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Biden’s Labor Proposal: Naive and Full of Rethoric

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In his campaign, Joe Biden promised to create new jobs in the United States. However, most analysts agree that the job recovery has already peaked, and what the possible next president does is unlikely to have a major impact.

Within his program, Biden promised to offer deductions of up to 10% on the amount of taxes paid by companies that invest in the United States and generate manufacturing jobs.

Even if these tax deductions bring a few industrial jobs back, their achievements could be reversed if a minimum wage of $15 per hour is approved, pressured by the most radical wing of the Democratic Party, including Vice President Kamala Harris.

Although he has not yet made a commitment, Biden has been in favor of increasing the federal minimum wage to $ 15 an hour, a policy that will be pressured by the executive if he nominates Bernie Sanders as Secretary of Labor.

Currently, no state has an effective minimum wage of $15 per hour, with the exception of the District of Columbia. The states of Washington and Massachusetts today have the highest minimum wages in the Union with $ 13.50 an hour and $ 12.75 respectively, according to the Department of Labor. Florida approved via referendum an increase in the minimum wage to $15 an hour, but it will increase $1 per year until 2026.


The reality behind the proporsal of a $15 hour minium wage

The Congressional Budget Office found that an increase in the minimum wage in 2024 to $ 15 an hour, while raising the income of 17 million Americans earning a minimum wage, would come at the cost of more than 1.5 million unemployed in industries where work is easily automatable or can be replaced with foreign labor.

A Purdue University study estimates that a significant increase in the minimum wage could shift the costs of this increase to the prices of end products in industries intensive in low-skilled labor, such as fast food.

Considering that the vast majority of people that earn a minimum wage in the USA do not work in corporations, but in Small and Medium Enterprises (SMEs), it is very likely that a significant increase in the minimum wage will discourage small and medium businesses from hiring new staff, at best, or firing people at worst.

Biden’s supporters, many advocates of the $ 15 an hour minimum wage, often refer to it as an economic stimulus to aggregate demand. This is supposed to stimulate long-term growth. Unfortunately, this is a reversed view of how the economy works.

Economic growth is the real creation of new goods and services for society. This creation of tangible value is what allows real wages to grow, not a magic number decreed on paper. What the American economy had been experiencing before the pandemic was exactly that: higher growth rates than in previous years, accompanied by an increase in wages for entry positions in companies.

Despite Biden and Sanders’intentions to push for a $15 per hour federal minimum wage, they are unlikely to make progress on this proposal in a Republican-majority Senate led by Mitch McConnell.

More power for unions, less for less-skilled workers

As if drafted by Jimmy Hoffa himself, Biden’s plan is committed to strengthening unionization in the United States, promising that it will be vigilant of corporate abuse, promoting union formation and collective wage bargaining.

Biden appears unaware that unionization in the United States is declining, promoting practices such as banning employer-employee meetings to discourage them from unionizing, forcing employers to negotiate with unions, and creating a cabinet that focus on promoting unionization in both public and private entities.

Although Biden’s program insists on using the word “corporations,” most of these employ people in white-collar jobs that are not usually unionized, and other companies like Amazon are already in an automation program that could be accelerated if the government insist in forcefully unionizing workers.

The Biden program is unlikely to create many new jobs, while it is highly likely that many employers will be discouraged from hiring new staff. Those most affected, of course, will not be the corporations so demonized by Democrats but the least educated workers, African Americans, Latinos, younger people, and other groups that are normally employed in minimum wage jobs.

A divisive proposal and full of rethoric

The most troubling of Biden’s proposal, in addition to its poor viability, is its condescending and divisive language, assuming ordinary people are dumb and justifying the lack of a viable plan to increase wages and employment with idiotic claims like: “While we can survive without Wall Street and investment banks, our entire economy would collapse without electricians keeping our lights on.”

Biden’s contradictions, which go against a basic understanding of economics, surely serve to win naive followers, however, behind them is an octogenarian, without political force, who made concessions with populists in order to aspire to beat Trump in the elections and to whom the band of Sanders, Harris, and Ocasio-Cortez will most likely take their toll at the expense of all Americans.

Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica

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