President Obama has promised to lay down the gauntlet at tonight's State of the Union address, and to attempt to go around the entire legislative branch on the matter of "boosting middle class prosperity," as Reuters has termed it
This is a dramatic exercise, coming as it is from a president with a 42 percent approval rating
— as Gallup has most recently reported.
But, political posturing aside, let's take a look at the numbers and the impact President Obama's congressional end-around on the minimum wage question will have on the prospects for the American middle class.
The president is proposing increasing the federal minimum wage to $10.10 from the current hourly wage of $7.25. According to the Pew Research Center
, citing the Bureau of Labor Statistics, only 1.566 million Americans earn the federal minimum wage. We are talking about less than .5 percent of the U.S. population; hardly a cure for the middle class.
But let's assume that Obama's minimum wage maneuver reached the entire middle class voting populace. Raising the minimum wage to $10.10 represents an increase of $2.85 per hour. Let's also assume, just for the fun of it, that all minimum wage workers put in a full 40-hour week. The $2.85 per hour increase translates into a $114 weekly increase on gross dollars — but after the payroll tax, re-instituted by President Obama and his allies in congress to help pay for Obamacare, and a tax that does not take income levels into account — the take-home pay on net dollars is quite meager.
However, boosting the minimum wage will have a negative impact on the middle class — as upward wage pressures will be most clearly represented in agricultural products, and all higher wage costs will be passed on to consumers. While there are wage variables in agriculture
that allow for rates that are below the federal minimum wage mandate, to account for migrant workers, the federal wage will invariably pull state wages higher.
This translates into higher food costs for everyone, including the same middle class President Obama's totalitarian gestures are supposed to support.
Income inequality is going to be one of the central themes of the 2014 mid-term election season, and President Obama's State of the Union address is very much meant to kick off this conversation. But the answer is found in comprehensive tax reform, as addressed in a recent Digital Journal Op-Ed
on the matter.
If President Obama and his Democratic friends in congress were serious about helping middle class prosperity, they would institute the consumption-based Fair Tax Act of 2013