Obamas proposed base pay walking could cost D.C. tasks( bizjournals.com).
Minimum Wage and Monetary Policy( anirrationalviewoftheirrational.wordpress.com).
Whats the Minimum Wage in Your State?( blogs.wsj.com).
Obama: We cant cut our method into success.
Republicans: We cant tax our way into success.
Male behind the drape: Hey, why not inflate our method into prosperity?
If you have a lot of fixed expenses (mortgage, automobile loans, trainee loans, credit cards, medical expenses, etc.), and your earnings doubles, then your repaired expenditures will account for a smaller percentage of your earnings. You now have more money to invest on consumer goods?
It makes a specific quantity of sense for individuals who already have a home, car, and so on, and are not preparing to purchase any brand-new items in the foreseeable future. However, the real issue with this plan will be the cost of “brand-new” cash. The banks, due to the fact that they are no longer making money from “old” money, will instantly make new money a lot more costly. And, it will be pricey. They have will have to compensate for what they are losing on old money.
If you desire to acquire a brand-new home, or a brand-new cars and truck, or a new student loan … well, great luck. If the rate of return is less than the cost of cash, the money stays put.
This is apparently what Obama wants according to his call for raising the minimum wage from $7.25 to $9/hour during his State of the Union address. Raising the Federal minimum wage by the level hes asking (a $1.75 boost) WILL BE inflationary. The eventual outcome will be a boost in everybodys wage and a boost in durable goods rates.
Inflation + economic crisis = stagflation (something brand-new we had to make up a brand-new name for). It didnt work back then, and it will not work now – even with hugely increasing Federal costs., but it provides nothing to increasing future development and more frequently than not stagnates it.
FDR increased the minimum wage 5 times during the Great Depression in the 1930s. Each time resulted in a remarkable slump in industrial growth. There is no reason whatsoever to believe it will work differently now (what did Einstein say about “Repeated the very same thing expecting different results”? Insanity).
On top of that, the last time the minimum wage increased, tens of thousands of teens lost their jobs. It made sense considering that the majority of those tasks were in quick food restaurants where the margins are pathetically slim. The reaction, in that case, was to drop the least effective workers (normally younger employees) and increase the variety of hours for more productive workers (normally older workers).
Can we really handle another increase of unemployed employees in this existing economy?
Bad strategy, Obama, bad strategy.
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The real problem with this strategy will be the cost of “new” cash. The banks, due to the fact that they are no longer benefiting from “old” money, will instantly make new money much more expensive. If you desire to purchase a brand-new house, or a new automobile, or a brand-new trainee loan … well, excellent luck. If the rate of return is less than the expense of money, the money remains put. The eventual outcome will be a boost in everyones wage and a boost in customer items costs.