Obama's 'jobs deficit' swells to 4.2 million
Created on July 21, 2009
Jobs Killed by Higher Minimum Wage and
Taxes on Small Business
With unemployment edging toward 10 percent nationwide, this
summer isn't such a hot time to raise the minimum wage. Owners of
on-the-edge small businesses, for instance, hardly need another
obstacle to hiring more help.
Yet that's what employers will get as of today, July 24. The
cost of hiring unskilled workers will jump 10 percent, to $7.25 an
hour, as the increase in the minimum wage passed by Congress two
years ago fully kicks in.
"This minimum wage increase will artificially increase costs for
struggling businesses at exactly the wrong time," labor policy
analyst James Sherk of The Heritage Foundation writes in a new paper. "And as a result, it will cost
300,000 teenagers and young adults their jobs."
Clearly, this is no way to close the "jobs deficit" that has
grown each month since President Obama made his final push for a
$787 billion economic "stimulus" to create or save 3.5 million
As of June 30, employers had shed 4.2 million jobs since
January. Nearly 7 million jobs will have to materialize to meet the
president's prediction that stimulus spending approved by Congress
would spur total employment to more than 138 million jobs by the
end of next year.
"When Congress passed the minimum wage increase, unemployment
was low," Sherk notes. "Now, in the middle of a deep
recession, unemployment has risen sharply for the least skilled
workers. Wage growth has flattened. Congress should postpone this
minimum wage increase until the unemployment rates of teenagers and
unskilled adults return to normal."
If some in Congress get their way, though, a minimum wage of
$7.25 would be the least of a small business owner's worries.
Rep. Charlie Rangel of New York, chairman of the House Ways and
Means Committee, has proposed a surtax of 5.4 percent on 2 million
high-income Americans -- to pay for the Democrats' $1.3 trillion
health care bill.
About half of those taxpayers, 1.2 million, own
small businesses -- as Heritage's state-by-state table
The result would be Americans paying sky-high, European-style
taxes at top rates that -- combined with local and state taxes --
exceed those of economic competitors such as Germany and Japan.
"The large tax increases proposed by Charlie Rangel would harm
over a million small businesses, making them less likely to expand
and hire new workers," Heritage senior policy analyst Rea S.
Hederman Jr. writes.
"The Rangel surtax and the expiration of the Bush
tax cuts means the top marginal rate would increase by over 28
percent in the next two years. Much of this burden will fall on
small businesses, which will pass those costs onto consumers,
employees, or both."
Not only that, but the president would have the power to raise
the surtax higher.
"The House health care bill also would force small businesses
with at least $250,000 in payroll to provide health insurance or
pay a tax penalty up to 8 percent of payroll," Hederman adds. "Almost all small businesses and
employees would be affected. The mandate increases the cost of each
additional worker, making it less likely that small businesses will
hire new employees or give raises to existing workers in a weak
None of this sounds like a prescription to close that "jobs
deficit," Mr. President.
The Heritage Foundation offers sensible conservative solutions
to reviving the
economy and reforming health care.
McIntyre is the Marilyn and Fred Guardabassi Fellow in Media
and Public Policy Studies at The Heritage Foundation.