Wednesday, January 29, 2014

Fixing inequality

The president does not understand even basic economics. In his State of the Union address, he showed his misunderstanding several times when talking about inequality. Two important topics he talked about are corporate profits and the minimum wage.

While it is true that corporate profits are up for some companies, this irrelevant to the topic of inequality. This is an attempt by an ignorant president to instigate class warfare to divert from the fact that inequality has risen during his administration largely due to the policies he endorses. He ignores the important role profits play and if government would get out of the way, long run profits will decline as new competitors enter these markets seeking some of those profits for themselves.

As for the minimum wage, it is a largely uncontested fact that minimum wage causes unemployment. A few studies have tried to show that increasing the minimum wage does not cause unemployment but there are serious methodological flaws in these studies. We can see the effect of minimum wage in the employment statistics. Younger unskilled workers have a very high unemployment rate compared to the general population.

Rather than help the poor and fix inequality, President Obama wants to double down on his own failed policies. If we seriously want to fix inequality, we need to get the barriers out of the way that the government has put up. We need to abolish the minimum wage and begin to deregulate industries. We need to make it easier for manufacturers to produce in America. Manufacturing, the industry government has been working hardest to drive out of the US, is where the high paying low skilled jobs are located.

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