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  • Guest Blogger: Congressman Pete Olson (R-TX) on the Increase in Minimum Wage

    Today, another burden is being placed on America’s small businesses. Effective on this date is the third installment of the increase of the minimum wage that was passed in 2007. Once again, our federal government has provided not a help, but a hindrance to our economic recovery.

    When the three-phase minimum wage increase was initially signed into law in May 2007, the unemployment rate was 4.5%, and when the first phase went into place, the unemployment rate was 4.6%. Today it stands at 9.5%.

    At a time of record deficits, uncertainty of increased taxes, the looming prospect of government takeover of the healthcare system, and a national energy tax, small businesses simply cannot afford this final wage increase.

    Yesterday, I introduced H.R. 3309, the Small Business Job Security Act. My legislation will delay the third and final stage of the federal minimum wage increase on July 24, 2009 for one year. At that point, Congress should reassess the economic climate taking into account the unemployment rate. Because it takes effect today, if passed after the fact, the minimum wage would revert to $6.55, the rate it was yesterday.

    This bill is not meant to disparage the millions of men and women in minimum wage jobs who depend on this raise to provide for their family. Quite the contrary, it is a way to help secure those jobs, and to prevent those businesses that employ them from closing down.

    This legislation represents a fundamental approach to addressing the economic crisis facing our nation. The Republican approach is to provide relief for small businesses, not burden them with costly minimum wage increases, higher taxes, or new government mandates.

    The economic challenges that face our nation will not be solved overnight and they will not be solved without sacrifice. But that sacrifice should not be dispersed unequally across our society, especially on a segment that can be the primary driver of this recovery.

    We have failed to grasp the long-term implications of our actions in our attempt to fix our economic situation. We have too often decided to act now, think later– or more accurately, spend now, pay later. This type of decision will not secure long-term economic stability. As we have seen by the aforementioned stimulus, it doesn’t even do so in the short term either.

    The actions of this Congress should reflect a thoughtful and deliberate attempt to restrain spending, decrease our debt, and give those who can create jobs to do so. We clearly have a long way to go, but this legislation is a step in that direction.

    The views expressed by guest bloggers on the Foundry do not necessarily reflect the views of the Heritage Foundation.

    Posted in Economics [slideshow_deploy]

    20 Responses to Guest Blogger: Congressman Pete Olson (R-TX) on the Increase in Minimum Wage

    1. Erik, Austin, TX says:

      When one calculates$7.25 times 40 hours times 52 weeks (No Vacation) the figure for a year's income is $15,080. That's before purchasing health insurance (Ha!).

      Seems to me like Pete Olson is saying the way to keep your job is to stay poor. His plan will also aid in preventing the working poor from transitioning into entrepreneurial ventures and competing with those who believe the only way the economy can stay strong is to keep those at the bottom struggling to survive.

      "The economic challenges that face our nation will not be solved overnight and they will not be without sacrifice. But that sacrifice should not be dispersed unequally across our society, especially on a segment that can be the primary driver of this recovery." I agree with this statement.

      "The actions of this Congress should reflect a thoughtful and deliberate attempt to restrain spending, decrease our debt, and give those who can create jobs to do so."

      Seeing as Congressional pay is more than 1000% higher than the current minimum wage, I suggest we take a slight tangent on his approach and reduce congressional pay to the current minimum wage.

    2. Ben Franklin says:

      It doesn't take a bunch of economic impact studies to know that the minimum wage causes unemployment – all you have to do is pay attention during Econ 101. Price floors cause surpluses. The minimum wage is a price floor on the cost of labor… a labor surplus is unemployment.

    3. marlan kirkland says:

      What I would like to know–is–Where does the congress get off thinking that it's their business to dictate to companys what they can (should) pay their employees?!?!

      That should ONLY be up to an employer–based upon what the employee is attributing to the company.

      IT'S NONE OF CONGRESSES BUSINESS.. PERIOD !!!

      Congress has gone too far–usurping the employers rights–and THE STATES RIGHTS.. This has to STOP..

    4. marlan kirkland says:

      Congressman Olsen—It's a little late–but I'm glad that someone is doing something.. Congress had no business butting in to an employers business. Wages should be ONLY left up to the employer–based on the employees ability,,and contribution to the company involved.

      Congress should BUTT OUT where it has no business being.

      This fiasco will ONLY get more fired..

    5. Erik, Austin, TX says:

      Ben,

      In light of your comments; I will change my proposal to say, "Let's set the wages of Congress beneath minimum wage.".

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    8. DAG, Round Rock, TX says:

      It is so typical among the people we call liberals ( read the first comment ) to think that pain of $15,080 paid to a minimum wage worker should be shared by a member of Congress.

      I may extend this idea even further by applying it toward the doctors, engineers, software developers, scientists, school and college professors, skilled trades, small and big business owners, financiers, enterpreneurs, management – all these people who determine economic and social progress.

      Isn't it reasonable that the work they do should be compensated at a 10-20 ratio to the minimum wage (low skilled) worker? Those who suggest cutting off professional people wages and giving it to the minimum wage worker are invited to think if progress will still be taking place. If someone believes in this, then he/she is advised to read books on the recent history.

      A wage is a number set by the marketplace. This is apllied toward both the high as well as the low end earners. Time and again we are seeing goverment intervention into this process.

      $30,000-35,000 per a family of two earners is not luxurious but it is enough to survive. It is also THE stimulus and THE driving force to learn and advance to the next step.

    9. Jill, California says:

      Despite the burden on small business, I can't help feeling sympathetic to minimum wage earners.

      I'm a self-employed person who has chosen not to raise the prices I charge my customers. Yet all of my expenses keep rising significantly. So I'm falling further and further behind every day.

      If minimum wage workers can't increase their earnings but still must pay higher costs for everything, they'll end up on public assistance anyhow.

      What we really need to do is get skyrocketing costs under control. Only then can small businesses afford to pay their workers a little more while still making reasonable profits.

    10. Ben Franklin says:

      Sometimes, we forget the actual real spending power of people who make minimum wage. (Erik is an idiot whose comments don't add anything of value to the conversation, and are intellectually vacant, he obviously who doesn't understand the real world, so his comments can be summarily dismissed). In the real world, the vast majority of people making minimum wage are teenagers, college students, people trying to supplement their primary income (either as a second job, or house husbands/wives working part time), retired folks looking for something to do, etc. For this class of worker, the income they make is ENTIRELY disposable, since they are usually being supported by someone else. For example, the teenagers I employ in my business making $6.50 and hour (which three years ago was a dollar more then the minimum wage) bought their own school clothes, put gas in their own cars, bought their own christmas/birthday presents for their family, helped their parents with car insurance, went out to eat with their friends, and generally enjoyed a fair amount of financial independence while also learning the value of hard work and the rewards of a job well done. When the minimum wage is raised past the level where equilibrium is found in a free market, bunches of these people I am describing don't suddenly have MORE money to spend, they actually find themselves with NO money to spend, because they are longer working. So, now the local putt putt spot suddenly sees their business disappearing, and Wal-mart sees sales drop, etc. Mom and Dad now have to cover the costs that the kids used to, so THEY have less money, and the cycle continues, and you have exactly what we have today. Which not incidentally was the situation at the end of the Carter years when I was a teen looking for employment – there wasn't any.

      As far as the completely unconnected comments about congressional pay reform, please see other comments on various blogs at Heritage. The best one I have seen is that the pay rate for congress should be set by the individual states themselves. They hire (indirectly through votes, that is) those guys to represent them in D.C., they should decide what they get paid. That might mean the members from say.. Texas get paid more than the ones from say… Maine, but, so be it. It's really not Maine's business what Texas pays their guys, and vice versa.

    11. Larry Page, Charlest says:

      For wages to have real value they must have a relationship to value they produce in the market place. They cannot be given an artifical value by administrative action such as raising the minimum wage. Raising the floor erodes the entire system. Now there will be fewer opportunities for the 18-26 year old wages earners to get a job and earn even a minimum wage. I don't call that good!

    12. Barbara, CA says:

      When government raises minimum wages businesses must also increase the wages of all workers. Otherwise, the new minimum workers could be receiving the same as those who had advanced to the next level of wages. Most businesses raise their prices to cover minimum wage increases and often pad the increase a little due to other costs increasing. When minimum wage workers go to spend their new-found riches, they find prices have increased where they want to shop. So they are farther in the hole than they would have been with no government wage increase. Minimum wage jobs should be the place where people prove their worth to the company and then improve themselves to go to other jobs or decide they want to keep that job with the low wage. Workers should make the decisions and the market will set the prices of what their work is worth.

    13. Chris P. Janelli, Sa says:

      If the America’s Affordable Health Choices Act of 2009 is passed, I fear we will witness one of the biggest potential power and money grabs in American history. If Americans allow Congress to pass this act, they will once again about to prove they are nothing more than sheep to progressive Democratic political wolves’ intent on ramming through an extraordinary power and money grab. Under the guise of a health insurance crisis and healthcare reform, this grab exemplifies the worst degree of intrusiveness into our personal lives ever perpetrated by our government. God knows health care costs and health insurance need fixing, but this act is not the right solution to fixing what ails the American healthcare system; it is a doomed political solution of the worst sort.

      If this act that allows the federal government to control and regulate health insurance and define what is and is not “acceptable coverage” is passed, by the time America wakes up to what happened government will have taken a giant leap forward to becoming the ultimate Big Brother. Not only will this act socialize one of the best medical systems in the world dragging us down to the level of care delivered in Canada and Britain, Big Brother’s minions will make life and death medical decisions for its citizens. And if you think this isn’t about money and power, think again.

      First, government is inherently wasteful and inefficient and will never deliver services as efficiently or cost effectively as the private sector. If political addiction to pork isn’t proof enough, the Social Security system should be. This is not to say the American healthcare system doesn’t need to be reformed; it desperately does, especially Medical Malpractice Tort Reform that is glaringly absent from this act. Separate from health insurance, the American healthcare system costs approximately $2 trillion a year. About 70% of that $2 trillion is spent on chronic illness, a significant portion of which is preventable. Chew on “preventable” while we get back to health insurance.

      Don’t believe for one minute that The American Medical Association’s recent turnaround and endorsement of the House Democrats' version of the health insurance bill means everything is OK as physicians are leaving the organization in protest, which will likely grow as further details of what is actually being dished up emerge. Dr. George Watson, a Kansas physician and president-elect of the American Association of Physicians and Surgeons said, “This is war. This is a bureaucratic boondoggle to grab control of health care. Everything that has been proposed in the 1,018 page bill will contribute to the ruination of medicine."

      As for the money involved in this boondoggle, let’s just make some down and dirty financial calculations to see what has our “wealth redistribution” administration and progressive Democratic Congress salivating and licking their chops.

      Let’s go with a U.S. population figure of 300 million people of which there are reportedly 47 million that are not insured, which includes illegal aliens. We’ll get back to this 47 million.

      Assuming 253 million Americans are insured, using Kaiser Family Foundation statistics in 2005 “the average individual's job-based premiums were $3,991, while families spent an average of $10,728.” This works out to a premium payment of approximately $332 per month in 2005, which is within the range of other available stats. For our calculation and illustration, let’s be conservative and call it $300 per month.

      Of that monthly amount collected by a private health insurance provider, about $0.35 is paid out in health care costs. Let’s again be conservative and bump it up to $0.40, which leaves $0.60 for “catastrophic reserves” and “investment.” Put another way, 60% of every premium dollar is retained by the insurance provider so each month $180 of the $300 premium payment is retained. Annualized that’s $2,160 per each insured. Multiply that by 100 million people and you have $216 billion put into the cash register every year.

      If all 253 million Americans where covered by The Uncle Sam End of Life Health Insurance Company, that increases to over $546 billion; more than enough to cover the current annual interest payments on the national debt and leave something over for political pork sandwiches.

      Now if you think the Capital Hill gang isn’t going to treat those investment funds like they do the Social security system, which is essentially an empty bank account holding federal government IOU’s, then you really deserve to be devoured by a wolf. And the Capital Hill wolf pack knows how to get more bang for the buck; actually that’s not true. What they will do is make more of the funds available for their own agenda, pork and power. How you ask?

      If you believe government is intrusive now, starting in 2014 every physician in America must electronically provide to the government health Czar, or whatever they’re called in 2014, all the medical history and information on all of their patients. This data collection by Big Brother via electronic healthcare records has already been federally mandated and will be done with or without the patient’s agreement. Being enamored with the U.S. Constitution as a founder of Distressed Patriots for America, I refer to Amendment IV of the Constitution that states, “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizure…..etc.” I think you could make a pretty good case that this seizure of personal health data without individual consent is unconstitutional. If I need to extrapolate on this point with regard to your personal health information, even if it resides on your physician’s computer, you probably voted for Obama and I would be wasting my breath arguing the point.

      Now ask yourself: Why does Big Brother need this information?

      Big Brother wants to push people on Medicare into end-of-life counseling. The language can be found on page 425 of the health care bill. If you are interested, you can download the America’s Affordable Health Choices Act at: http://edlabor.house.gov/documents/111/pdf/public….

      Sec. 1233 of the bill labeled "Advance Care Planning Consultation" details how the bill would, for the first time, require Medicare to cover the cost of end-of-life counseling sessions. Undoubtedly, government insured Americans will be encouraged not to choose to pursue costly aggressive care. Essentially, since Big Brother will be responsible for rationing healthcare benefits that could decide who lives and dies they will take on the added burden of convincing many people to take a less costly earlier flight. No doubt all those cost savings will be made available for loans to the federal government. Lives for pork, or as Wind in His Hair said to John Dunbar, "Good trade." (Dances with Wolves)

      As for those 47 million uninsured Americans, let’s get the facts straight. One third of those 47 million are illegal aliens. You can make your own decision about whether or not you would want to pay the freight for their coverage. However, if the progressive Democrats pass this bill, you – if you are a tax payer – will pay for them. Period.

      One third of the 47 million are working Americans, many of whom are young and healthy, and could afford to buy health insurance but choose not to. I think in America that’s called “freedom of choice” although when these uninsured have serious health problems, it can potentially become a societal cost. In fact, the income statistics on this group indicate family incomes of $50 thousand plus, with 7 million earning $75 thousand plus.

      The remaining third cannot afford insurance or can’t get insurance because of prior or existing conditions and other reasons. This group needs help and support, but represents a mere five percent of the U.S. population of 300 million. Five percent, or 15 million people, is not a catastrophic number for our government to deal with if they would surgically address the problem and stop their rush to socializing healthcare with yet another inevitable government boondoggle program scaring Americans with “crisis” when the real crisis is what is about to be perpetrated on America.

      Despite political promises, which we all know you can take to the bank, Obamacare is going to be nothing less than another Social Security cash register to be raided. And if you believe it won’t, I know of a bridge across the East River for sale. And it actually goes somewhere. These are just two issues that should concern Americans in another 1000 plus page progressive Democrat social engineering act that won’t get read by Congress and certainly not by most Americans. If this administration, abetted by an out-of-control Congress rams this bill through next month, then America is truly on the path to socialism and a know all – and for many – end all Big Brother government.

      If Big Brother is successful with health insurance, I cannot help but wonder what kind of scheme the Obama wolf pack is planning with regard to the healthcare industry. In 2006, this was America’s largest industry providing 14 million jobs and predicted to generate an additional 3 million jobs between 2006 and 2016. As an industry, it is comprised of approximately 580,000 establishments of which 77 percent are offices of physicians, dentists and other health practitioners. While hospitals represent only 1 percent of all health care establishments, they employ 35 percent of all healthcare workers.

      Just imagine the funds sloshing around in that industry and the power that would come from converting those private sector workers to government employees. Nationalization of this industry would make General Motors look like small potatoes. Under the guise of it being another American healthcare crisis, let’s remember Rohm Emanuel’s famous quote regarding the financial crisis, “Never let a serious crisis go to waste…it’s an opportunity to do things you couldn’t do before.” And get away with it!

      Perhaps American is simply prepared to stay asleep and count sheep while yet again the wool is pulled over them by the Chicago gang that sold them “Change We Can Believe In,” which is starting to stink like a snake oil cure all. Well if this bill is passed, when you wake up America you won’t believe the change you abetted, unless of course you believe in snake oil.

    14. Lwesson, Tejas says:

      I think it rather presumptuous that someone take the moniker, "Ben Franklin". But in so doing I might likewise take some presumptions based on the historical thoughts of the actual Mister Franklin, the sadly long departed Founding Father. He might actually find that this issue discussed here on this Forum dwells with a much more serious situation than merchants wringing their hands over their lowly Bob Cratchits servant's wages. Franklin might find a more electrifying curiosity as to why the Federal Government was involved in setting wages at all! He might also be questioning the wisdom in regard to a healthy nation of the need for both parents in a family having to work to make ends meet because of "natural" wages. At that, he might look askance as to why Americans have to compete with near slave labor from, say, China. He would point out that Adam Smith, the Scotsman who wrote, The Wealth of Nations, was referring to like nations and peoples in healthy competition NOT alien nations and their countless poor that can be, now, exploited for short run profit. Franklin in his curiosity, doubtless would follow the money trail and wonder with amazement how The Republic had been usurped by powerful monied entities, both alive and not and their control over The Peoples Representatives. The real Franklin would openly question as to why the sovereignty of The People had reversed to The Sovereignty of the State OVER The People.

      To answer a query addressed to Franklin as to what form of government we were getting, Franklin said, "A Republic, IF YOU CAN KEEP IT!" The dead white guy would now muse, "Apparently, They, The People have indeed LOST it, The Republic.)

      At such point, the actual Franklin might mirthfully think that the Declaration of Independence is as fitting for today as it was for his own time with King George and his Parliament's disregard and contempt for principals of English Law under the tyrannical guise of such principals being living/breathing and subject for, ah, CHANGE. In that regard, the thought of Tyranny would trouble Franklin in his ageless sleep.

    15. Kent Snyder, Clarkst says:

      If it is true that higher minimum wages DO NOT cause an increase in unemployment nor do they place a burden on small business ….. then ….. let's raise them to $20.00 per hour.

      $20.00 times 2000 hours equals $40k per year !!!!!!! Is that enough ?

    16. Lynn B. DeSpain says:

      The United States raising the minimum wage at this time, is akin to the Titanic calling for more ballast to be taken on board to keep from sinking! Who in the Hell is robbing this train and why?

      Hozro

    17. David A. White/ Alab says:

      Set the minimun wage at $25.00 per hour, then the worker can buy health insurance and if both parents work, can afford to send their kids to college. I get tired of hearing about the problems of small business bought on by high wage rates. In the United States, the less one does, the more money they make. The majority of business owners in the USA are helped by some form of government program at the expense of the tax payer.

    18. angela says:

      It is common sense that if you raise min wage then the employers will have to do something it compensate this. Such as lay off people and they will raise the prices of whatever product they are supplying. This will make unemployment rise. That does not sound like something that we need right know in the economy

    19. Ben Franklin says:

      BTW, my REAL name is Ben Franklin, thank you. And you are right, the Ben Franklin well known from history, as opposed to me, who is less well known, woul dhave been completely shocked that the Federal Gov't would deign to think that it had the power to dictate a private company's wage scale.

    20. Ben Franklin says:

      "In the United States, the less one does, the more money they make." Wow, bold words, guess you've never owned your own small business. I will place the amount of work my wife does in our small business up against ANY of the people she has working for her any day.

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