Obama’s Minimum Wage – A Lesson in How to Create Unemployment

"Nobody who works full-time in America should have to live in poverty. I'm going to keep on making the case and fighting for the fact that we need to raise our minimum wage, because right now it's in lower terms than it was when Ronald Reagan took office."

“Nobody who works full-time in America should have to live in poverty. I’m going to keep on making the case and fighting for the fact that we need to raise our minimum wage, because right now it’s in lower terms than it was when Ronald Reagan took office.”

Now that the media has once again successfully diverted national attention away from their messiah’s ever-growing list of “phony” scandals (including Benghazi, IRS, NSA, AP, and Fast & Furious — many of which are clear-cut signs of the oncoming police state that the ever-growing number of zombies in our nation fail to recognize), he has turned his sights to gun grabbing and the minimum wage (read his typical sycophantic remarks here).

Of course, his attempt to hike the minimum wage is merely another attempt to divert the national discussion, so I’ll be brief in debunking his theories that are once again heavy in ideology but light in facts.

Labor and wages can be represented by a simple supply and demand curve (a concept covered in the most basic of economics courses).  Consider the following chart that describes a basic labor supply and demand:

Supply-and-Demand2

The blue line represents the number of workers available to work at the current wage price, while the red line represents the wages employers are willing to pay at any given level of labor available.

If the availability of labor is incredibly low, employers are willing to pay extremely high wages to nab those few employees.  However, if we have plenty of workers available, employers aren’t willing to pay as much (“Why should I give you $10/hour when I can hire any Joe Schmo off the street?”).

Where the red and blue lines cross is the “equilibrium point” in which all workers have been hired at a wage that satisfies both employee and employer.  Any scenario that does not fall onto the equilibrium point suffers from “market failure”, a non-optimal utilization of all available resources.

Now let’s examine the same graph with a minimum wage restriction.  Effectively, we’ll be setting a “price floor”, eliminating all scenarios below a predetermined horizontal line.

Min-Pay

Now we have a “minimum wage” line that rests ignorantly above the “equilibrium wage”.  Now our available supply rests at point “B” — lots of people want to work at such incredible wages (thank you so much, Dear Leader!) — but employers only want to hire the quantity of workers at point “A”.

See the triangle formed by the supply and demand lines and the new minimum wage line?  That represents two things:  All the workers who are now out of work as well as all the dollars that could be used to hire those workers.  In case it’s not clear, here’s the same graph with the inefficiency triangle filled in:

Min-Pay-with-gray

Whoops.  Our incredible plan to “pull people out of poverty” is now weakening employers by stripping them of their ability to hire enough employees.  And we’re throwing more people into the poverty pool by preventing them from joining in all the employment fun.

Like I said, the concept is incredibly simple.  But it’s made difficult when your narcissism and radical ideology prevent you from using the rational portion of your brain.

More info:  The U.S. Government Should Eliminate Wages in Order to Increase Employment

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5 thoughts on “Obama’s Minimum Wage – A Lesson in How to Create Unemployment

  1. ‘Minimum wage’ is only price control applied to labor; a lot of folk who know that price control doesn’t work, somehow fail to make the connection. I guess it looks different when it’s your paycheck… We never seem to realize that every time we receive a raise, the selling price of our product rises…

  2. Pingback: Points of Derailment | shiftthink

  3. Pingback: The Parable of Scott’s Tots | shiftthink

  4. you seem to have labeled your dead weight loss incorrectly… maybe you should consider rotating the gray section 270 degrees, while keeping everything else rigid 😉

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