Obama #budget takes a non-market, socialist approach to #wages

In his recently released budget proposal, President Obama envisions a living, minimum wage with future increases based on the rate of inflation.  Interesting.  Will this also mean that where we see a negative consumer price index that wages will fall accordingly?  Probably not.

By the way, Mr. Obama’s proposal appears on page 30 of the budget.  I figure giving the page number should help given the budget is some 2,000 pages.

There is something union-esque about this proposal.  It takes away a market-based evaluation of wages and bases the minimum wage on fairness, whatever fairness is supposed to mean.  In business, wages paid are not based on fairness, but on the value the employee brings to the organization; a value based on production.  When I managed a restaurant a few moons ago, I wanted the most productive people on my shifts.  Efficiency falls if you can’t delegate certain tasks to an employee because they won’t be able to deliver and if you have to make up for their shortcomings by doing there job in addition to yours, your efficiency falls off as well.

Rather than focusing on a programmatic offering designed to keep the progressive electorate in the fold, President Obama should focus on creating an politico-economic environment that makes it easier for individuals to garner the capital they need to make themselves valuable and thus drive their economic values up.

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
This entry was posted in Barack Obama, Budget, capital, Economy, minimum wage and tagged , , . Bookmark the permalink.

4 Responses to Obama #budget takes a non-market, socialist approach to #wages

  1. Ken Ciszewski says:

    “In business, wages paid are not based on fairness, but on the value the employee brings to the organization; a value based on production.”

    I think it’s a little more complicated than that. Most jobs have a “target” wage that a business pays that is based on many considerations. One is direct cost of labor added to raw materials to make a final product at a specific price point so as to be competitive. Another has to do with overhead (indirect) labor cost to support the business. Yet another has to do what competitors are paying. Still another has to do with how high an employee sits in the organizational structure.

    How much value do CEOs bring to an organization? Judging by their compensation, they must more valuable than God! Of course, without workers at the street level to do the actual work, CEOs couldn’t bring very much value to the organization, since they themselves couldn’t produce enough to create the income to pay their huge salaries. CEO pay is created by those actually produce, sell, and support the products and services of a business. Since that is true, why shouldn’t the average worker be well compensated? Admittedly, there is a limit to what this can be, since there is only so much money consumer have to pay for a particular product or service. I submit, however, that, considering all the money being paid to executives and CEOs, who produce little of direct value, and often, I believe, little of indirect value, businesses could find ways to better compensate workers, but most of them don’t want to.

    During the 1990s, when CEO pay started to increase by leaps and bounds, whether companies did well or not, I was sorely tempted to place the following ad in the local newspaper:

    “Tired of you’re overpriced CEO? I’ll do his job for $500,000 a year, and a good health plan–no bonuses, no stock options, no incentive pay.” I figured that I couldn’t mess things up any worse than most of the CEOs did. If we did this, the money saved could be used to compensate line level employees.

    My idea is that anyone who’s being paid $500,000 a year ought to be dancing in the streets for his good fortune and an opportunity to great things for his business. He shouldn’t need “incentive” pay to a better job. His incentive is to keep his $500,000 per year job.

    From this point of view, the idea that wages aren’t paid based on fairness takes an ironic twist–those farthest from the actual production and delivery of goods and services are paid the most for allegedly running the show. In most cases, CEOs have little day to day impact on business operations (even though they believe otherwise) unless they radically reorganize things, and when they do that, they often make things worse, or at least, not any better.

  2. Kenneth Ciszewski says:

    All that said, I tend to agree that the government shouldn’t have to mandate wage levels. But until we all learn to cooperate and share instead of competing against each other to win at all costs, something needs to be done the equalize the situation at least somewhat.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s