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Sunday, February 17, 2013

Tony Paradiso: Smarter, a working goal for president

Tony Paradiso

President Barack Obama has turned over a new leaf.

He no longer wants to spend taxpayers’ money, he wants to invest it. ...

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President Barack Obama has turned over a new leaf.

He no longer wants to spend taxpayers’ money, he wants to invest it.

Best of all, the president has apparently devised a way to invest in a range of worthwhile projects without costing us any additional money – not one dime.

To be exact, the president said that nothing he proposed in his State of the Union address “should increase our deficit by a single dime.”

Hmmm … should not rather than would not, a curious choice of words.

The president did say one thing that I think everyone can agree on: “It’s not a bigger government we need, but a smarter government that sets priorities and invests in broad-based growth.”

Is that what Mr. Obama did in his first term because I hadn’t noticed the smarter part.

Some of the worthwhile projects that the president would like to invest in include infrastructure, combating climate change, preschool for everyone, and a higher minimum wage. Imagine, accomplishing all of that without adding a single dime to the debt.

It’s hard to argue with his list.

Unquestionably, many of our roads and bridges need repair. Evidently, the tolls and gasoline taxes we pay are insufficient to meet those needs. And who would argue with providing our children a better education.

To Mr. Obama, smarter means adding another year of schooling rather than improving the 12 years of schooling kids already receive.

My generation had the benefit of preschool.

Oh, that’s right, we didn’t.

All we had were teachers who cared and had the authority to control their classroom environment without parents helicoptering in to undermine their efforts.

That’s no substitute for a year’s worth of Sesame Street singalongs.

Mr. Obama went on to say that we need “to make sure that this government works on behalf of the many, and not just the few; that it encourages free enterprise, rewards individual initiative, and opens the doors of opportunity to every child across this great nation.”

That sentiment has my full support. I want the entire system to work for everyone.

To accomplish that, free enterprise must be facilitated not hindered; everyone must not only take the initiative but personal responsibility; and opportunities must be available to every citizen regardless of race, sex, or age.

But I heard little in the president’s speech that will accomplish those goals, and I particularly question increasing the minimum wage.

As noble as it sounds, increasing the minimum wage will throw a monkey wrench into the service sector by increasing costs without a commensurate gain in productivity. It also doesn’t foster individual initiative.

Minimum wage jobs are minimum wages jobs because they require little training or education. Typically, they are entry level or part-time jobs. Those who hold them should be striving for better jobs, not expecting to be rewarded with higher pay for doing the same work.

This probably sounds harsh to many.

However, a basic understanding of the profile of minimum wage workers illustrates why the minimum wage is not an issue that a smarter government should be placing at the top of its priority list.

According to the Bureau of Labor Statistics, in 2011 there were 1.68 million workers making the minimum wage and 2.15 million earning less than minimum wage. The Fair Labor Standards Act has numerous exemptions to the minimum wage provisions for jobs where the hourly rate is supplemented with tips or commissions.

Almost by definition, minimum wage jobs are hourly rate jobs. In 2011, there were a total of 73.9 million workers who were paid hourly. Of that total, only 2.3 percent were minimum wage workers. Including the sub-minimum wage workers only brings the total to a shade above 5 percent of all hourly rate workers.

But it gets better.

Almost 30 percent of all minimum wage workers are younger than 19. For the sub-minimum wage group the under 19 segment is appropriately 19 percent.

And for both groups, the percentage of part-time workers who work less than 25 hours per week is 38 percent. In other words, these jobs are heavily weighted toward first-time or supplemental jobs.

The total minimum and sub-minimum wage workers older than 19 account for 4 percent of all hourly wage workers. Full-time minimum and sub-minimum wage workers account for just above 2 percent of all hourly wage workers.

If we compared these workers to the entire American workforce, they would constitute little more than a rounding error. I think the government has a ways to go in perfecting that priority thing.

Of course, increasing the minimum wage does achieve the president’s promise not to add to the deficit. That’s because it will be thousands of small businesses that will foot the bill.

Over half of all workers with hourly wages at or below the minimum work in leisure and hospitality.

Those businesses that employ people to sweep floors, stock shelves, bus tables, and work a cash register will see their payroll expense substantially increase.

And I can say with certainty that the result will be one of two outcomes: fewer jobs or higher costs for consumers. Neither are exactly the ingredients for economic growth.

Author, professor, entrepreneur, radio and TV commentator Tony Paradiso can be reached at