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The minimum wage – Politics 101?

February 22, 2014

The minimum wage increase issue is one that affects a lot of plain old folks. Somewhat lost in the blizzard of statistics is the fact that there a lot of people earning less than President Obama’s $10.10/hr. target. While it is true that only about half a million or so people earn $7.25 an hour, there are many times that number that earn $8 to $9 an hour, and that’s a lot of voters.

In my own little corner of the world, jobs are proudly advertised as being “above-average compensation” at around $8.50 an hour. A job fair where someone is paying $10.00 an hour attracts so many applicants that there are pre-screening desks set up to control the number of interviewees that make it to the HR reps. That indicates that $10 is most people’s sweet spot.

Dismissing the issue as a factor in the upcoming elections because relatively few people actually earn the very bottom wage number is, well, stupid. At $7.25 an hour, and assuming the job is forty hours a week, you earn just over $15,000 a year. At $10.10, the number goes to $21,000. I don’t know anyone that wouldn’t want a $6,000 raise. Even those above-average $8.50 workers are going to get another $2,680. Small wonder that polls show 60% of Americans support an increase in the minimum wage.

The argument shouldn’t be about should we do it, as much as what we will really get out of it.

For one thing, the new normal fulltime workweek has been defined by Obamacare as 29 hours. Working two-thirds of the previously normal forty-hour work week is highly touted as a good thing. The trouble is, that’s also two-thirds of your former paycheck. No matter who you are, or what your pay scale is, taking a 33% pay cut is a big ouch. Enter the government EMT’s with a really big band-aid, the minimum wage increase.  Presto, emergency handled.  Or is it?

People tend to live in the present. Right now, while some people have had their hours cut in anticipation of the Obamacare employer fines, penalties, taxes (take your pick), added to the premium increases employers fear, it hasn’t hit the majority of workers. Thanks to innumerable “adjustments” to the deadlines,  it won’t have a large-scale impact until after the 2014 and even 2016 elections. Folks working a forty-hour week now simply see a nice raise in the offing.

Most small to medium-size businesses, especially those that who employ semi-skilled workers, simply can’t absorb the added costs of raising wages by 40%, and surveys show that reducing the payroll will be a survival necessity for many. It’s either that, or go under. For the sake of argument, let’s project they all decide to go to the 29-hour week.

If you are making $7.25 an hour working forty hours, you are making $290/wk. Working 29 hours at $10.10 an hour you will be making $292.90 a week. That’s $150.80 more annually. Oops! Where did that six grand a year go?

This administration has routinely played down the true cost of their policies, particularly the true costs of Obamacare, and this is another four-Pinocchio moment. In order to try to stop the backlash about loss of income resulting from Obamacare mandates as well as its direct costs, liberals have to make this move.

By the time November 2014 rolls around, anyone who has lost a job or had their hours cut and suffered the economic consequences is going to be looking at things a bit differently than they did in 2012. If the pain can be lessened by an increase in the minimum wage,  fewer people are going to be in the economic ER. Less pain, less backlash. That’s politics 101.

Then there is the issue of people re-entering the workforce and getting off  welfare, because now they can make enough money to survive. After all, they only have to work 29 hours a week, right? This is another classic bait-and-switch argument.

Most low-income support programs, including Obamacare , either cut off or substantially reduce subsidies and payments at 150% of the poverty level. As this is written, the Federal income number posted on the HHS website defining poverty  for a two-person household is $15,730. Two people earning $7.25 an hour and working just 20 hours a week match that number pretty closely. The closer that two-earner household gets to 150% or $23,595, the fewer benefits they can access. When the minimum wage goes to $10.10 they will earn just over $21,000 for the same hours. If they collectively work just another four and a half hours a week, they will exceed the 150% threshold.

Would you take even a 29-hour workweek, if it was actually going to put you in the hole financially? If you suddenly can’t access food stamps, heating subsidies or even Obamacare subsidies, why would you go back to work? That’s just simple kitchen table economics. The problem is, we have to have the facts to do that math.

If the minimum wage proponents gave the people all of the facts and the country still wanted to raise the minimum wage, that’s at least an informed decision. Unfortunately, telling the whole truth and nothing but the truth is not politics 101.

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