Steven G. Percifield--author

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Steven G. Percifield  Author and consultant
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On minimum wage..

It just doesn't add up


Watching President Obama's State of the Union Message I couldn't help but be impressed. The man is a tremendous orator and a great politician; I consider that first trait to be admirable and that second one...not so much. What he said was well-written, beautifully presented and, taken as a whole, of minimal substance or beneficial consequence. In fact, just like all of his economic policies during the over five years he has been in office, shaped as they are by his never having participated in the commerce he wants so much to control, they are designed to appeal to his political base despite their likely negative impact on the economy.

To wit: increasing the minimum wage. 

It's like the TV commercial with the kids sitting around the adult: so more is better, right? How can anyone with any empathy for the plights of the hordes of unfortunates in our society argue with the concept of paying them more money than the "less than subsistence wages" their task-masters are forcing them to work for? Clearly a full-time, hard-working, conscientious adult, trying to support a family just can't do it on the measly current minimum wage of $7.25/hour--a paltry $15,000 per year. Let's consider the situations of these downtrodden folks.

According to the US Bureau of Labor Statistics, 73.9 million American workers age 16 and over were paid at hourly rates. Among those, 3.8 million were paid at or below the Federal minimum wage: a little less than 3% of workers. How can they be paid less? A very large swath of minimum wage workers are exempted from the Federal minimum wage: among them, wait-persons in foodservice (who rely on tips), self-employed persons, certain types of at-home service providers, tutors, etc., etc. Assuming that these persons constitute 1/2 of minimum wage earners, those who would actually benefit from a minimum wage increase would total 1.9 million or just over 1% of all workers.

Of all current minimum wage workers, around half of them are between 16 and 24 years of age and still living at home and/or are students. They are not seeking a lifelong livelihood at their minimum wage job nor are they planning on raising a family with earnings from it. They are looking to offset some of their educational expenses or just looking for some spending money. In many cases, theirs' are one of multiple incomes in the household they share with their parents.

Based on the President's analogy of a minimum wage earner trying to support his or her family, an increase would affect approximately 950 thousand of them; about one half of one percent of all workers.

About 135 million Americans are employed. But, according to the Wall Street Journal, "Even among those in their prime working years between 25 and 64, the number not working  has increased by about 1.8 million since 2008. That is on top of the 11.3 million who are officially unemployed (my italics)."  The labor force participation rate (the number of available workers who actually had jobs) as of the third quarter of 2013 stood at the lowest level since the 1970s, a mere 63.2%. In other words, 36.8% of available working age adults were unemployed whether they were looking for work or not. It must be assumed that many (if not most) of these persons wanted to work but could not find jobs.

Clearly, employment for 36.8% of working age Americans is of higher priority than raising the minimum wage for the 0.5% who are trying to support a family with a minimum wage job.

But that is not going to be done without an increase in overall commerce.

Our President, apparently, does not see it that way.