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Tuesday, June 30, 2009

Unemployment in the United States reached 9.4% in May, and predictions place June's rate at 9.6%. President Obama, through his American Recovery and Reinvestment Act (hereafter known as the Stimulus) vowed to keep unemployment low through this recession.

Unemployment with and without Stimulus
Well done. However, I don't intend to debate the merits of the Stimulus (in this post), especially when Keith Hennessey has provided such a thorough, well-written analysis over at his blog: http://keithhennessey.com (I highly recommend it).

Instead, let's focus on the scheduled federal minimum wage hike to $7.25 in July. This will affect the 21 states with a lower or no state minimum wage rate. Congress passed this three-step increase in the federal minimum wage rate back in 2007 when the unemployment rate measured a mere 4.5%.

According to David Neumark, professor of economics at the University of Calirfornia, Irvine:

Based on 20 years of research, I doubt there is ever a goodtime [sic] to raise the minimum wage. However, with the aggregate unemployment rate at 9.4%, the teen unemployment rate exceeding 22%, and the unemployment rate for black teens nearing 40%, next month's increase seems like the worst timing possible [emphasis added].
Mr. Neumark estimates that July's scheduled 11% increase in the federal minimum wage will cause 300,000 lost jobs for teens and young adults. If President Obama really wants to enact policies to temper the nation's rising unemployment, he should call for a moratorium on next month's scheduled federal minimum wage hike.

Posted by Eleutherian

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