Obama’s Minimum Wage Ploy Hurts the Working Poor


President Obama put his political fortunes ahead of the least prosperous citizens by badgering Republicans in Congress to raise the minimum wage to $10.10 an hour.

In 1938, Congress established the federal minimum wage and has periodically raised it to accommodate inflation. Currently at $7.25 per hour, it appears woefully inadequate to fair-minded Americans, and the president feeds this sentiment by carping that it’s worth 20 percent less than when Harry Truman was president.

What Obama doesn’t tell voters is the minimum is sometimes paid to teenagers bagging groceries and college students on work-study jobs that are essentially masked financial aid. Moreover, adults earning the lowest wages have sources of income not available in Truman’s days—an earned income tax credit, food stamps and Medicaid. And employers of domestic workers now fund social security pensions and unemployment insurance—an additional 8 percent in compensation generally not offered in Truman’s time.

Liberal newspapers and cable networks are fond of rolling out single mothers, seemingly following the script of union-supported community activists and organizers, who recount they cannot afford to eat earning so little at McDonald’s. Yet, they hardly ever appear malnourished, and correspondents never get around to asking how they use their food stamps or about child support payments they might receive.

Except for apologists for farmers that don’t farm and academics hanging off the left edge of reality, economists don’t like price fixing, whether perpetrated by unscrupulous businesses or politicians buying votes. After all, agricultural supports raises the price struggling mothers must pay for milk, clothing, and other essentials for their families. The minimum wage makes hiring workers more expensive, eliminates jobs at the bottom of the ladder, and generally slows growth and raises unemployment.

Economic studies show that periodically raising the minimum wage to keep pace with inflation creates little additional harm; after all, that is not much different than the raises most other Americans receive as prices rise. However, what Obama is proposing is a wholly different matter.

Congress last adjusted the federal standard in 2009. Since, consumer prices are up 9 percent but the president is proposing a 39 percent jump. Along with higher taxes and health insurance costs (thanks to “Obamacare”), most businesses will be compelled to substitute more technology for workers. Drug stores, grocers, and McDonald’s, for example, can make greater use of computerized checkout and order taking, and even impose premium prices on patrons who insist on dealing with clerks directly.

McDonald’s is already challenged by an inability to raise prices because working-class Americans can’t afford to pay another dollar for lunch.

Across the board, small value-priced restaurants and hotels will do less business or close, and others in the planning stages will never open. Ask the folks in the lodging business in Sea-Tac, Wash., where the city council has hiked the local minimum beyond what the market can reasonably bear.

Obama understands Republicans in Congress, who care about creating jobs and growth, cannot happily approve a huge increase to $10.10. Hence, he gets to run around the country fashioning Democratic candidates in the fall elections as champions of justice, and the GOP leaders as throwbacks from the Age of Dickens.

To this economist, like it or not, a minimum wage is a fact of life. Raising it to keep pace with inflation and a bit more to $8.25 won’t affect employment much.

Giving the president a political victory by raising it further will only serve to deny hundreds of thousands of the working poor decent jobs. In the meantime, his politically motivated campaign blocks a reasonable adjustment and keeps those earning the least from getting a raise.

Peter Morici, professor at the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Previously he served as director of the Office of Economics at the U.S. International Trade Commission.

Views expressed in this article are the opinions of the author(s) and do not necessarily reflect the views of Epoch Times.



  • rg9rts

    Now we have the gopee message. Hey Pete you do realize that the american taxpayer subsidizes Micky D’s to the tune of $1.2 BILLION a year. American business has NEVER done a thing for the worker unless mandated by law or SHAMED into action. I think Christie needs your input

  • rg9rts

    Hey Pete don’t forget top consult the Mickey D tipping guide for the pool boy and other peons for the holidays.

  • LTE2

    It should be kept in mind when wages increase, other employer expenses go up as well.

    • Mugzi

      Also, when he say “consumer prices are up 9% but the president is proposing 39% jump”… does this scholar (?) realize that 9% does NOT include fuel and maybe even food. Wages of the working class have not kept pace with what they should be in the 21st century…

      • LTE2

        “Wages of the working class have not kept pace”

        .
        This doesn’t change the fact a $1 raise in the minimum wage is more than a $1 to an employer. You may use McDonald’s as an example but one must keep in mind many McDonald’s are franchised and those units must stand on their own. A owner that may have 2 stores may not be able to cope in a way McDonald’s owned stores could.
        .
        Economists will point out that sometimes well intentioned forced changes to the market create perverse incentives, counteracting the intended good. A raise in the minimum wage may not affect a growth area with a new hot industry but could be a drag on an area that has more traditional industries that have to compete on cost. Minimum wage increases may not cause a massive reduction in the work force but may stall job growth by reducing future hiring. The new hot area has to start making up for the taxes the older industries can no longer pay.
        .
        The effect of minimum wage increase on the economy are minimal as a $3 increase will not cause a spending boom. At best, one could hope for is the employee will be able to pay their electric bill on time.
        .
        In time prices will readjust and a $10.10/hr wage will be seen as outdated, just as what happened to the current minimum wage.
        .
        Where we are at today I think goes back to when the free trade argument picked up steam back in the early 1990′s. It was never clearly established how $18/hr American workers were going to compete against .50/hr Chinese or Mexican workers. A look at trade and current account balances will show the United States was on the losing end of free trade.We sell them more soybeans, they sell us everything else. How many soybean growers are reading this board?
        .
        All we ended up with is more poor Americans and a bunch of illegals to boot.
        Some trade, Some deal.
        .
        I have thought the Republicans have a wonderful opportunity to go back to what was their traditional view on trade, tariffs for the protection of American industry and workers. They should be explaining the cost of free trade and that the Chinese made coffee maker you bought sent money to China while the savings from the cheap maker was used to pay increased school and city taxes due to a decline in tax paying American industry. Oh well, the Republicans never miss an opportunity to miss an opportunity.

    • AskandTell

      In committee hearings, data shows that a minimum wage increase for a company such as McDonald’s would actually translate to an increase of four cents an hour. This was also a warning to any company who chooses to lie to the public.

      • LTE2

        “data shows that a minimum wage increase for a company such as McDonald’s would actually translate to an increase of four cents an hour”
        .
        What committee?
        .
        When an employer pays more wages, they pay more taxes that are coupled to the wage.

  • Pony

    Because most Fast Food has peak hours they are usually only fully staffed during those times. Younger workers use these jobs as entry level to build a resume and gain work place experience . They were never intended as full time jobs able to support an adult let alone a family.
    I often see the profile of a woman who says she has worked there for 10 + years with small children well under that age saying she can’t support her family on that wage. If you can’t feed yourself perhaps having children isn’t the best idea.
    Meanwhile with the continuing rant to raise fast food to 15 dollars our government continues to allow business here to offshore their company where they pay pennies on the dollar and then import it here to sell at a huge markup.
    The problem isn’t the minimum wage its the loss of our middle class blue collar jobs that supported a family.

  • AskandTell

    ELIZABETH WARREN: During my Senate campaign, I ate a number 11 at McDonald’s many, many times a week. I know the price on that. $7.19. According to the data on the analysis of what would happen if we raised the minimum wage to $10.10 over three years, the price increase on that item would be about four cents. So instead of being $7.19 it would be $7.23. Are you telling me that’s unsustainable?

    BUSINESS OWNER DAVID RUTIGLIANO: Senator Warren, not all restaurants are created equal. I’m in a full service restaurant business. McDonalds has efficiencies and they operate completely differently than I do. I have many jobs, many jobs that pay well above minimum wage. We have a retirement plan. We offer health insurance to our salaried employees. So my business is a little different. I can’t raise a four cent price. I mean I don’t have, I don’t operate like a fast food restaurant. I would hope you appreciate the distinction.

    WARREN: I do appreciate the distinction and I’m not going to be in the business of being a McDonald’s representatives but they would talk about having some higher paid jobs and some opportunities for management and advancement as well. But I get your point, maybe it’s only four cents on $7.19. But if your entrees are $14.40 we’ll see how fast I can do the math — are you telling me you can’t raise your prices by eight cents?

    • LTE2

      “But if your entrees are $14.40 we’ll see how fast I can do the math — are you telling me you can’t raise your prices by eight cents?”

      .
      This is a great line…. for people who have never been in business and Warren can be counted among that group.

  • horribletruth

    USA Europe and Japan are DDOS attacking various countries for Bit-coin mining with -440 deg sub zero processing chips easy money in comparison of cost vs how much is made and then blame debt on some individual or weak link or the problems of the planet.. all the while generating massive untraceable debt by clearing the data transfer cache and in return fake debt by credit inflation.. 10 million chip vs stealing 1 million a day by Malware NSA spy-ware and theft across the globe in comparison 1 dollar here and there from poor people isn’t much different nor as serious coming from top fat cats and dictators keep in mind when the grid gets government shut down taxes halt and the underhanded side of the government plays nasty clear the data wipe taxes and credit

    • Daniel Price

      please seek help

  • Robin Cohen

    Even at $10.10 an hour x 40 hours it will be difficult for a family to survive in many areas of the country and many employers will balk by hiring fewer full time workers with benefits.

  • Cynthia W.

    Is this article for real? Is this what the GOP has their “cult” believing. You’re destroying our country and don’t really care. Just pack up your money, move elsewhere, and leave the hungry throngs behind.

  • Susen Shapiro

    Of course the working poor can’t afford to spend an extra dollar for lunch. They don’t make enough money. These so-called experts drive the conversation around in circles to prove their idiotic point. This big deal $10.10 an hour is insufficient for most workers. Maybe it’ll let them keep their heads above water, just barely, for a while. But why would these capitalist creeps care? Keep ‘em down, keep ‘em hungry.

  • Canukistani

    I guess I will never understand how guys like this can keep insisting that the tinkle down model works and all will be well if everybody just does all they can to protect the profit margins of the corporate world. They make it sound somehow noble to scrape by on subsistence wages to do that, while continuing to proclaim in their superior way that if the common people have no bread they should just work harder and in the meantime eat cake. We’ve seen where that goes. The dead end is clearly visible for all they try to dress it up.

    They’re so caught up with their economic models and studies and their determination to defend the profit margins of big business that they never even try to imagine what would be like on a personal level to try to keep their lives together when the job market is tough and they don’t have fancy credentials to get them in the door. They are as out of touch as Marie Antoinette was and they deserve much the same fate, at least figuratively speaking.

    To point out what should be obvious, Macdonald’s and other large corporate citizens don’t have to raise prices to support a raise in the minimum wage. I’d suggest instead that they’ve been gorging themselves on profits for some time now. It’s time and past time when, even though it’s contrary to Mr Morici’s economic models, those profits aren’t sacred. It’s their turn to make do with a little less in order for everyone else to have a little more. Let’s have that trickle down from the top for awhile instead of that other stuff they’ve been giving the rest of us.


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