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Entrepreneur: Obama Minimum Wage An Economic Self-Destruct Button

Up to 1 million jobs will be cut and the deficit will increase under Obama's wage increase

AP

The CEO behind America’s greatest hamburger chain says that President Obama’s 40 percent minimum wage hike is a cynical political ploy that will hurt the poor and the middle class.

Andrew Puzder, CEO of CKE Foods, which owns Hardee's and several other prominent food chains, wrote in the Wall Street Journal that the pay hike may help unions and some existing workers, but the average low-skilled or entry-level worker will suffer greatly.

The feds can mandate a higher wage, but some jobs do not produce enough economic value to bear the increase.

If government could transform unskilled entry-level positions into middle-income jobs, the Soviet Union would be today’s dominant world economy. Spain and Greece would be thriving.

The non-partisan Congressional Budget Office estimates that up to 1 million jobs will be cut and the deficit will increase under Obama’s wage increase. Other labor policy experts and business executives hint that robots will replace human workers as companies look to cut costs. Puzder said that will become the inevitable future.

But here’s what middle-class business owners, who live in the real world, will do when faced with a 40 percent increase in labor costs: They will cut jobs and rely more on technology. Such changes are already happening in banks, gas stations, grocery stores, airports and, more recently, restaurants. Almost every restaurant chain in the country from Applebee’s to McDonald’s is testing or implementing automated ordering with tablets or kiosks.

Puzder said that the president should pursue a growth agenda if he is interested in improving lives, rather than scoring political points in a tough election year.

The better policy would be to encourage the private sector to create more middle-income jobs. North Dakota enjoys the lowest unemployment rate in the country, at 2.8%, thanks to the state’s energy boom. The state minimum wage is $7.25, but entry-level employees typically make $12 to $15 an hour. This happened because the state’s dynamic economy created a demand for labor and supports increased pricing to offset increased wages.

But if the administration succeeds in persuading Congress to raise the wage, the new law should at least attempt to mitigate these negative economic consequences. A more modest increase would help. So would spacing out the increase over time…

But the pre-election push is mostly about safeguarding the jobs of a smaller group of people: congressional Democrats.