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February 26, 2013
The Dismal Science
Minimum Employment
by Adam Smith

The news is full of dire consequences if the sequester implementation is not averted. The silliness in Washington DC has reached new heights. The fact is the sequester is going to reduce current year federal government spending by about $44 billion. Sounds like an enormous total. That is until you realize the government is going to spend around $3.5 trillion dollars. The $44 billion is a little more than 1% of the total spend and really gets lost in the rounding when it comes to total government spending.

It seems the politicians love to see themselves on television working hard to avert the next crisis, even when one does not exist. Congress could pass a bill the day after the sequester went into effect making it have no effect. We need to card all the politicians in DC to make sure they are all of appropriate age. You find more maturity at a frat house on Friday night.

The Republicans are running around talking about the debt. Cutting costs. We do need to address the debt but if something else does not improve, all the planning by both parties will come to naught

Let’s see, what was that other thing that it seems no one in Washington likes to talk about. Environment – no, China – no, Iran – no, gun control – no. Oh yes, the economy. There are still 23 million people either unemployed, underemployed, or have given up trying to find a job. And if you work in private industry there are some very troubling signs.

Obamacare is destroying full time job opportunities. More companies are going to part time positions to avoid paying for mandatory health insurance.

The tax increases imposed at the beginning of the year are starting to be felt. Retailers are lowering their sales and earnings estimates for 2013 because they started to feel the tax increase effects in February. Lower sales and earnings for companys means no growth in employment and maybe some layoffs. With an economy that is barely growing, it is easy to see the US slipping back into a recession.

If the economy does start to shrink again or even just keeps going at its current pace, we are in trouble. Most of the models on the debt assume that the economy is going to recover and grow at 3 – 4%. No amount of tax raising or cost cutting to going to fix our problems until the economy finally comes back to normal levels of growth.

Reading the above it seems that all is doom and gloom and it does seem like 2013 is going to be a tough year. But given the above, it is really almost incomprehensible that the President of the United States has recommended that we increase our minimum wage from $7.25 to $9 per hour. Really?

We have at least 23 million people in this country struggling with employment and the President decides it is a good idea to increase the minimum wage (known to decrease employment) by 24%. Really?

The raising of the minimum wage will hit hardest teenagers trying to get their first job. You know those teenagers, the ones that the unemployment rate is currently at 23%. He wants to implement a policy that will dramatically increase that percentage. Really?

How entirely insensitive and uncaring can a person be?

In my articles, I try to be fair to all points of view. I do think that there is a place in society for having a minimum wage. I just wish that it would be much more nuanced in its implementation and adjusted for current economic conditions.

This minimum wage policy recommendation is so ridiculous that it has no chance of passing. These are hard times that require serious people. Making this recommendation makes the President appear unserious and completely out of touch with how many proud people are struggling keep their families going in a stagnant economy.

So many of the policies that have been implemented over the past four years have been deleterious to employment. It is time each law, policy, regulation, etc. to be scrutinized about its effect on employment. All that hurt employment be discarded or put on hold. It is time we start putting those hurting the most at the front of the priority line.

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