The Obama Administration Actually Just Suggested American Companies Make Less Money

It mind boggle your mind, but it’s true.

In a blog post at the White House’s website, Jason Furman, the chairman of the Council of Economic Advisers, and Council of Economic Advisers member Betsey Stevenson wrote this in response to the CBO’s estimation that raising the minimum wage to $10.10 an hour would cost the economy a half-million jobs…

“Overall the logic for the finding that raising the minimum wage does not result in large adverse impacts on employment is that paying workers a better wage can improve productivity and thereby reduce unit labor costs. These adjustments, along with others that firms can make, help explain why the increase in the minimum wage need not lead to a reduction in employment. Higher wages lead to lower turnover, reducing the amount employers must spend recruiting and training new employees. Paying workers more can also improve motivation, morale, focus, and health, all of which can make workers more productive. In addition, by reducing absenteeism, higher wages can increase the productivity of coworkers who depend on each other or work in teams. In addition, businesses can adjust in other ways rather than reducing employment (for example, by accepting lower profit margins). CBO’s estimates do not appear to fully reflect the increased emphasis on all of these factors from the recent economics literature.”

Consider the breathtaking mendacity in this statement.

First, paying workers a better wage can improve productivity – if in fact the employer makes the strategic choice to pay a better wage to a specific employee. If that employee is working two jobs, for example, and is tired on the job in question, a better wage might result in the employee cutting back hours at the second job and therefore getting more sleep. But a one-size-fits-all, government-coerced wage increase has no strategic value where productivity is concerned. It’s tantamount to the political commissar showing up at the factory and announcing the manager will be increasing everyone’s pay. Rather than improve his individual productivity, the employee is now incentivized to get on the right side of the commissar in hopes he’ll pay another visit to the factory with a further wage increase.

That someone on the Council of Economic Advisors would put his or her name on such a blatantly foolish statement is not insignificant.

Also, the idea that an increase in the minimum wage would not result in a decrease in employment is novel, considering that only in booming economies in which a labor shortage exists and therefore a minimum wage is largely meaningless in terms of the labor market is that a possibility. In fact, there hasn’t been a minimum wage increase in a bad economy since the late 1930’s for this very reason.

As for the lower turnover argument, we’re talking about minimum wage jobs here. Nobody hires people at minimum wage for jobs which require a lot of skill or training. If it takes a significant amount of training to make an employee productive, you’re going to pay that employee enough money on your own volition to keep them on the job. The federal government cannot positively affect that dynamic.

As an aside, it turns out that the government numbers show that on an historical basis, there is no need for a minimum wage increase…

Oh, but it doesn’t feel that way? Maybe that’s because they don’t count food and fuel prices in inflation.

And the fact that the poorer you are, the larger the percentage of your meager resources go to pay for food and fuel will be means that inflation numbers are meaningless to you.

What’s not meaningless is Obama administration “green” policies which explode your light bill and the Fed’s printing money which explodes your grocery bill, making your cost of living escalate greatly even though the government’s inflation numbers don’t show it.

It’s interesting that Obama is pushing a minimum wage increase which will decrease employment and put more poor people out of work – and also increase the number of people who are unemployable – while at the same time engaging in policies which destroy the purchasing power of the lower class (and the middle class too, for that matter). He could instead be working to lower the cost of living for poor people by taking steps to make food and fuel cheaper.

Like doing away with ethanol mandates, for example, or getting the Fed to stop flooding the markets with $85 billion a month in fiat currency, or stopping his war on coal, or issuing leases for energy exploration in places he’s locked up, or backing away from Obamacare which has terrible effects on restaurants and other food-service businesses.

He’ll do none of that, and so the cost of living for poor people will continue to be a tremendous burden. And the cost of living for middle-class people will continue to eat up their disposable income and make the consumer economy sluggish.

It’s the kind of thing you’d expect from an administration made up of economic illiterates. And that’s why the astonishing suggestion that American businesses might just agree to become less profitable based on Obama policies isn’t all that surprising.


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