bleechers's Blog

Corporate Lay-Offs Steady, Yet Unemployment Jumps

Unemployment is up. There are many factors that can affect unemployment. In some cases it is a simple matter of a shift in the economy. Often, however, it is simply a matter of the demand for labor. When the government messes with either side of the equation by trying to direct a free market (thus rendering it less free) bad news is sure to follow.

In the 1970s a statist view of the economy was adopted by both political parties and the government inflicted wage and price controls on us. Disaster. You cannot mess with the free market. Jimmy Carter tried to tax and regulate the US into prosperity. Disaster. 

With unemployment at well over six percent, NAFTA was adopted. Whereas unemployment in some sectors increased (I lost my job at Cone Mills to it), unemployment across the board dropped to historic lows. The demand for labor was so great that we had an influx of labor from across the globe and wages increased. The only people who were working for minimum wage jobs were students and those working part-time jobs.

Minimum Wage, Maximum Unemployment

When you increase the minimum wage, one of two things will happen. If the labor is needed it will put pressure on the price of goods (where laborers eventually find their wage) or if labor is not needed, it will lead to unemployment in that sector of the labor market. In the first case, the increase in inflation will negate any gains made from the wage increase. In the latter, if no one is hiring, it does not  matter what the wage is.
 

The chief economist with BenchMark Financial Network explains it this way:

• Ask yourself a few questions: Why did unemployment surge at a time when unemployment compensation claims are historically low? More to the point, how could unemployment spike this much without a coinciding spike in corporate lay-offs?
• The answer to all of these questions is same: because very few people lost jobs last month. This huge jump in the size of the unemployed comes from new entrants to the economy – hundreds of thousands of them. In short, well over 600,000 people who were not job seekers in April became job seekers in May. And who starts looking for work at the end of Spring? That’s right – students. Hundreds of thousands of students are looking for work right now, and they’re not finding it.
• Congress is to blame. Last year Congressional Democrats (along with some Stockholm-Syndromed Republicans) passed the Fair Minimum Wage Act of 2007, which started a phased hike of the minimum wage from $5.15 an hour to $7.25. Free market economists warned them that this would increase unemployment – that rapid increases in unemployment compensation hit teens and minorities the hardest. But the class-warriors are running the people’s house now, and they would hear none of that, so they took to the floor, let loose the dogs of demagoguery, and saddled America’s pizza parlors, municipal swimming pools, house painting businesses and lawn mowing services with a huge cost increase.

The Democrats in congress are refusing to drill at home. Even as the Republican House Leader begs them to consider yet another domestic drilling bill, they open their ears and pockets to the environmental lobby and ignore the needs of the nation. But in the last two years, they did manage to radically increase the minimum wage. Whoop-de-do.

These simpletons probably believe that we can just magically set, by force of law, the price of gallon of gas at $1.50/gal and all will be well (a "maximum price" for the "minimum wage"?). Obama speaks of “oil industry price gouging” yet he can produce no evidence. This is all dangerous politicking. Handing out minimum wage increases that hurt the people who will buy the hype and demonizing the industries that deliver the products we demand.

Government does nothing to get the gasoline to your tank, yet they profit from every gallon to the tune of 40-60 cents! They cry against tobacco yet they profit more than the tobacco companies who do all the work. Pharmaceutical companies spend billions to bring humanity the greatest advances in medicine the world has ever known, and now leftists like Clinton and Obama are threatening them with a government takeover

As We Walk Into Slavery

The Congress is either utterly ignorant of economics or woefully sold out to a left wing, anti-American agenda that will lead to ruin. As you’ve probably guessed, I believe it’s a powerful combination of the two. They want to tell you how to live, where to live, how to raise your children, what to drive and where and when to go to the doctor. It’s a form of slavery and we willingly sit back and hand them our lives.

Next time you are seduced by the carrot of government-mandated wage hikes or promises of “free” this or that, know that the carrot is tied to a very large stick. Another name for that stick is a “whipping switch.”