More unemployment benefits and a higher minimum wage? Couldn’t be worse for struggling Americans
Michael Tanner writes: To put it in today’s standard D.C. terms, Democrats sure must hate poor people.
That’s silly, of course. But there’s no doubt that Democrats are preparing to push policies that are likely to hurt struggling low- and middle-income Americans.
Both the Obama administration and the Democratic leadership in Congress have announced that their top priority when Congress returns later this month will be extending unemployment benefits and raising the minimum wage. Both policies are likely to leave more Americans jobless — especially low-income workers with few skills, the very people Democrats claim they want to help most.
Take the extension of unemployment insurance. Labor economists may disagree on the extent to which unemployment benefits increase or extend spells of unemployment, but the fact that they increase the duration of unemployment and/or unemployment levels is not especially controversial. As Martin Feldstein and Daniel Altman have pointed out, “the most obvious and most thoroughly researched effect of the existing UI systems on unemployment is the increase in the duration of the unemployment spells.”
In fact, even Paul Krugman, in the days when he was an actual economist rather than a partisan polemicist, wrote in his economics textbook:
Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.
President Obama’s former Treasury secretary Larry Summers estimated in The Concise Encyclopedia of Economics that “the existence of unemployment insurance almost doubles the number of unemployment spells lasting more than three months.”
Less than 0.1 percent of the industry’s workforce participated
Jim Epstein writes: Yesterday, Naomi Brockwell and I attended a demonstration demanding that fast-food restaurants boost their minimum wage to $15 per hour, or a little more than double the current federal minimum wage. The strike, which was led by a group called Fast Food Forward that’s affiliated with the Service Employees International Union (SEIU), was one of more than a 100 similar demonstrations held in cities across the country.
The New York demonstration had about 150 people, but the number of actual fast food employees participating in the strike was small. It was business as usual at every restaurant we dropped by yesterday morning and, at a McDonald’s restaurant on 23rd Street and Madison Avenue in Manhattan, employees behind the counter said they had heard nothing about a strike. Read the rest of this entry »
For all of their mutual public admiration, Presidents Clinton and Obama react differently to political trouble. Bill moved to the middle, while Barack always moves left. So it’s no surprise that Mr. Obama is responding to his ObamaCarerollout slump by doing his best Elizabeth Warren imitation.
Mr. Obama returned to his favorite theme of rising income inequality on Wednesday, which he called “the defining challenge of our time.” He ought to know since few Presidents have done more to increase inequality than he has. Median household income has fallen since the economic recovery began, while the rich who own capital assets have done very well thanks to the Federal Reserve’s focus on reflating stock and home prices. Mr. Obama is the Chief Economist of Nottingham posing as Robin Hood.
Editorial board member Steve Moore on why Congress shouldn’t hike the federal minimum wage to $10.00 from $7.25.
The President’s political purpose here is what the pros call rallying your base. Many Democrats are as dismayed as Republicans at ObamaCare’s rollout, so the White House wants to change the subject and give MSNBC viewers something else to debate. Mr. Obama didn’t have much new to offer that would help the economy or the middle class, so instead he’s decided to escalate that hardy liberal perennial, the minimum wage.