President Barack Obama recently announced an initiative to raise the minimum wage from $7.25 to $9.00 an hour. Not surprisingly, economists from both ends of the political spectrum have taken opposite sides on the issue. Liberal economists think this will help the poor, while conservative economists believe that the move will likely increase business costs and decrease employment. Ignoring this aspect of the debate, there is much more to the story.
I noted in a previous column
that Obama is a crony capitalist disguised as the helper of the “99 percent.” So how does that fit in with this initiative? Even liberal economists would agree that raising wages does impact employment. How does this help the rich and large companies?
Alert: End of America's Middle Class a Startling Reality. Read More Here.
The first point is that yes raising the minimum wage would help the 99 percenters (for those with jobs). While no one can survive on $9 an hour, it is a heck of a lot better than $7.25 an hour. Obama is awarding those who voted for him. According to a New York Times exit poll, “Obama received 63 percent of the votes from Americans making less than $30,000 and 57 percent of those making between $30,000 and $50,000.” These are the people who will be impacted by the minimum wage hike.
So how does this fit into large corporations? That brings me to my second point. It doesn’t in this case. According to OpenSecrets, Obama’s top five donors in 2012 included, Google, Microsoft and many prestigious universities. While companies like Google and Microsoft certainly have some employees who make minimum wage, the vast majority make more than $50,000 a year (as is the case with university employees).
Obama’s top donors do not include companies like Wal-Mart, Burger King, Home Depot, etc., where a good percentage of employees make minimum wage and therefore the companies would face hefty cost increases from this hike. Obama has the best of both worlds. He can reward his base of voters without alienating his base of donors.
To be fair, Mitt Romney and other presidential candidates received money from large banks and companies that have few minimum wage jobs. So what is my point? The losers here are the people Obama talks about constantly, the middle class.
Some economists claim that raising the minimum wage will push up wages across the board, thereby benefiting the middle class. However, even assuming that’s true, direct help would have far more impact than this trickle up economics would. But forcing companies to pay people $50,000 to $100,000 a year will alienate the donors without even rewarding his base of donors.
So there you have it. Once again the giant corporations with lots of money do well with trillions of dollars overseas to avoid taxes (most of which are tech companies and Obama supporters) and the poor get wage increases, while the middle class suffers. If these policies (which started before Obama’s presidency) continue, the American dream will soon be a thing of the past.
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