes sense to a casual observer, it is largely untrue. The 2009 fiscal year began October 1, 2008, nearly four months before Obama took office. The budget for the entire fiscal year was largely set in place while Bush was in the White House. So is we update the chart to show the Bush fiscal years in green, we can see that Obama is partly right in claiming that he inherited a mess (though Obama actually deserves a small share of the blame for Bush’s last deficit since earlier this year he pushed through both an “omnibus” spending bill and the so-called stimulus bill that increased FY2009 spending).

http://www.cato.org/images/homepage/200911_blog_mitchell2.jpg

It should go without saying that this post is not an argument for Obama’s fiscal policy. The current President promised change, but he is continuing the wasteful and profligate policies of his big-spending predecessor. That is where critics should be focusing their attention.

[Popcorn Sutton]

Thanks for the link barry.

http://www.cato.org/pub_display.php?pub_id=11094