The Irony of Obama's Costco Speech

Tuesday, 18 Feb 2014 03:57 PM

By Chris Freind

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After his State of the Union address, the president went to Costco to tout raising the minimum wage from $7.25 to $10.10 per hour. By highlighting one of the nation’s largest retailers, you would think many of its employees would benefit from the staggering 40 percent increase the president is proposing.
 
None would.
 
The wage for entry-level Costco workers is $11.50 per hour (with average hourly wages of $20). Even using the “new math,” that’s higher than the best-case scenario wage the president seeks.
 
So the way to sell your plan of raising the minimum wage to 10 bucks an hour is to go someplace where they pay their lowest employees considerably more than that? Hello? Am I missing something?
 
Does the president not see the irony in pushing a federally mandated wage hike against the backdrop of a company that is, and has been, paying decent wages on its own accord, free from government intervention? Kind of begs the question, “If it ain’t broke, why fix it?”
 
Maybe the president should be looking at Costco as an example of something that is working: a company making smart decisions to grow and keep its workers employed. For all the unfair shots it takes, that thing called “the free market” works pretty well. And it would be infinitely better if politicians just left it alone.
 
If they did, a funny thing would happen: The economy would grow.
 
But don’t count on that anytime soon.
 
“It’s time to give America a raise!” Yes, Mr. President, it sure is. But if your plan were to pass, the only thing we’d be raising would be inflation, unemployment, and the number of Americans on the public dole.
 
And the reason is simple. Raising the minimum wage is not a solution to the nation’s economic woes.
 
Let’s review a few fundamental principles (not regurgitated “conservative mantra,” but inarguable laws that govern economics):
 
1. There is no such thing as a business tax. Never has been, never will be. Any levy always gets passed on to the consumer. Translation: the very people minimum wage is supposed to help will pay more for everything. Minimum wage hikes, while well-intentioned, result in negative unintended consequences.
 
2. A minimum wage increase is a business tax. Companies will deal with it as they always have: Some will ship out overseas or call it quits; some will institute a hiring freeze; worse still, some will lay off employees; and finally, all who remain will raise prices. Often, companies do several, accelerating the economic decline.
 
3. Inflation rises. When companies are forced to absorb increased costs, be they raw materials or minimum wage hikes, they raise prices. As prices rise faster than income, inflation shoots through the roof, so the 10 things in your grocery cart, which had cost $80, now runs you $100. And don’t forget that the government’s “official” inflation rate ever-so-conveniently omits skyrocketing fuel and food prices.
 
Labor unions love minimum wage increases because it gives them more negotiating power. If a worker had been making $10.25/hour, and the president’s plan passed, the union would demand their workers get that three dollars per hour above the new rate, since that was what the employee was worth prior to the wage hike. More inflation, and a lot more union dues.
 
The result would be that America’s near-permanent underclass would sink that much further as fewer jobs will become available. And public-benefit programs would swell at a time we can least afford it.
 
4. If Washington wants to end “economic inequality,” it would help us again become a manufacturing nation. No country can survive, let alone prosper, if it doesn’t make things. We can, but choose not to, and that is the root of America’s decline.
 
We possess the largest cumulative energy reserves on the planet, including the mammoth Marcellus Shale, yet drill for only a fraction of that Godsend. If we utilized those reserves in environmentally responsible ways, we would have the world’s cheapest energy and thus have a significant edge over our manufacturing competitors who immorally exploit their cheap labor.
 
Factories could be fired up, and American workers would earn a paycheck so far above the minimum wage so as to render that whole debate meaningless. Such a manufacturing revival would increase tax revenue, helping reduce debt without raising taxes.
 
Government should not be in the business of setting wage rates and “creating jobs.” Its purpose should be to foster a climate conducive for businesses to start and thrive. If we create that environment, then America would awaken from its slumber and shed its “sleeping giant” image.
 
If not, we will become evermore comatose and eventually expire. So let’s forget the extraneous debate on artificially raising wages, and raise the only thing that truly matters — America’s spirit.
 
Chris Freind is an independent columnist, television commentator, and investigative reporter who operates his own news bureau, Freindly Fire Zone Media. Read more reports from Chris Freind — Click Here Now.
 
 

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