Friday, April 17, 2015

Minimum Wage Madness

Hillary Clinton has just announced her candidacy for the Presidency in 2016. Predictably, her big issue is “income inequality,” a problem that she and other like-minded Democrat politicians claim has gotten worse and worse in recent years. Never mind that these years include almost six and a half years of the Obama administration.

Despite all the problems in the world today, it would appear that “income inequality” will be the big issue in next year’s election campaign. Already activists are taking to the streets in demands to increase the minimum wage in the country to $15 dollars an hour. April 15, the tax-filing deadline, saw mobs disrupting traffic in New York City, and demonstrators marching on the State Capitol here in Connecticut.

I would bet that hardly any of these demonstrators had ever employed anyone, except baby sitters. The great majority have no idea of what it means to meet a payroll every week. Of course, when their upper class liberal supporters hire gardeners, and cleaners, they are notorious for their own parsimony. I recently talked to someone who owns a house cleaning service in Martha’s Vineyard, a trendy vacation island off the coast of blue state Massachusetts. She complained that while her business that complies with all employment standards, the wealthy vacationers prefer to hire illegal immigrants to clean their homes at markedly lower rates.

Most of the demonstrators and their liberal supporters think that business owners, big or small, are rapacious, greedy wolves. Why do they think they will act like sheep willing to stand by placidly while they are being sheared? Despite the good intentions of those who think an almost 100% increase in the minimum wage will help those on the bottom of the economic ladder, there is evidence that it will do more harm than good.

A recent legislative proposal by Marilyn Moore, a newly elected representative to the Connecticut State Senate from the city of Bridgeport provides a good example of the potentially bad effects of mindless legislation. The Senator proposes that any large corporation in Connecticut that does not raise its minimum wage to $15 per hour will be subject to a large fine for each employee under her desired minimum.

She expects that the legislation will bring in millions in fines that could be then used to alleviate the plight of the poor. Let’s just skip over the fact that a recent large tax increase failed to bring in the projected revenues, or that the monies raised did not necessarily go to the poor, but concentrate on the fact that this proposed legislation might cause many low income employees to lose their jobs.

Senator Moore targeted General Electric (GE), one of the large corporations in Connecticut. GE’s corporate headquarters are located in my hometown of Fairfield. GE is the biggest taxpayer in Fairfield paying about 2 Million dollars a year in real estate taxes. It is therefore the largest supporter of our town services like public schools and police and fire departments. Moreover, GE employees who live in Fairfield and other Connecticut cities pay state income taxes, state sales taxes, and local real estate and personal property taxes.

What would prevent GE from moving its corporate headquarters to another more tax friendly state like Texas or Florida? The huge company is in the process of divesting itself of its financial arm, and so would seem to have less reason to remain close to New York City. The loss of GE would be a catastrophe. Taxpayers in Connecticut and Fairfield would have to bear a heavier burden. Thousands of employees would either relocate out of state or just lose their jobs. Many peripheral companies and workers would also lose their best customer. Finally, the low paid workers that Senator Moore is hoping to aid would suffer the most. They will probably never have as good a job as the one they had at GE.

I don’t want to sound like an alarmist but just today headlines noted that retail giant Walmart just closed four stores and 11000 employees lost their jobs.

Nevertheless, politicians from lowly state senators to presidential candidates like Hillary Clinton will continue to rail against income inequality. Speaking of Mrs. Clinton the Wall St. Journal noted this week that she gets paid $300000 for her speaking appearances. In addition, she insists that all her expenses be paid by the sponsoring organization. These expenses include the most expensive suite in the best hotel, and a private jet round trip.
If she gives just one speech a month, that comes to $3.6 million per year. It’s also tax-free since it goes into the Clinton Foundation whose primary social welfare program this year would appear to be getting her elected President in 2016. The companies who pay her the $300000 can write it off as a business deduction. What a joke! But the jokes on us.


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