Minimum Wage Madness

The Minimum Wage is going up! Chicago and Seattle are looking at raising their number to $15 an hour while the President and numerous state and local leaders want a rise to ONLY around $10.

These people are nuts! These people are socialists, but then I repeat myself. These people are economically illiterate, but I repeat myself yet again.

Is it in any way possible that all they look at are their highly doctored, highly phony headline numbers on unemployment and the economy?

Let's examine a few charts to see what really is going on. First, how many people really are unemployed and underemployed? While the headline number (U-3) is 6.7%, the broader official rate (U-6) is around 12½ %, while the pre-1994 methodology shows US Unemployment today is closer to 23%! This chart from www.ShadowStats.com is truly ugly.

Looking at the St. Louis Fed's Civilian Labor Force Participation Rate since 1985 confirms the awful employment situation, with only 62.6% of working age Americans in the work force. This is the lowest it's been since way back in May, 1978!

All those Americans out of work help explain why the rolls of Food Stamp recipients have grown to 50 Million! While the President and members of Congress praise this growth, many of us who live in the real world consider this to be a national disgrace – a national tragedy.

Americans are getting poorer from all the existing stupidity coming out of Washington. Many have to choose between food and energy. But, those items are no longer counted in the headline CPI number. And the CPI methodology has changed continually, so that a comparison with the past is difficult at best.

John Williams at www.ShadowStats.com has kept track of the changes to the methodology, and he blesses us with an accounting of what the CPI would show if we hit “UNDO” back to the 1990 (and also back to the 1980) way of figuring the CPI. So, while today's CPI says there is just 2% “Inflation,” the 1990 version (before the tinkering during the Bush I, Clinton, Bush II, and Obama administrations) says the CPI would have registered around 5½% y.o.y., and the 1980 version (pre Reagan era tinkering) would be nearly 10%!

The US Economy, as measured by GDP, also shows disaster. Once again the official numbers are unreliable. The real – inflation adjusted – GDP takes the nominal figure and subtracts out the rises in prices. The official numbers show the US Economy growing slowly, at 2%. However, if we back out the CPI 1990-methodology price increase number, then GDP is shrinking today about 2% a year. (Adjusting the GDP for the 1980s methodology CPI shows GDP shrinking at a 6% rate!)

Comparing the GDP rates, the official numbers show a brief Recession in 2008-2009, while the 1990 CPI version shows that we've been in Recession for 15 years, except for a few months in 2004. (Not show in the graph below is that, using the 1980 CPI to adjust, the Great Recession has been going on continuously since the end of Ronald Reagan's Presidency.)

The US Economy remains in a tailspin, unemployment is at Great Depression levels, millions of Americans have given up hope of ever finding a job, and prices for things real people buy are soaring. All this – except in the official version spewing out of the offices of the numbers tinkerers in Washington.

And now, these geniuses on the Potomac want to boost the Minimum Wage. Basic Economics 101 tells us that if you raise the price of anything, less will be demanded. In this case, less labor will be demanded, and Unemployment – already horrendously high – will go even higher. Why not raise the Minimum to $100 an hour and have 98% of Americans on food stamps?! Morons!

I think I need to go lie down so that my blood pressure doesn't kill me.