Is the president really this ignorant of business and economics?
Telling American employers to raise their wages sounds innocent enough. But it ceases to be innocent when people lose their jobs as a result of it.
In his State of the Union address, the president called for higher minimum state and federal wages and added: “ I ask… America’s business leaders to…raise your employees’s wages.”
This is not the first time a president has made this “request” of employers.
After the stock market crash of 1929, President Hoover began talking about wages. They needed to be protected from cuts, he said, and preferably increased, so that consumer demand would increase. More consumer demand would supposedly get the economy through the storm.
As the economy sputtered and prices began to fall, the president acted on his pet theory. He began lobbying businesses not to reduce wages. He did more than lobby. He sent a clear signal that if his directive was ignored, the government might step in and legislate wages.
Businesses listened. But they also had their backs against a wall. With consumer prices falling, wage reductions were needed to protect profits. Without profits, a business fails and everyone loses their job.
Faced with this reality, but afraid to make any reduction in wages, businesses did the only thing they could do to try to stay afloat: they cut jobs. Millions were thrown out of work who might have kept their jobs at reduced pay but for Hoover’s intervention.
When the new Roosevelt administration came in, it embraced the same bogus economic theory. Both prices and wages were tightly controlled by the National Recovery Act. In a famous incident, a New Jersey immigrant worker, Jacob Maged, was sentenced to jail for three months on a charge of pressing a suit for 35 cents instead of the legislatively required 40 cents.
These policies had the paradoxical effect of making some Americans newly affluent even while throwing millions out of work. Since prices had fallen sharply, those who kept their jobs at the old wages could in many cases buy twice as much with the same money.
The Hoover/Roosevelt/ Obama policy meant that some got a windfall; others got destitution. Economic inequality sharply worsened. In general, the Roosevelt administration’s most powerful supporters, labor unions, saw to it that their members did not lose jobs, while those without unions were the ones laid off.
It is noteworthy that the same thing happened when the Obama administration bailed out General Motors. The non-unionized workers, even those in the most efficient plants, lost everything: jobs and retirement benefits. Unionized workers allied with the president kept both.
If Obama was really concerned with workers making ends meet, he would halt his energy policies that have caused inflation throughout the economy. Therefore, I propose that the real reasons why Obama want’s to raise the minimum wage is because Democrats need a 2014 campaign distraction from the debacle of Obamacare, and so that the government will collect more in income taxes.
The more damage he does to the economy, the better the chances of the Federal Government getting more control over not only the economy, but the citizens as well.
Economic growth depends upon workers being paid enough for the work they do to also be consumers of a reasonable share of the goods and services that they produce. You would think this would be obvious. Apparently it isn’t.
Greg, did you have to go to school to get that stupid, or does it come naturally?
@Scott in Oklahoma, #4:
Maybe you’ll bless us with the benefit of your superior intellect by explaining just what it is that’s so stupid about what was said in post #3.
Suppose you want your lawn mowed and someone offers to do it for you for $50. Suppose you think he should do it for $40. How much is the work worth, to you? to the worker? Not necessarily the same, is it? Who should decide what to pay? I’d say the homeowner. If he can’t get someone to do it for $40, he can do it himself.
Half of the statement in post #3 seems to have been omitted.
The point is that decades of declining real wages translates into decades of decreasing buying power on the part of American consumers. An economy cannot continue to prosper and grow when the customers that businesses rely upon are able to purchase less and less.
The fact that a relatively small percentage of the population has been reaping most of the benefits of GDP growth since the recovery began and growing much wealthier doesn’t help an economy that depends upon a broad customer base. Suppose you sell sofas, or lawn mowers. How many sofas or lawn mowers does a single wealthy person need? This is true of most consumer goods, and also of most services.
Greg, economic growth is sustained by business, not individuals paychecks. Are they connected? Sure. But before a business can thrive, passing that success on to it’s employees, it first has to make money. Part of that money making process is having affordable overhead, affordable and reasonable taxes and the ability to comply with regulations at a reasonable cost. Having more government control over business, be it by taxation, over-regulation, mandated benefit programs regardless of cost or mandated pay for the lowest, least skilled and least productive workers all hinder the primary goal of business, making money.
When did the recovery begin and the GDP begin to increase? Maybe you should check with some of the 95 million or so people who don’t have jobs, can’t find jobs, want to work and have to be sustained by our tax dollars in bottomless pit programs. The only reason you believe there’s a “recovery” going on is because the government’s propaganda machine tells you so. Don’t you find it the least bit uncomfortable that the same week the extended federal unemployment runs out for a lot of people, the government releases really good news that unemployment has dropped under 7% (a fraudulent number at best anyway).
Like I asked… did you study to get that stupid? Because that seems to be a liberal trait. Now I’m going to work, and it’s going to be a long couple of days, so don’t think y lack of reply means I have lost or given up the fight, it only means I chose to do other things after working 12-14 hours out in the oil fields.
ECONOMIC GROWTH DEPEND ON JOBS, AND IF THE GOVERNMENT BREAK THE INCENTIVE OF THE COMPANIES, NO JOBS ARE BEING CREATED,
THE CREATOR OF JOBS HAVE BEEN TOLD BY OBAMA: YOU DID NOT CREATE YOUR BUSINESS,
WE KNOW THE BUSINESS OWNER WOULD ANSWER,….. I WON’T REPEAT IT, BUT I READ THEIR THOUGHTS CLEARLY,
AND BY CLOSING IN WITH HIS 2THOUSANDS AND A HALF BOOK OF REGULATIONS, OBAMA KILLED THE BUSINESS , HE IS RESPONSIBELE FOR THE LINES OF JOB SEEKERS, SPENDING HOURS IN THE COLD WEATHER TO BE TOLD AT THE END : WE HAVE NO DEMAND, COME BACK TOMORROW,
WHAT A SHAME, AMERICA THEY PUT YOU THRU,
DO NOT FORGET IT,
AND REMEMBER TO VOTE WELL AND RESPONSIBLE,
YOU ALL MISSED ON MITT ROMNEY,
DON’T MAKE THE SAME MISTAKE AGAIN, YOU WILL HAVE THE CHOICE OF SUPER SMART REAL WORTHY CONSERVATIVES, OF TAKING THE PRESIDENCY, JUST PICK ONE,
@Scott in Oklahoma, #8:
Positive GDP growth resumed in 2009, as can be seen in this chart. This Real GDP Per Capita graph shows the trend reversed from negative to positive at the same point in time, so what we’re looking at is actual growth. That figure is now slightly higher than it was before the recession. Real wages have not increased for years, despite increasing productivity.
I would hypothesize that real wages are based on productivity. Let’s go back to lawns and mowers. If you hire someone to cut a one acre lot for $50 and he gets a bigger mower that can cut faster and he can now cut one and one half acre in the same time, he should be paid $75 to cut that one and one half acre, that is an increase in productivity and an increase in pay. What’s the problem? The chart you linked to only shows wages, based on wages. Real wages have to have a productivity element. That chart only shows ‘relative wages’, not ‘real’ wages. One year relative to another. Real would relate to productivity. More productivity, more pay.
OK, here’s a chart: Productivity and Average Real Earnings. It plots both worker productivity and average real earnings over the long term. The article that it appears in dates from 2011.
As we can see, productivity has steadily increased over the long term along with the GDP, while real wage growth has remained essentially flat.
If a business owner is forced by government to raise wages, then he has to raise the price of what he sells. So the wage earner sees everything he needs to buy to live eat up the increased pay. He is not better off, certainly not if the business owner has to fire him to avoid going bankrupt.
@Greg: Greg. good chart. It does clearly show that wages have not kept up with productivity. Now one other element needs to be shown on that chart. Number of illegal workers that are included in the calculations. There is not many company’s producing goods that will not tailor their prevailing wage to the availability of workers. If you own a company producing widgets and each worker gets paid $10 per hour to produce 100 widgets and suddenly the average worker is available for $7 per hour instead of the $10 they had been available for, how many companies will not take advantage of that lower wage availability? Suppose though instead of that scenario, that another company had located nearby and was paying $12 per hour. Suddenly, the present company might have to raise wages to compete, either that, or move the factory to Mexico and pay 50 cent per hour. Business is business and charity is charity. If you can make a product, pay $15 an hour and make a decent profit, most companies would be happy with that. It’s when they start losing money that changes have to happen. I suspect the availability of many very cheap laborers (here illegally) do not help the wages. That is more in the Domain of the Dimocrats (I think).
If wage growth continues to remain flat, the consumption of goods and services by American working families will at best continue to remain flat. That will slow and then stall out economic growth, initiating another self-perpetuating downturn. Economies only thrive when those who actually produce the goods and services receive increased compensation as a result of that increased production. That’s what allows them to consume more, which in turn increases demand for the things they produce.
We recently tried to fuel the economy not by increasing the working consumers’ disposable income, but by making credit too easily available. This made a lot of people a lot richer, but it’s never sustainable. It’s what threw the economy into a nearly disastrous nose-dive. Had that disaster not been avoided, the rich would have gone down along with everyone else. They didn’t, however, so the temptation remains with some to repeat the process.
And a lot of people poorer.
I didn’t know that it was avoided. When did that happen?
That’s one theory, and if it’s true, why would you want to continue to bring in illegal workers to keep the pay scales low? Why not send them back home, reduce the available work force to produce the same amount of goods and the wage will have to rise to attract workers from the smaller work force. That’s a different theory. One benefit of this theory is that you won’t have to give those illegal workers Social Security, Medicare, Unemployment, in-state tuition, etc. and you could actually reduce taxes while keeping the present workers making a higher wage.
The rapidly deteriorating situation in 2008 and 2009 could have turned into a prolonged global economic depression. Fortunately, that didn’t happen.
When is the news gonna be released? You were just posting charts above showing how bad the Obama occupation has continued to be. While it can’t well be termed a ‘depression’ it is definitely a prolonged recession thanks to our fumbling, bumbling leaders.
Hasn’t everyone heard the news? Rich people think the economy is doing just fine.
As the article points out, members of Congress—regardless of party—tend to be wealthy themselves. That probably explains a lot.
No they don’t. Rich people only want to get richer, if they aren’t, they usually do what is necessary to make it get better. Yes, most members of congress are rich, so is the president, and the richer ones are the dimocrats. But, people that get rich usually know what it takes to get richer. Maybe we need to elect some business people(instead of community organizers) for congress and the presidency.
Obama lyingly claims there is no substantial proof that his ObamaCare refefinition of ”full-time” work is anything more than 30 hours/week has cost workers money.
But here’s a constantly updated list of public organizations as well as private businesses that have announced cutting back employee hours:
Notice how many are public employees?
Firemen, sheriffs, police, EMTs, teachers, garbage men, school bus drivers, school cafeteria workers, student workers, professors, deputies, and so on.
How can the economy rebound when so many US workers are less-than-full-time?
But that is on Obama.
it might be the intent to crush the market he hate, which he proved before,
you did not build that business, someone else did it,
the more he flatten the market the more he will convince the people in need of work,
that he alone has the solution , which is finish his destruction of the USA,
BY IMPLEMENTING HIS MARXIST TEN LAWS TO THE PEOPLE,
and becoming the suprime job maker, like he has already done by hiring so many in government unionize public jobs, where criminals are welcome as any foreigners known hater of this country,aiming at ruling the tolerant people by installing their violent sharia, on stuborn AMERICANS BRAVES ,
NAMING THE RIGHT WING THEY LIKE TO CALL IT AS IF IT WAS A THREAT TO THE NATION,
WHEN WE DISCOVER THE OTHER WAY AROUND IS THEY ARE THE REAL THREATTENING SNAKES UNSEEN BUT FELT THE POISONNOUS VENIM, ON AN EVERY DAY LIFE,
the car to car thecnology is coming,
what happen to the icy road in the storm, you cannot stop OR DIRECT YOUR CAR TO SAFETY,
NO NOT GOOD, THE COMPANY CAN TRY AGAIN, BECAUSE OF THAT LUPHOLE IS
WHERE THE NEED IS TOO APPARENT,
he said JIMMY FALLON IS TARGETTING THE NEW GENERATION,
but it’is the old generation who have the money and they choose JAY LENO,