The Minimum Wage Hike: Who Pays?

As President Obama tries to deflect attention away from his failed foreign and domestic policies he's bringing up the old class warfare issue in one of its stereotypical garbs: a raise in the minimum wage.

It would be nice for everyone to earn more money, and sympathy can be gained by saying the least paid could benefit the most from a pay raise. But the question Obama and his media supporters flee from is a simple one: who pays? The jobs held by minimum wage earners are predominantly in service jobs, such as fast food franchises, and small business establishments.

These businesses are supported by consumers. And if consumers are expected to pay more to support a hike in the minimum wage, it follows that consumers would need more money in their pockets in order to afford to pay minimum wage earners higher wages. If consumers don't have more money, then a hike in the minimum wage without a hike in consumer incomes would force them to purchase less. Either way the minimum wage is not controlled by government fiat but by simple economic reality: the disposable income of those who purchase the goods and services produced by minimum-wage workers.

And recent developments in the economy under the policies of President Obama have created the opposite situation: that consumers have less money in their pockets to spend at small businesses.

In fact, under President Obama the median income of working-class Americans has dropped more quickly than under any other president since the Great Depression. The average working American now has the same income they had in 1996, but the cost of things they are most likely to purchase have all risen. For example, gasoline, an item essential for working Americans, has more than tripled since 1996. And under President Obama, who has obstructed drilling and oil exploration on Federal land, the price of gasoline remained over four dollars a gallon longer than under any president in history.

Other costs have risen: in 2005, property taxes were an average of 2.79% of income, in 2010 this rose to 3.25%, taking a bite out of the pay of working Americans that is already lower. This is another tax that consumers have no choice but to pay, and which is rising faster than at any time in history. And in highly populated areas it has risen much more.

If anything, the disposable income of working Americans is in no condition to support a raise in the minimum wage. President Obama cannot simply order people to pay more for items. He has floated Wall Street investment firms for years by using printed money to purchase securities, yet that has failed to make any dent in the unemployment situation, or to spur economic growth. Those four trillion dollars weren't directed toward those making minimum wage: he expects consumers to foot that bill, consumers who have less in their pockets every year.

The fact is President Obama has damaged the ability of minimum-wage workers to have jobs more than any president since the Great Depression. Teenagers, the traditional minimum wage earners, are suffering the highest rate of unemployment in history. Illegal immigrants are taking jobs from citizens in urban areas run by the Democratic Party's officials and operatives in public sector unions.

And as ObamaCare, forced on the American voters by the Democratic Party, increases monthly health insurance premiums, even less money is available for consumers to spend on discretionary items such as visiting restaurants, purchasing clothes, and other items not essential to the family.

As the Obama Administration's policies take effect the wallets of middle income Americans have shrunk. And it is their wallets, and their wallets alone, that would pay for any minimum-wage increase.

Rather than harping on the tired Democratic Party's rhetoric of class warfare and minimum wage inequality, the Obama Administration can, with the stroke of "his pen" as the president has recently said, lift the payroll taxes from those making minimum wage. Why the president chooses to avoid this simple solution, which would put up to 30% more money in the hands of those already working at minimum wage, is difficult to understand.

President Obama can give those already working at today's minimum wage rate a pay increase simply by removing Federal payroll taxes, just as he unilaterally lifted 2% of the social security tax from paychecks for two years. This would accomplish two important goals, goals that are central to helping workers: it would put more money in the hands of those who earn the least, and it would not damage the payrolls of those who own small businesses.

The idea that small businesses are swimming in excessive profits is false and misleading. If the president believes that small businesses don't need money, that they are holding back, then he has to explain why he handed four trillion dollars to Wall Street when they have far more money to spare.

If President Obama has proven anything it's that his government policies cannot create jobs, that they hurt the incomes of middle-class Americans, and create higher unemployment for all working people. Those who are hurt the most are the ones who are least able to cope.

If President Obama wants more money for the minimum wage earners, perhaps he should consider some trade-offs. He can cut the pay of Federal workers, who, unlike the working middle class, have seen their pay and benefits increase in the past ten years. He can, with the stroke of his famous pen, remove all Federal taxes from gasoline and diesel fuel. He can open up Federal lands to oil exploration, and enable tens of thousands to work on the Keystone pipeline.

But he won't cut Federal pay: they are the shadow party that he needs to run government. He wants the votes of government workers at all levels. He would rather exploit the middle class and poor than alienate his closest allies. Just as in warfare, Obama needs to depend on past allies for support, and all the while pretending to help those most in need. It's a strategy that may have played out its usefulness, as middle-class American taxpayers reel under the weight of support Obama's government allies.

The president likes to frame the minimum-wage issue into a discussion of whether they should or should not earn more. But that's irrelevant: the real question is whether consumers can afford, given their ever-lower disposable income, to pay more for what minimum wage earners produce. And under Obama the answer is no. As Oxfam has reported, since 2009 Obama has grown the gap between rich and poor in his country faster than the leader of any developed nation. 

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