Sunday, Dec 21, 2014
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Reiniers: Good politics, bad economic policy

BY JOHN REINIERS
More Than Words

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What may be good politics is often bad policy; more often than not a tactic to influence voters prior to an election. An insidious result of playing this political game is that the no-knowledge voter is misled into thinking these shenanigans are the solution to problems, but in reality they ignore far larger and more complicated economic issues.

Politicians are forever tinkering around the edges of Medicare, Social Security and the tax code to score brownie points with a favored special interest. Obamacare, for example, apart from costing millions of jobs and a host of unintended consequences, did not focus on the underlying challenge to pull cost out of our massive and costly health care system. But the no-knowledge voter was deluded into thinking this is the solution, so it will be difficult to get a buy-in to reform what is now law.

And now we have the increase in minimum wage gambit.

Congressional Budget Office (OMB) Director Doug Elmendorf estimates the Obama increase in minimum wage to $10.10 an hour will cost an estimated 500,000 jobs. Asking employers to pay more would simply mean less hiring. And the crisis du jour is the lack of jobs.

President Obama candidly admitted that raising the minimum wage is good politics but he ignored the projected job losses, and failed to use his bully pulpit to remind us our overarching economic challenge is to create well-paying jobs - $25 -$35 an hour - not low-skill jobs with entry level wages. And raising the minimum wage only will trigger increases in union contracts to already well-paid union members.

Everybody - certainly Republicans - believes people should earn more. The irony is that this policy will result in a transfer of wealth from the low income worker to other low income workers who will lose entry level job opportunities.

The demographics of these workers bear comment. The administration's own numbers show that only 30 percent of these minimum wage workers are young people; or they have spouses, but no kids. Only 26 percent have kids. Then there are two-income households. If the goal is to lift families out of poverty, CBO found that only 19 percent of the benefits will go to families in poverty, whereas households that earn more than three times the poverty level will capture 29 percent of the total gains.

Raising the minimum wage is facially a quick fix, but in reality no solution. If the president were an honest man he would take the long view. The United States needs well-paying, challenging jobs of substance to enhance the dignity of the individual. He has made this a debate over the value of labor. Creating better-paying hamburger flipping or janitorial jobs will not close the wage gap.

At the very least President Obama could have admitted that raising the minimum wage is not the answer to what ails our economy, but just lipstick on a pig. As a leader, he should have given a stirring speech to the undereducated and unmotivated to not depend on a minimum wage to close the income gap, but to bootstrap themselves - more importantly their children - up the wage ladder by staying in school and getting a 21st century education with skills necessary in a high tech world.

It could have been his Kennedyesque moment: "We choose to go to the moon" speech. Imagine Obama saying: "This is a challenge we are willing to accept, one we are unwilling to postpone, and one we intend to win."

A high school graduate nowadays might need the skills and discipline to operate a state-of-the-art $2 million sophisticated machine. Back in the day a high school grad easily could operate an old fashioned machine in an assembly plant.

The average minimum wage earner only stays in a low wage job for seven to eight months, just to learn the basics of work - getting to work on time, following instructions etc. This is not meant to be a lifetime of work.

Progressive liberals insist they are forced into this type of menial labor. What they do not say is that parents have failed to mentor or that their kids have refused to take advantage of the public educational system; have made poor choices or have simply just dropped out of school. These folks are the bulwark of the Democratic coalition.

The February National Association of Governor's meeting was most instructive because its focus was on getting citizens educated and ready for global completion - not raising the minimum wage for fast-food workers. "Good politics" was not on their agenda.

The discussion centered on elevating the curriculum of secondary education and community colleges to include hi-tech, job-ready skills and partnering with industry. (I had written before about a German automobile manufacturer in the United States that was so desperate for talented graduates, it began recruiting for students, offering to pay the tuition costs in a community college and for paid summer interning with a guarantee of a job upon graduation.)

Jeffrey Immelt, CEO of of General Electric, and founding chairman of President Obama's Advisory Council on Jobs, was the featured speaker, and advised the governors that our most pressing challenge was to increase capital funding for entrepreneurs of small and middle sized manufacturers and provide them with an educated work force. He spoke admiringly of the German apprentice system which he thought was the best on the globe for getting students ready for hi-tech manufacturing jobs. Interestingly, while in Vietnam, Immelt was impressed with its national poverty reduction program, which includes - among many other things - a commitment to graduate 5,000 welders yearly.

No commitment to fight poverty with a guaranteed minimum wage, but rather to train motivated students in manufacturing job skills.

Good economic policy is good politics even in a communist country.

John Reiniers is a retired attorney and regular columnist who lives in Spring Hill.

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