There have been many criticisms of President Obama, culminating in his new-low 41 percent approval rating, as reported by a recent WSJ/NBC News poll. Of all of them, the most frustrating may well be his complete lack of understanding of the concept of unintended consequences.
We are living through the nightmare of the Obamacare unintended consequences, getting far fewer new insured individuals at the expense of millions who have lost their previous health care. Now, the president seems hell-bent on interfering in economics without understanding the repercussion potential from that either, such as killing jobs and small businesses.
First, he started pushing to raise the federally mandated minimum wage and now, it's the threat of a legislated raise in overtime pay for salaried employees who don't currently qualify for it, circumventing Congress to do so through an executive order.
While I believe that those individuals, including the president, who are seeking to raise wages through mandates generally have good intentions, they don't understand what artificial interference into the economic system can mean and who their "good deeds" hurt in the process. While I agree that we need better jobs with higher wages, mandating increases by policy instead of through supply and demand is not a plan that I can get behind.
In fact, in a time when we really need to foster a job-creating environment, such policies threaten existing jobs and create a scenario where it's less attractive to create new jobs.
Here are some of the issues that need to be understood.
I have often heard that the minimum wage hasn't kept pace with the cost of living. Proponents of legislated wage intervention cite the challenges of raising a family while working at minimum wage level during a 40-hour work week. This is the argument for boosting overtime pay for certain salaried workers as well: that too many people have to work more than 40 hours for their salary.
For better or worse, the reality is that the 40-hour work week benchmark in America is no longer relevant. Working "9 to 5" (or 8 to 4, or 10 to 6) five days a week is a fairy tale or, at least, a relic of years gone by for many. With technology making everyone connected and accessible, I know very few people who work full time and work only 40 hours a week. Most people that I know are comfortably in the 50- to 60-hour range and many others, including a lot of entrepreneurs and small business owners that create employment opportunities, work far more.
For those on salary, there should be the expectation that you may have to work some longer hours, more than 40 per week, to complete your work. You are being paid for tasks or results, not for hours worked. For those on an hourly wage, if you are on hard times, I would suggest that 50 or 60 hours would be a minimum consideration for a work week. Sixty hours would be working an 8-6 or 9-7 shift (or several combined), six days a week. That still leaves a full day off each week (which, as many people, including me early in my career, don't get when they are starting off or are trying to make ends meet).
Labor Has Power
The discussion around workers and business has also become very much a caricature. Proponents of legislated wage increases like to cite the soaring profits of public companies at the expense of the worker. While public companies have in fact been cutting overhead -- including jobs -- to increase profitability (thanks, in large part, in my opinion to Fed policy), the reality is that workers aren't without choice when it comes to employment.
There are 28 million businesses in this country, with more than 6 million of them currently acting as employers. All but less than 20,000 of those are... small businesses. So, it's not exactly a monopoly of wage power from a few employers. Employees have the ability to leave if they don't like their terms and seek employment from one of the other 6-plus million firms that already have employees, or start their own business if they can do it better.
While I acknowledge that the labor force is tight currently, that won't be the case forever, although any raise in the wage policies will be -- at least until they get raised again, since they are never revised down. But the biggest problem creating labor issues is that the skills or workers are a mismatch in many cases for the needs of employers. Mandating that someone pay a certain wage based on the whims of politicians rather than supply and demand in the market doesn't address that problem and will lead to businesses seeking other solutions, such as outsourcing overseas, replacing workers with technology and moving full-time jobs to part-time jobs, which we are already seeing this as a result of Obamacare.
Penalizing the Job Creators
People get very generous about spending other people's money. Too many want to require a spending level of a small business owner to its workers to guarantee their income, yet nobody is guaranteeing the small business owner's income or future. As noted above, the greater majority of businesses in this country -- greater than 99 percent of them -- are small businesses. Small business owners take on a lot of risk, including capital risk, to start a business to create employment for themselves and often, for others.
If you know anything about the small business space, these entrepreneurs work hard. I mean, really hard. Many struggle to get by. Most businesses earn little over their lifetimes. Many entrepreneurs, on an hourly basis, earn less than the minimum wage while they create the foundation for their business. But still, they are subject to incredible rules and regulations, including having to pay others a defined amount, regardless of their own success.
In a time when we need to encourage job creation, why would our president, or anyone, seek to penalize those who are creating the jobs? It absolutely makes no sense, particularly since nobody is forced to sign up for a job -- hourly or salaried -- that they do not want.
Absent from every discussion about raising wages by legislation is the responsibility of the worker. What requirements do the workers have? In the context of working more than 40 (or 50 or 60 hours) for your salary, what productivity requirements do you have as a worker to keep up your end of the bargain? Just because you are "at work" for any given amount of hours, doesn't mean that those hours are entirely productive. So, if you are going to get legislated treatment, what should be required of you to get that special consideration?
For those that say that the employers have recourse, such as to fire non-productive workers, I would say that workers also have recourse, such as not to take a job that doesn't fit their requirements for salary, working conditions or otherwise.
We have to stop trying to legislate growth and instead, foster an environment that creates more demand for labor and better jobs. We should be making it easier for businesses, including small businesses, to hire people, not more difficult. We should make it easier for people to go into business for themselves as an option to take control over their futures and to innovate -- a necessary component for growth. And we need to find ways for people to become retrained with skills that are in demand.
We cannot tax and legislate our way into prosperity. We need to stop trying to do that and foster an environment that will allow for prosperity to happen organically. That is the only way to create a successful financial future for the maximum number of Americans.
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