It is telling that President Obama decided to address the problem of Americans “stifled by stagnant wages” through government programs. An increase minimum wage, the earned income tax credit, and the MyRA are his solution to this problem. But of course, it is government intervention in the economy that has led to the problem of stagnant wages in the first place.
Stimulus spending, inflationary policies of the Fed, heavy regulation of the financial markets and every sector of the economy have led to one of the worse economic recoveries in history. More of this won’t solve the problem.
On the other hand, Texas has shown the way on this. Our low tax, less regulation approach has proven to be the way to grown the economy and increase wages. For example, since 2001, Texas has experienced a 16% increase in job growth, whereas the rest of the country has experienced job growth of ½ of one percent. In other words, almost all of the job growth in the U.S. during the last 12 years has been in Texas in the last 12 years.
The U.S. can’t just spend its way out of this problem. But that is what the President wants to do with the minimum wage.
Wages grow naturally when the economy grows. It doesn’t work the other way around. Forcing companies to spend more money on wages does nothing to improve the economy–or help workers.
In fact, the people who this policy is supposed to help-inexperienced and lower wage workers-are the ones who are hurt the most. The unemployment rate under the current minimum wage among 16-19 year olds (24%) and 20-24 year olds (14%) makes this painfully obvious.
If we really want to help lower wage workers, the Texas Model is the way to do it-it keeps costs low to make a higher standard of living more accessible. We can see this when comparing Texas with California. California’s minimum wage is $8 an hour. Yet when adjusted for the cost of living, it is worth only $6.06 an hour. On the other hand, Texas’ minimum wage of $7.25 is worth $8.08.
In other words, a lower minimum wage under the Texas Model leads to a higher standard of living.
This approach works in all areas of the economy, and is the direction that President Obama and Congress should take to help all Americans.