As Obamacare hammers the middle class with higher premiums and loss of coverage, Democrats are turning to their age old panic button – demagoguery over the minimum wage. Later this week or next week, the Senate might consider yet another minimum wage increase bill, S. 460. When Pelosi and the Democrats took over Congress in 2007, they raised the minimum wage to $7.25 per hour from $5.15 per hour. The bill would raise the minimum from $7.25 per hour to $10.10 after two years, indexing future increases to the rate of inflation.
With the labor-force participation rate at 62.8%, the lowest since 1978, what better way to crowd out the labor market than by imposing new wage mandates? As we can see, past increases have done nothing to increase household income across the board, and if anything, we have lost more jobs as a result of the mandate.
If Democrats truly believe that these jobs are filled by those who support families, then why stop at $10 an hour? Come on – do they really believe that $10 an hour is a “respectable living wage?” Why not make it $15 or $18 an hour? If government can simply wave a magic wand and increase wages without destroying the job market and the economy, why not make it even higher so everyone can earn a middle-class wage?
The reality is that wage mandates force employers to modify their hiring practices and restructure their production in order to circumvent the mandates. This will be exacerbated by the Obamacare employer mandate, which gives companies a $3,000 incentive not to hire someone for full-time work. With the extra hourly rate increase, employers will have an even bigger reason to reduce hours, and in return, lower productivity and efficiency. Here’s how Jed Graham of Investors’ Business Daily explains it:
Faced with such a dramatic increase in labor costs, it is inevitable that employers would step up efforts to evade the portion of the cost increase that is largely voluntary. By shifting low-wage workers to part-time, for-profit employers faced with a $2.85 hike in the federal minimum wage (from $7.25 now) could avoid the equivalent of an additional $2.44-an-hour wage hike.
That $2.44 figure reflects the pretax (wage-equivalent) cost of ObamaCare's nondeductible employer fine for each full-time worker who accesses subsidies to purchase coverage via the new exchanges.
With a $10.10 minimum wage, a worker would earn $293 per 29-hour workweek. That's ever so slightly more than the $290 a 40-hour workweek would net at the $7.25 minimum wage in effect in 30 states.
That means full-time workers earning the federal minimum who saw their hours cut to part-time could work a lot less without suffering an income hit. Some could make more by working a second job. But those now earning $8.50 or $9 an hour might still end up with less income if their hours are cut, despite a higher wage.
If Democrats really cared about the plight of the “working class” they would repeal Obamacare.
Oh, and one more thing: if they really want to raise the minimum wage, maybe they should stop supporting an endless importation of third-world labor to artificially depress wages.