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The 3 reasons Obama raised the federal minimum wage

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Today, President Obama, in a speech delivered to House Democrats, commented on his most recent executive order (as of this writing) to raise the minimum wage of federal contractors to $10.10 per hour.

“These are folks who are looking after families and trying to raise kids, and to see what it would mean to them for us to have a federal minimum wage of $10.10 an hour how much relief that would give them, and how committed they were to the American dream and getting ahead, and hoping somebody was standing up for them. It reminded me of why I’m a Democrat.”

Besides engendering speculation on whether anyone can actually "raise kids" and pursue "the American dream and [get] ahead" on $10.10 an hour," one has to wonder why President Obama REALLY signed this particular executive order.

There are about 200,000 people, by some estimates, who would actually get a raise because of this. So this executive order will not significantly change anything.

Why, then, did he do it?

There are 3 reasons he did this. And none of them have to do with raising the minimum wage for federal workers:

  1. To divert attention from multiple scandals and failures
  2. To try to control his PR message to the public as one who advocates benevolence
  3. To influence the states to mandate higher minimum wages

A politician cannot simply wave his proverbial magic wand, and make things better for people. Many have tried it. It never works.

Dick Durbin tried it in arbitrarily reducing the amount banks can charge businesses for debit card transactions. Banks simply found another way to replace the revenue.

Most small businesses are struggling, with their owners frequently willing to forgo their own salaries to ensure that payroll is met and the company remains solvent. If government arbitrarily raises the minimum wage, businesses will be forced to either raise their prices or reduce their costs to ensure the company does not go bankrupt. The most natural adjustment they will make is to let some employees go, and require remaining employees to pick up the slack.

It seems rather stunning that our politicians in Washington DC do not understand this. But I suppose that's what voters get when electing politicians with absolutely no business experience.



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