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Obama's Minimum Wage Hike "Won't Meaningfully Help Economy"

Tyler Durden's picture


The US minimum wage has been a common news topic lately - increasing its sound and fury since President Obama's State of the Union proclamation of a rise in federal employee minimum wages to $10.10 (from $7.25). While obviously a contentious political issue, one question keeps coming up - will this help? As BofAML notes in a recent report, a simple back-of-the-envelope calculation suggests that the rise in wages from a minimum wage increase would amount to fractions of a percentage point on macroenomic data. There simply are not enough people working at (or below, since some jobs are exempted) the minimum wage to have a noticeable impact on the total wage bill and in the end, there are just too few people, earning far too little, at the minimum wage to meaningful affect aggregate macroeconomic statistics. So why is he doing it?

Via BofAML:

The Chart below shows the limited coverage of minimum wages upon the labor force.

According to BLS data, in 2012 there were just over 129mn wage and salary earners in the US, and a little less than 3.6mn were paid at or below the federal minimum on an hourly basis. In other words, only about 2.8% of US wage earners were paid at or below the minimum wage. This share has risen in recent years, likely due to increases in the statutory minimum from 2007 and 2009, as well as the recession pushing some workers into low-paying jobs. Even restricted to just hourly workers, of which there were about 75mn in 2012, according to the BLS, less than 5% are paid at or below the minimum.

To figure out the effect of a minimum wage increase on wages in the aggregate, we have to make a few approximations for unavailable data. First, the share of workers at or below the minimum appears to have been trending slightly lower — as one might expect as the economy recovers — but let’s be conservative and assume it still stands at 2.8% today. Next, we need to figure out the share of wages, not persons, being paid at the minimum. Since those at the minimum wage are earning less than those above, less than 2.8% of wages are at the minimum — in fact, well less.

Chart 1 shows the minimum wage as a share of the prevailing hourly wage for private production and nonsupervisory workers. We plot this measure as it has a long history, which shows that the current share of around a third is not particularly high. The average wage across all workers in 2013 was about US$24/hour — nearly US$4/hour higher than production and non-supervisory workers.

But, as Chart 2 shows, average wages vary significantly across sectors — as do the relative sizes of each sector, shown as the share of total private sector hours along the horizontal axis.

For the sake of argument, let’s assume that the minimum wage does increase from the current US$7.25/hour to the proposed US$10.10/hour. That is a US$2.85/hour increase, or 39%! Surely that has to be inflationary?

Not necessarily. As a rough approximation, US$2.85 on a US$24 average hourly wage is nearly a 12% gain. But with just 2.8% of wages subject to the minimum, the overall impact is a 0.33% increase in average hourly earnings. This is very unlikely to be noticeable at all in the wage, let alone the inflation, data. If we use the 5.5% from the prior paragraph, the impact would be doubled, but still less than a percentage point increase in average hourly wages. Of course, these are very simple computations, but this exercise gives useful ballpark figures.

The minimum wage increases that have been enacted at the state level this year are smaller in size — the largest, a US$1.00/hour increase, brings the minimum wage for New Jersey to US$8.25/hour. This is only a little more than a 4% increase in the average hourly wage, so even if 8% of the workforce was affected, the impact on wages would still be just 0.33%.

In the end, there are just too few people, earning far too little, at the minimum wage to meaningful affect aggregate macroeconomic statistics

So one has to ask - if the rise in the minimum wage has begligble effects on growth or inflation and has the potential to price some out of the employment market - why is President Obama so insistent on its occurrence?


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Wed, 02/05/2014 - 22:54 | 4406674 Music101
Music101's picture

Even if it would work in theory -- it wouldn't -- raising it too much and too quickly would simply create other imbalances and cause significant layoffs and corporate margin pressures. 

It's a WORLD OF DEBT!!! See Video Below "WORLD OF DEBT"!!

Wed, 02/05/2014 - 22:59 | 4406686 zaphod
zaphod's picture

It won't help the economy, but it will help the Democratic Party. There is no other reason to do it.

Wed, 02/05/2014 - 23:02 | 4406692 Occams_Chainsaw
Occams_Chainsaw's picture

Both parties are willing to spend any amount of YOUR money to buy some new vote slaves.


Long live the Free Shit Army!!!!

Wed, 02/05/2014 - 23:11 | 4406717 nmewn
nmewn's picture

Lets just go full retard and make it fiddy an hour.

Entry level, menial jobs deserve a living wage and I've never had a $85 cheesburger in my life, so I want to see what it tastes like!


Wed, 02/05/2014 - 23:18 | 4406736 Skateboarder
Skateboarder's picture

Like a plastic portion of cowhorsefox adorned with extinction-proof plastic sponges infused with flour particulates.

Wed, 02/05/2014 - 23:35 | 4406763 nmewn
nmewn's picture

Thats right, this will give them the opportunity to perfect the chitilated horse nut with the pineapple glaze salad entree, to be carried back to the office in the re-procossed-recycled-heavily sterilized hand towel paper plates collected from the mens bathroom waste basket.

Its a win-win! ;-)

Thu, 02/06/2014 - 02:54 | 4407045 James_Cole
James_Cole's picture

In the end, there are just too few people, earning far too little, at the minimum wage to meaningful affect aggregate macroeconomic statistics

Lol, brilliant insight bofaml

Wonder if dropping the compensation of the Fin. sector would have a 'meaningful' effect on the macro economy? 

* spoiler * bofaml discovers the entire world economy would immediately collapse!

Thank the gawds we have bofa to explain such things to us. 

Thu, 02/06/2014 - 09:59 | 4407500 johnQpublic
johnQpublic's picture

even at ten an hour, an ethnically challenged female makes far more per year just collecting government moneys for staying home and increasing the population of poor downtrodden uneducated fatherless n'er do wells

Thu, 02/06/2014 - 15:04 | 4408569 czardas
czardas's picture

The difference is that today folks think it's "OK".  When I got to the US in 1980 few would have publicly stated that living off welfare was "OK" and acceptable.  Now taxpayers are paying for ads encouraging folks to become dependent and politicians praise the notion of reliance on the state.  How much further can we decline?

Wed, 02/05/2014 - 23:26 | 4406748 Occams_Chainsaw
Occams_Chainsaw's picture

C'mon bro....let's go $100.....we can all be ritch bitches!

Wed, 02/05/2014 - 23:40 | 4406778 nmewn
nmewn's picture

I'll see that and raise it a hundred...the sky is the limit when Obama is talkin the talk with our money!

Right? ;-)

Thu, 02/06/2014 - 00:33 | 4406870 A Nanny Moose
A Nanny Moose's picture

I've never had a $85 cheesburger

You've never had friends with airplanes?

Thu, 02/06/2014 - 00:31 | 4406871 Canoe Driver
Canoe Driver's picture

Cheeseburgers are going for $85 and more, all over Manhattan.

Thu, 02/06/2014 - 09:10 | 4407337 dynomutt
dynomutt's picture

Oh, that'd be true a couple of decades ago, but nowadays, those minimum-wage earners will simply be out of luck, unfortunately. This is just the kickstart needed for some SV angel-funded startup to automate the shit out of all of those burger-flipper jobs. Perverse incentive to the rescue!

Wed, 02/05/2014 - 23:00 | 4406693 AlaricBalth
AlaricBalth's picture

"...why is President Obama so insistent on its occurrence?"

Votes in 2014

It plays well in Peoria.

Thu, 02/06/2014 - 00:45 | 4406904 The Dunce
The Dunce's picture

Bullshit.  Let's face facts.  We have a bullshit service economy.  That won't change.  So we need a wage hike.  Word to your mother.

Thu, 02/06/2014 - 01:07 | 4406950 Hal n back
Hal n back's picture

it woudl be interesting to see the across the board min wage of 10.10 and how it would  affect a company like AMZN and its 110,000 employees. I think that sort of raise woudl wipe out AMAZon profits. Amazon and vendors cannot pass thru the cost in creases as it woudl not be compentitve with many brick an dmortar stores. Then all AMZN woudl need woulf be for all the states to levy sales tax on on line.


Say good bye to the 600 PE AMZN and possibly AMZN



Thu, 02/06/2014 - 03:02 | 4407050 James_Cole
James_Cole's picture


Wait..are you saying amzn has profits? Shit, all this time I thought it was bullshit accounting..


Thu, 02/06/2014 - 09:13 | 4407343 dynomutt
dynomutt's picture

That's handled.

Thu, 02/06/2014 - 08:56 | 4407304 jerry_theking_lawler
jerry_theking_lawler's picture

This is all assuming the numbers you are dealing with are this goal seek day and age (see ADP) the numbers are probably fake....and inflated.

Wed, 02/05/2014 - 22:56 | 4406676 Grande Tetons
Grande Tetons's picture

So one has to ask - if the rise in the minimum wage has negligble effects on growth or inflation and has the potential to price some out of the employment market - why is President Obama so insistent on its occurrence?

Answer. So that the sheep will think the system is looking out for them. 

Wed, 02/05/2014 - 23:00 | 4406694 NoDebt
NoDebt's picture

Yep.  When every problem has a government solution, you're already long past screwed.  We might not be in hell yet, but I'm pretty sure I can see it from here.

Wed, 02/05/2014 - 23:05 | 4406703 Grande Tetons
Grande Tetons's picture

I am sitting here with the wife and kid and we are roasting marshmallows without a fire. Yep...having hell so close is kinda handy. 

Wed, 02/05/2014 - 23:10 | 4406718 mofreedom
mofreedom's picture

Where are you taking me in this odd basket?

Hell for you and yours, hell for me and mine.

I am the devil B H O!

Thu, 02/06/2014 - 00:42 | 4406898 JLee2027
JLee2027's picture

Personally I say raise the Minimum Wage to $50 an hour and set off the hyperinflation bomb overnight.

Wed, 02/05/2014 - 23:02 | 4406695 Skateboarder
Skateboarder's picture

Corollary: So that accelerated unemployment and withdrawal from labor can create more welfare dependants.

Thu, 02/06/2014 - 00:36 | 4406884 A Nanny Moose
A Nanny Moose's picture

No. Because gummint has been increasingly in charge of edewkayshun, since 1900. Think long and hard about it.

Thu, 02/06/2014 - 00:55 | 4406923 Ident 7777 economy
Ident 7777 economy's picture



So that the sheep will think the system is looking out for them.  "


 . . . Warning: Objects in your rearview mirror may appear as wolves . . . 


Thu, 02/06/2014 - 01:00 | 4406938 Miffed Microbio...
Miffed Microbiologist's picture

So does this mean our ration of chocolate will go up a gram per week? Well, if so I'm all in.


Wed, 02/05/2014 - 22:59 | 4406679 LetThemEatRand
LetThemEatRand's picture

The whole minimum wage debate is nothing but theater designed to make the Blue Team seem "worker friendly" when they are anything but, and to give the Red Team voters something to rail against while both parties rape us all blind.  Too bad the sheeple are too fucking stupid to see it. 

Thu, 02/06/2014 - 00:38 | 4406886 A Nanny Moose
A Nanny Moose's picture

Too bad the sheeple are too fucking stupid to see it

Who was responsible for edewkayting the sheeple?

Thu, 02/06/2014 - 08:42 | 4407276 kralizec
kralizec's picture


...who ceded authority to progressives...

...and once schools were turned into K-12 daycare centers, too many parents gave up giving a damn... in the end the answer to your question ultimately ends with us.

(Not that all are complicit, The Great Reckoning will sort out all the accumulated dirty laundry!)

Thu, 02/06/2014 - 09:08 | 4407318 GCT
GCT's picture

Spot on LTER!  Both parties do their best to take whatever they can from us when it is not an election cycle.  During the election cycle they promise more shit then they can deliever on.  The dumbass sheeple then vote for the one who promises the most feed.  Once the cycle is over they go on about the business of taking more of our rights. By the way for those that want to make a case about it for one side or the other, both sides of the isle do their best to make your life miserable.

 People are so gullable it is simply scary.

Wed, 02/05/2014 - 23:00 | 4406681 dexter_morgan
dexter_morgan's picture

Why is he doing it........DUH - because it sounds good and will warm the cockles of the left leaning folks. And, BONUS, nobody will ever bother to calculate the negative effects it will have, or if they do it will be buried, explained away with shit  like the the Kock Bros. or some other bogey man commissioned it, so therefore it must be ignored even if factual.

No downside for the king. Reality doesn't seem to matter these days.

Wed, 02/05/2014 - 23:01 | 4406697 Occams_Chainsaw
Occams_Chainsaw's picture said cock.

Wed, 02/05/2014 - 23:01 | 4406687 Cognitive Dissonance
Cognitive Dissonance's picture

"In the end, there are just too few people, earning far too little, at the minimum wage to meaningful affect aggregate macroeconomic statistics."

A classic example of missing the trees, but seeing the forest. might not make much of a difference on macroeconomic statistics BUT it will make a big difference to those 2.8% of US wage earners who were paid at or below the minimum wage.

Clearly the author of the above article has never worked a minimum wage job other than possibly as a very young adult in high school. I find the statistics above are out of context and misleading. Not saying that raising the minimum wage is a good thing. But any time you look just at statistics you aren't looking at people.

Wed, 02/05/2014 - 23:12 | 4406725 NoDebt
NoDebt's picture

With all due respect, CD, you're dead wrong on this one.

I could go on for thousands of words on this subject, but I won't.  The minimum wage and "means tested" government entitlement programs are inexorably linked.  They're almost indistinguishable from eachother in their effect.  And the net effect is WORSE than a zero-sum game.

Down-vote me, argue against me.  I don't care, I got broad shoulders.  Think it through as you see fit.  It's basically a question of "using what criteria do we decide when to flat-out carry people?"  

Extra credit thinking:  is income level the best yardstick to use to determine who gets carried on the public dole?

Done.  Out.  Your ball.

Wed, 02/05/2014 - 23:39 | 4406773 Cognitive Dissonance
Cognitive Dissonance's picture

No need to argue with you because I agree with you. Minimum wage hikes under these circumstances are not productive or helpful. Class warfare is what is being stoked here, the true purpose of Obama's initiative. And we here as well as other supposedly enlighted websites are falling for it hook, line and sinker. I would like to see those statistics adjusted for inflation, official or otherwise. And soon enough the middle class will find itself working for minimum wage. Then there will be no more class warfare because the war will be over.

Wed, 02/05/2014 - 23:54 | 4406804 NoDebt
NoDebt's picture

"And we here as well as other supposedly enlighted websites are falling for it hook, line and sinker."

Let's agree, right here, right now, to stop feeding the beast on this issue.  Not everyone is falling for it.  I'm not.  Apparently, you're not either.  What others think.... is their business.

Too many straw men.  Too many counter-factual arguments.  Too many opinions offered in ways too subtle to see through the sarcasm or reverse psychology.

Just SAY IT.  Lay it out there.  MOST of us already know the truth.  So let's just SPEAK IT, using plain language (or at least obvious saracsm, as is de rigueur on ZH).  

Thu, 02/06/2014 - 00:14 | 4406840 LetThemEatRand
LetThemEatRand's picture

The minimum wage is designed to kill small business and (together with EBT etc) mask the effect of enriching a few oligarch CEOs by passing legislation enabling them to profit from sending jobs overseas or giving them to desperate immigrants.  

Thu, 02/06/2014 - 00:40 | 4406896 A Nanny Moose
A Nanny Moose's picture

Let me universalize for you....

Every action be government, is committed with the sole purpose of reducing/eliminating comptetion.

Thoughts? Comments? Questions?

Thu, 02/06/2014 - 01:10 | 4406953 MeBizarro
MeBizarro's picture

What?  You honestly don't think that this the endpoint of any relaltively mature market with a handful of companies/single company won't seek to eliminate meaningful competition?


Thu, 02/06/2014 - 00:44 | 4406903 FreedomGuy
FreedomGuy's picture

I will give you a different argument against minimum wage. Government does not "own" people. People are free to work for whatever wages they please whether it is $5/hr or $500. You have the right to be unemployed as a corollary. Government also does not own private businesses nor is it responsible for business performance. What you or anyone else wants to work for including benefits, conditions, etc. is up to you. Government has no say in this private contract.

To fight minimum wage on most any other basis is tedious and neverending at best. Conservative free market types will tend to get beaten as collectivist-statists are always capable of outbidding you for votes and good press coverage.

Thu, 02/06/2014 - 03:15 | 4407064 James_Cole
James_Cole's picture

People are free to work for whatever wages they please whether it is $5/hr or $500. You have the right to be unemployed as a corollary.

Right, you're free to work for whatever rate you want. You'll end up homeless in the process, but whatever, your choice man!! 

But for sake of argument, let's take a quick 'back of the envelope' scorecard on who owns what. Banks own... all the commodities, almost all of the businesses, definitely all of the governments...hell, they even own the currencies!

And you own? Actually nothing, you don't even own the shit you think you own (stop paying taxes and find out). So yeah, work for whatever wage you want. Oh, can't make up your mind between $5 & $500? - don't worry, the benevolent 'market' will help you decide. 

Freedom never been so free bitches!!

Thu, 02/06/2014 - 06:09 | 4407159 DRT RD
DRT RD's picture

Think wage compression. Next think tax incease.  

I have said it before, raising the minimum wage is nothing but a tax increase on business.  Everybody else wants a raise too.  When an individual earns more, payroll taxes go up. It is just this simple.

A lot of people seem educated way beyond their intelligence.  

Fuck the FED!!!



Thu, 02/06/2014 - 06:55 | 4407190 negative rates
negative rates's picture

No, the size of your tits are the best yardstick. Now get back to diggin that grave.

Wed, 02/05/2014 - 23:29 | 4406754 mofreedom
mofreedom's picture

You make me a dollar, I'll give you $0.65, and if you're not found out to have squeezed the Charmin, I'll give you profit sharing in the form of a Christmas bonus.

I did build THAT!!!

Wed, 02/05/2014 - 23:39 | 4406779 SheepDog-One
SheepDog-One's picture

Unfortunately it will certainly have just the opposite outcome and just result in the loss of a lot of these peoples jobs.

Wed, 02/05/2014 - 23:02 | 4406690 Shizzmoney
Shizzmoney's picture

The Fight for $15 is a great thing, because maybe the people can finally come around to admitting TO THEMSELVES: that the Fed and their TBTF Banker Butt Buddies have completely destroyed the currency (just so they can prop asset prices up).

People can't comfortably live on less than $15/hour anymore.  Think about that shit for a minute.

Thu, 02/06/2014 - 10:37 | 4407606 RKDS
RKDS's picture

 Nobody wants to actually understand why this stuff happens.  If the Federal Reserve banks stopped printing money and propping up the stock market to please themselves, inflation would be kneecapped.  That kneecapping would go a long way twoards quieting the calls for higher wages far beyond the realm of minimum wage.  But, no, we've got to keep coddling the rich and the banks while acting surprised and indignant that people suffering from the results of such monumentally stupid policy are upset...

Wed, 02/05/2014 - 23:03 | 4406700 1C3-N1N3
1C3-N1N3's picture

The way I read it, this calculation only takes into account the effect of people earning exactly the minimum wage @ $7.25/hr., and ignores everyone else who is currently earning between $7.26-$10.09/hr.

I wouldn't call this conclusive by any means.

Wed, 02/05/2014 - 23:26 | 4406738 Trucker Glock
Trucker Glock's picture

"a simple back-of-the-envelope calculation suggests..."

Maybe they only had a small envelope.

Read somewhere 25% of private sector jobs paid less than $10/hr.  Don't know if that's fact or not.




Thu, 02/06/2014 - 02:20 | 4407015 object_orient
object_orient's picture

Exactly. The entry-level burger fipper makes 7.25. The guy there for a year makes 8.25, and the assistant manager makes 9.25. All of a sudden there's wage parity and only the new guy is happy about it. This would probably push up wages for those making <12.00/hour. Or, we get unmanned burger kiosks and the (few) remaining workers go to 1099s. Future's so bright I gotta wear shades.

Wed, 02/05/2014 - 23:04 | 4406701 yogibear
yogibear's picture

Obama will increase government expenditures if anything. Add more to the debt.

So their trying to get inflation going by increasing the wages.

They forgot that many things are now produced outside the US. An increase in government wages has little effect on global wages. 

All Obama and his banksters will do is crush those on entitlements and fixed income.

Wed, 02/05/2014 - 23:09 | 4406711 Atomizer
Atomizer's picture

So Dow ended up with a chicago fiverr? Now they need 50% increase to cover broken pension funds. When will the fraud waterfall begin on new immigration fucknuts paying into a new system of deceit?

Wed, 02/05/2014 - 23:10 | 4406713 Save_America1st
Save_America1st's picture

Why does obama do what he does?  He's a Marxist, treasonous, criminal, puppet, fraud, scumbag. 

And 2 names:  Cloward and Piven

It's all being done by design...and obama is more than happy to be the willing traitor who will do the bidding of the NWO elitists who hate this country and want to see us destroyed.

Wed, 02/05/2014 - 23:22 | 4406746 SheepDog-One
SheepDog-One's picture

Good thing no one is buying their 60's era Cloward and Piven bullshit...those clowns had no idea the internet would be here now. Nothing new under the sun, same old shit.

Thu, 02/06/2014 - 06:45 | 4407183 ISEEIT
ISEEIT's picture

You got that correct.

It's a war and the bad guys are winning.

Wed, 02/05/2014 - 23:12 | 4406721 infinity8
infinity8's picture

O-BA-MA-LOTOMY? Thanks again.

Wed, 02/05/2014 - 23:18 | 4406735 nmewn
nmewn's picture

He's really gonna actually subsidize Big-Fast food, I can just feel it.

Wed, 02/05/2014 - 23:31 | 4406759 infinity8
infinity8's picture

Don't get me started n.m. - i've been very "agitated" lately. I am not commenting much (and never really have, relatively speaking) because i'm sick and fucking tired. We need to come together (bitchez) and, I've never been to
FL! (how'd that happen?). ((and the food is shit))


Wed, 02/05/2014 - 23:51 | 4406794 mofreedom
mofreedom's picture

re:  ((and the food is shit))

how'd you get access to a computer in the nuthouse?

i can break you out of one of those.

Wed, 02/05/2014 - 23:12 | 4406724 Atomizer
Atomizer's picture

Obama: If I had a son, it would look like a union member who I bamboozled to get me re-elected..

Wed, 02/05/2014 - 23:20 | 4406743 Rentier88
Rentier88's picture

10% increase in minimum wage = 10% price increases to cover cost the bottom bar of labor going up.  Zero benefit to those making minimum wage...and really just a inflation increase on those not making minimum wage.

Thu, 02/06/2014 - 02:24 | 4407016 object_orient
object_orient's picture

You're saying the labor cost component of finished goods is 100%? Hmm, I thought it was a bit less.

Thu, 02/06/2014 - 10:42 | 4407613 RKDS
RKDS's picture

Prices will actually go up much more because brainless management and useless shareholders will think that they deserve a raise too.

Wed, 02/05/2014 - 23:22 | 4406745 Occams_Chainsaw
Occams_Chainsaw's picture

Since when did working for a min wage mean you were upper middle class?  Min wage jobs were meant to to make you want MOAR and not just get by.  Let's face it.....when a career in fast food is supposed to equal middle class we have finally lost the middle class to masters who only want poor simple minded vote slaves.  The EndGame is to have the slaves and have the masters......bow down bitches.

Wed, 02/05/2014 - 23:25 | 4406747 SheepDog-One
SheepDog-One's picture

Min wage hike...and where's that money coming from? ObaMao's 'stash' I guess? Bunch of nonsense...this Shitliner is going down.

Wed, 02/05/2014 - 23:35 | 4406765 Yes_Questions
Yes_Questions's picture





of course it won't.  the owners won't let Barry near ANY of the levers..


like they're fucking stupid or something.


Wed, 02/05/2014 - 23:38 | 4406769 SheepDog-One
SheepDog-One's picture

When in trouble, pander to the serfs. It makes them feel like they're empowered. Right out of the socialist handbook 101.

Wed, 02/05/2014 - 23:39 | 4406771 Playtime's Over
Playtime&#039;s Over's picture

Just as with everything with Oblamo.  Everyone wants free shit.  Free wage increases.  Free health care. Free spermicide.  Free phones.  Free rent.  Free freeeeeee freeeeee.  Dumbest kluckin generation ever. Not clue one.  And then there's the clueless king.

Wed, 02/05/2014 - 23:50 | 4406790 John Wilmot
John Wilmot's picture

The demand curve is downward sloping.

The demand curve is downward sloping.

The demand curve is downward sloping.

The demand curve is downward sloping.

The demand curve is downward sloping.


Thu, 02/06/2014 - 00:10 | 4406834 eatthebanksters
eatthebanksters's picture

Every snake oil salesman has one thing in common...they always give their audience what their audience thinks they want, even if its bullshit.

Thu, 02/06/2014 - 00:38 | 4406887 Bugsquasher
Bugsquasher's picture

Because it sounds good to the touchy feely limousine leftists and it sounds like "more free stuff" to the ignorant and just plain stupid.

Thu, 02/06/2014 - 00:42 | 4406890 kchrisc
kchrisc's picture

I stopped reading at "According to BLS data." And "why is he doing it?" Is that a trick question or something?!

Thu, 02/06/2014 - 00:42 | 4406897 Canoe Driver
Canoe Driver's picture

Raising the minimum wage is inherently inflationary. A wide cross-section of employers will raise some or all prices to adjust for the increase, and this inflation defeats, more or less immediately, the ostensible purpose of the wage hike.

The problem to be solved is that the jobs being done generally have little real value, and the replicants themselves are ensuring that there are always far too many applicants for any position.

Thu, 02/06/2014 - 00:51 | 4406920 FreedomGuy
FreedomGuy's picture

Actually, it is more likely to be deflationary. Raising wages artificially above market value and even possibly above their productivity value is likely to cause more unemployment. It now takes more dollars to buy the same unit of labor and like any price demand curve the demand for labor decreases.

It is possible that business tries to pass on the costs but costs do not determine the price of a product, the market does. If that hamburger combo is still only worth $7.50 on the market then wage increases cannot be passed on. It will be absorbed in cost reductions in labor, what is in the burger or some other expense area.

Thu, 02/06/2014 - 02:27 | 4407023 object_orient
object_orient's picture

 or some other expense area

As long as it's not in executive compensation. ANYthing but that.

Thu, 02/06/2014 - 00:59 | 4406940 MeBizarro
MeBizarro's picture

It will be inflationary in a meaningful way if it only affects less than 3% of workers?  You can't argue on one hand that this won't have any meaningful effect on workers because it affects so few workers and yet at the same time argue that it will really stoke inflation.  Logically that argument has more holes in it than Swiss Cheese.  Nevermind the fact that every study that has come out in the US since the 90s comparing state to state effects found no meaningful differences in inflation.  

Raising it to $15/hr or something higher is a different story. 

Thu, 02/06/2014 - 00:48 | 4406906 Atomizer
Atomizer's picture

 Pencil whip new GDP growth by increasing slave wages and driving price hikes into the mix. Call it, an emerging market success. NSA is monitoring the situation.

/sarc. This has gone above funny!

Thu, 02/06/2014 - 00:52 | 4406917 kchrisc
kchrisc's picture

A business running at optimal profit, like most, will either need to boost productivity by squeezing more from their workers per hour (slave driving), cut workers and/or bring on labor cost saving devices.

The last two are my favs, as within about a year after the min-wage mandate the criminals of the government will be crowing about "productivity increases." LOL


"You must be a pol, crat or bankster to ride this guillotine."

Thu, 02/06/2014 - 00:58 | 4406936 lunaticfringe
lunaticfringe's picture

If I raise the minimum wage- then people making 14k a year will suddenly be making 21k a year. Since this represents the people getting free obamacare- they will have to pay a couple hundred a month.

This couple hundred a month will go out of employers and straight into Obamacare since we know nobody is paying full price and that the whole POS program is underwater. I actually think this is another one of President Numb Nuts ideas to further subsidize that shitty legislation of his.

Thu, 02/06/2014 - 01:51 | 4406995 dhengineer
dhengineer's picture

Most of these workers will be cut back to 29 hours a week or less next year as Obozocaresless kicks in with employer mandates.  The weekly wage will still be about $300 a week, and they will have to pay about $200 a month for "insurance."  Their yearly take will be around 14k, minus $2500 in premiums.  In other words, a net loss...

Thank you, Daddy Barry!

Thu, 02/06/2014 - 02:32 | 4407028 object_orient
object_orient's picture

Another good point. As wages go up, gov. bennies go down. Less money in food stamps, Obamacare subsidies, tax credits, housing vouchers... Seems like a wash. I wonder what consumer prices and wages would look like in a free market. Meh, we'll never know.

Thu, 02/06/2014 - 01:45 | 4406986 worbsid
worbsid's picture

I thought Obama's last order to raise government contractors minimum wages to $10.10 was good.  How many governmental contractors do you suppose make less than $10.10/hr?  They both got a raise. :-)

Thu, 02/06/2014 - 03:59 | 4407105 MickV
MickV's picture

Uh.... because it's class warfare?

Thu, 02/06/2014 - 04:02 | 4407108 Dan The Man
Dan The Man's picture

Y'all totally missed the pay scale argument.   Someone making 10.10 now is going to have to demand a raise over and above minimum as that worker's wage was originally set above minimum.  That worker must now be paid 12/hr+ in order to stay ahead of the minimasses.  Which, in turn, makes the 12/hr guy pissy so he demands 14+. And so on...and so on...Up to JamieDimon who can now command an even greater salary. This "scale" of pay is what will lead to inflationary benefits (for Obama).  Its not JUST the minimals, its eventually everyone.

Thu, 02/06/2014 - 06:51 | 4407186 Bagbalm
Bagbalm's picture

Most of the me too increases will not be asked for - they are built into union contracts. Many union contracts have a base rate of minimum wage plus some amount.

Raise the MW and they all get a nace automatic increase. Slick way for Obama to reward the union workers. And he doesn't even need to ignore contract law and screw bond holders to do it.

Thu, 02/06/2014 - 05:34 | 4407144 Rising Sun
Rising Sun's picture

time to automate the build of a "grande bold" at starbucks

Thu, 02/06/2014 - 06:31 | 4407172 BeetleBailey
BeetleBailey's picture

FUCK Obama and anything he proposes. It comes from his shit-eating staff anyway.

The cunt is an empty suit.

Fuck him.

Thu, 02/06/2014 - 07:10 | 4407196 ArmyofOne
ArmyofOne's picture

There will always be more workers than jobs.  As long as that fact remains wages will always be depressed by a simple supply and demand ratio.  Adam Smith said, and I paraphrase, that the lowest wage earner need to earn enough to afford the averages comforts and conveniences to make capitalism fair and sustainable.  Without a minimum wage capitalism become nothing more than another form of tyranny.  In short, Feudalism.  


In a perfect world where there was as many jobs as there are workers to work them then competition would and should set the wage rates,  Until then work has to pay more than wage slave rates.  

Thu, 02/06/2014 - 07:23 | 4407210 Mareka
Mareka's picture

Here's a guess.

1) Giving away somebody else's money to curry favor for a few more votes.

2) 39% increase of base wage upsets wage scale to push other wages higher to create inflation because destroying the value of the dollar is the only way to resolve US debt & unfunded liabilities.

3) Accomplishes 1 & 2 while appearing compassionate instead of appearing to be robbing your retirement savings.

Thu, 02/06/2014 - 08:29 | 4407247 kenezen
kenezen's picture

People for whatever reason are choosing Socialism. The president is successful because he builds the lower class reliance and keeps the other classes engaged in cross politics and fighting each other. look to you comments . How many are unbiased and looking at the national economy without a political bent? If I say the economy sucks, I have to back that up with fact. Not political Bias. Using political bias allows Obama to distract and separate. He's a master at that. He's on the road 90% of the time separating class, political segments, and sexes. He's a clever combination of Lenin and Chavez.   

Thu, 02/06/2014 - 08:36 | 4407267 ThirdCoastSurfer
ThirdCoastSurfer's picture

First off, as I understand it, the proposed raise only applies to Federal contracts.

I guess there are some fast food restaurants on military installations for which this will apply, but not very many. Hard to think of anyone else.

When you raise the minimum wage by $2 to $10, then those making $10 want $12 and etc. It does't happen all at once, it's a waterfall effect.

When you raise the minimum wage by $2 to $10, for those individuals not living in their parents basement by choice, the place you will chose to live will likely rise by an equal percentage. The $600 you were forced to pay will increase to $640 or whatever. A place a little closer to the job, a little bigger for the family or a little nicer neighborhood becomes a little more accessible.

The slumlord you rent from will have no one to replace you with. They will be forced to improve the dwelling or abandon it. If they put money into it, they will likely raise the rent to the new base minimum to recoup the investment. Again, not overnight, but overtime.

The same with the car you drive or couldn't previously afford. The food you chose to eat, the toilet paper you chose to wipe your ass with. Maybe you stop stealing the TP from the store.

A "living wage" is a very subjective term. Does this mean a cell phone, cable Tv, and some implied lifestyle over and above the bare necessities?

I think I have it pretty good in my self-directed retirement and while I could spend up to $2,500 a month of my savings to age 67, I find it hard to spend more than about $1,200 since I gave up drinking, smoking and drugs. I have non-obama care health insurance at $245 with a $2,500 deductible. Renter's insurance, auto insurance on a 2004 wholly owned vehicle, a cell phone, cable tv and internet at $115 and $630 in rent/water/trash/sewer and something called a street user fee. I have magic jack so no land phone bill and since I'm retired I have the time to shop for the bargains.

At $1,500 a month, that equates to a FT salary of $8.65 so I don't see the problem for where I live. I'm sure it's very different in NY or San Fran, but that's no reason to increase it for everyone.

When the whole thing collapses from the greed of our Nickleback "Rockstar" lifestyle where we all seek to "live in hilltop houses driving 15 cars", we're all going to be rudely reminded of what real poverty is, like the way life was for many all the up to the 1950's.

When's the last time you saw a patch on a piece of clothing, much less a hole that wasn't part of a fashion statement? That's poverty, were a chicken in every pot is a desire and not a vegetarian's lament.

Thu, 02/06/2014 - 08:39 | 4407268 bill1102inf
bill1102inf's picture

Of course this works, look at Walmart.  They will have to take a hit to their PROFIT in order to pay the higher wages. They are already running as lean as possible to keep the doors open.  That is millions of people making another $3.00 or so an hour, SPENDING it into the local economy.  Less profit for Walmart, more profit for everyone else. WIN WIN

Thu, 02/06/2014 - 15:27 | 4408608 MagicMoney
MagicMoney's picture

Walmart is profitable precisely because it hires cheap. If labor prices raise, profits will be reduced, more people fired, or prices rise. Employers look at the impact on your labor to their profit/loss accounting. If raising the minimum wage increases prosperity, why not raise it to 120 dollars an hour, and let the prosperity reign in. You also fall for the zero sum game of marxism. That rich people get richer by taking from the poor. Adam Smith already showed that isn't true at all.


When employers hire in the US, they don't simply pay you a wage, they have to pay other worker's rights expenses like workman's comp, payroll taxes, unemployment insurance, etc. Employers price your labor, not whether if you have 50 kids you need to feed. People who advocate minimum wage increases, which most US workers don't work at federal minimum wage, fundamentally don't understand the price system. CEOs are paid much more, because CEO's guide companies to profitability if they are good. THe market competes for quality CEOs to make profits for the company. Employers compete for workers too, they don't simply want cheap labor, they also look for quality as well. 


In a market economy, everything competes with each other. THis is how people decide which has more value between any two things, and manifests itself in prices when people make exchanges on a daily basis.


It's actually quite amusing that people want to raise wages of such fields such as retail jobs which in comparison to other types of jobs, are not very productive, require low skill, low impact on profits. This is why machines take the place of low skill work as a cost substitution, because employers want the inputs of servicing, and production to be competitive because they know consumers shop around for prices & quality, choosing between the tradeoffs if it exists.  Prices are product of markets economizing according to utility, and scarcity. They don't exist of sheer stupidity. People simply want to start at the top for doing low level work, and get paid high level wages.

Thu, 02/06/2014 - 09:07 | 4407332 dynomutt
dynomutt's picture

Congrats to the current administration for making yet another jobs program... This one, for ROBOTS.

Thu, 02/06/2014 - 10:21 | 4407571 roadhazard
roadhazard's picture

So if we pay people less it will help the economy more. Hows that working out for you so far.

Thu, 02/06/2014 - 10:56 | 4407630 drchris
drchris's picture

Really, we should be adjusting minimum wage (like we do tax brackets and deductions) yearly based on inflation. I don't even get why tax brackets are a step function and not a smoother curve. Nobody should ever be incentivized to earn less. We suck at math.

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