Obama sidesteps Obamacare problem to push minimum wage hike

President Barack Obama told a low-wage fry cook who has seen his hours cut by his employer because of Obamacare that the best way to help him make a living would be an increase the minimum wage:

During a Google Hangout session on Friday, fry cook Darnell Summers told President Obama that his hours were cut due to the Affordable Care Act. “We were broken down to part time to avoid paying health insurance,” he said. Summers explained that he makes $7.25 an hour and has been on strike four times seeking a wage increase. “We can’t survive, it’s not livin’,” he said.

The president responded by urging states to increase the minimum wage. “I am working to encourage states, governors, mayors, state legislators to raise their own minimum wage,” Obama said. “Obviously, the way to reach millions of people would be for Congress to pass a new federal minimum wage law. So far, at least, we have not seen support from Republicans for such a move.”

The president did not address Summers’s comments about the healthcare law.

Here’s the video:

There so much wrong with the premise of Summers’ question to President Obama. First, he doesn’t stop to think about the consequences of economic policies in the background presented before his question.

As he said, his hours were cut because of Obamacare, a step taken by his employer to avoid the employer mandate. This provision of the law requires businesses with 50 or more full-time employees, defined as someone who works at least 30 hours a week, to offer health insurance benefits or face a punitive, $2,000 per worker tax. As a result, many businesses have resorted to slashing hours or hiring predominately part-time workers to avoid added healthcare costs.

There’s the first consequence, which, unfortunately, President Obama didn’t even bother to address.

Secondly, the other policy mentioned in the question — the minimum wage — has an adverse effect on young and unskilled workers. It’s unclear how old Summers is or the level of education he’s attained, but we’ll assume for the sake of argument that he’s an unskilled worker.

Basically, it boils down to the law of supply and demand, as Mark C. Schug And Gordon D. Gaster explained in an editorial at the Milwaukee Journal Sentinel. When the market rate for labor artificially rises because of, say, a minimum wage increase, there will be less demand for unskilled workers (emphasis added):

In markets for unskilled labor, demand is created by employers, and when the price of unskilled labor (wages) goes up, employers will buy less — often laying off employees or finding labor-saving substitutes through new technology. When the price of unskilled labor goes down, they hire more employees. Suppliers in unskilled labor markets are the people who wish to work. When wages increase, workers are willing to do more work. When wages go down, workers are less willing to work.

The point where supply and demand for unskilled labor balance is once again the market price. When wages are arbitrarily set above the market price, the result is a surplus, and that surplus is what politicians and the media call unemployment.

The majority of academic research supports this conclusion. An exhaustive review of recent research by David Neuman and William Wascher concluded that 85% of the most credible minimum wage studies provide strong evidence of negative employment effects resulting from minimum wage laws.

By the way, a 2009 poll found that 79% of economists agreed with the notion that “minimum wage increases unemployment among young and unskilled workers.” There’s the second consequence of bad economic policy.

Separately, however, President Obama’s answer shouldn’t have been about the minimum wage. He is, of course, pushing that issue hard after his State of the Union address. But here’s the kicker, the real issue in the question is the employer mandate:

This exchange took place during a Google Hangout on Friday. The fry cook is Darnell Summers, a union advocate for raising the minimum wage. He noted to President Obama that his hours had been reduced to part-time as a result of Obamacare. Great point Mr. Summers:

• Federal minimum wage ($7.25/hour) X 40 hours = $290.00/week
• President Obama’s proposed minimum wage ($10.10/hour) X 29 hours (as a result of Obamacare) = $292.90/week

Interesting. But let’s dig some more:

• Because of Obamacare’s regulations, an hourly worker’s hours can be reduced by as much as 25% to get below the 30 hour threshold.
• In 2013, President Obama proposed a $9/hour minimum wage ($261/week @ 29 hours). Coincidentally this year, he upped his proposal to an amount that just replaces the money robbed from hourly worker’s paychecks by Obamacare.
• Yet, 21 states already have a minimum wage higher than $7.25. An hourly worker in Washington may be celebrating the Seahawks win, but he isn’t celebrating Obamacare gutting his pay by $102.52/week.

Had Summers not brought up the minimum wage and his personal activism on the issue, it would have been a very tough question for President Obama to sidestep. Unfortunately, by doing so, the fry cook gave him enough of a hole to escape.