By L&T Publisher Earl Watt
Unlike the Baby Boomers, my generation has been labeled as being a group of small thinkers.
According to a generational study I attended years ago, Baby Boomers tend to think about solving the problems of the world, while Generation X takes a more cynical view. Generation X-ers tend to see the world’s problems as too big and think that they might be able to solve a problem in the neighborhood at best.
There are a number of reasons each generation thinks differently, but that is for another day.
When it comes to the presidency, that is an area where we expect a big view, where we tackle huge problems.
If you look at how President Barack Obama has tackled issues, you would think he was a Generation X-er rather than a Boomer.
Granted, he was born late in the Boomer era (1961), only four years before Generation X began, but his style has been to take the small view to problem solving.
The economy is a clear indicator of this.
This is a huge problem and has been since he took the oath of office.
But his solutions are very small.
His two major efforts have been on unemployment and minimum wage.
Obama has stated that unemployment benefits stimulate the economy and need to be extended.
At best, unemployment has a slight effect on the economy in that those without a job are spending money on life’s basics like food and shelter. But an economy cannot be based on unemployment benefits.
For one, the money for the benefits must be taken from those who are working and paying taxes. That means money they would have spent in the economy has been removed. So at best it is a trade-off.
The reality is, it is a trade-off at a net loss, because the government also has to administer the trade, which costs money as well.
But from Obama’s point of view, this is a part of his overall strategy of redistributing wealth, but it does little if anything to help the economy recover.
His other plan is to raise the minimum wage.
This tells volumes of how small thinking it is in the term — minimum wage.
Raising the minimum wage is a minimalist approach.
Why aren’t we talking about creating high paying jobs rather than working on the lowest level jobs in the economy?
The effects of raising the minimum wage are also minimal at best and only result in inflation. If raising the minimum wage actually raises the standard of living for those at the bottom, then we should be able to see a correlation of that from the inception of the minimum wage to today.
When the minimum wage was instituted in 1928, it was 25 cents per hour. The average income was $1,731 per year. At minimum wage, it would have taken 6,924 hours of work to equal the average income.
Today, the minimum wage is $7.25, and the average income is $28,671 per year. At today’s minimum wage, it would take 3,955 hours of work per year to reach the average income, or slightly less than half of what it would take in 1938.
Clearly, the minimum wage has substantially increased since its inception, but the buying power is no more powerful today for minimum wage earners than it was 75 years ago.
There is a reason it is called minimum wage. It is for jobs that are at the bottom of the chain — low skilled jobs for low priced goods and services.
History has shown that as the minimum wage has increased, buying power has decreased.
For example, according to mybudget360.com, an average new car cost $860 in 1938. That equates to $14,244 today. But the average new price today is $31,252.
A new home in 1938 cost $3,900, which is the equivalent of $64,597 in today’s dollars. But the average price of a home is now $245,800.
Raising the minimum has nothing to do with stimulating the economy.
Again, the focus is on minimums rather than maximizing incomes for American families by supporting policies that result in a robust economy.
Ironically, 95 percent of income growth in the past five years has landed in the top 1 percent of wage earners.
When we focus on the minimums, everyone but those with the most resources suffer.
When we focus on getting more people into the upper income brackets by having high-paying jobs, we all win.
Think bigger, Mr. President, and the results will follow.