Much has been made of President Obama's non-deficit-increasing desire to raise the minimum wage by around 20%. This all sounds so good in front of a teleprompter but, as we noted here [8], a higher price for a good (low cost labor) simply means less of it will be demanded (higher unemployment). However, while setting a federally mandated minimum wage may make sense in the mind's eye of a President's panderers, a glance at Europe will blow most people's minds. The disparity across the nations of the European Union is 12-to-1: from Romania's EUR157 to Luxembourg's EUR1874 per month. This compares with an equivalent EUR998 for the US. As Bloomberg's Niraj Shah notes, this disparity drops to 6-to-1 if adjusted for local prices but two critical points come to mind; first, how can a 'union' with such massive disparity in labor function under a single monetary policy (hint: it can't); and second, with nations such as France, UK, and Ireland offering higher minimum wages than the US, it is hardly inspiring for any benefits Obama hopes to reap from his new deal.
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