Saturday, June 07, 2008

Some Conservatives Blaming Minimum Wage Earners For Biggest Unemployment Increase In 22 Years

Some conservatives are now advancing what has to be the most absurd and worst possible explanation of the root causes for the huge unemployment uptick that was the worst in 22 years. They are unbelievably actually blaming minimum wage earners of all people, and totally ignoring the huge hyperinflation in fuel prices that has completely destabilized the econmy, creating unemployment as sales drop in retailers as a response to a huge shift in the economy towards buying power directed at affording gas and heating oil.

This is absolutely the very worst explanation I've ever heard for the sudden increase in unemployment related to the economic slowdown hitting the United States which is entirely related to the 40% price increase in oil since just Jan 1, 2008. First of all, even the economic stimulus tax rebate checks program is based on the idea that if the consumer public has more money to spend, then it will filter all through the economy and eventually filter back to Washington. Even Senator Obama is proposing a $1,000 middle class tax cut to boost the economy back towards recovery. And increases in the minimum wage also helps to increase consumer buying power, however the rapid hyperinflation in oil prices has taken many lower wage income earners out of the market economy who are now spending far less at neighborhood businesses and instead using the money to purchase gas or heating oil.

Too much of the economy is becoming centralized in the energy segment, which has rapidly taken capital for all other segments of the economy resulting in slower sales and hence job layoffs. I've owned enough businesses in my lifetime to have seen this cycle played out several times with recessions, however this oil based recession is an entirely a new variation on recessions. This recession is characterized by hyperinflation in energy prices, a ripple effect of inflation in food and all other products that require truck transport. A gallon of diesel fuel is now at the $5 level in the United States, compared to Mexico where the government subsidizes the diesel to a $2 a gallon price. In fact, many world economies subsidize oil prices to create economic stability and growth, unlike the U.S.

China for example is experiencing some of the world's fastest economic growth while the American economy is rolling backwards. The government keeps price controls on oil, and instead offers a subsidy to the oil producers to help them cope with raw oil commodity price increases. In April, for example, CHINA PETROLEUM AND CHEMICAL CORPORATION received a $1 billion dollar($7.1 billion yuan) government subsidy.

Better wages in the U.S. have nothing to do with big uptick in unemployment. The huge inflation in oil prices in the United States diverting billions and billions of dollars from all other segments of the ecomony in lost consumer spending has everything to do with big jump in unemployment as slower sales in many businesses result in job layoffs creating a cycle of recession that only feeds on itself.

Conservatives like to oppose things like decent wages or government price controls. Fair enough. But the U.S. is now suffering a great economic slowdown due to this directionless political philosophy that ignores the necessary reality of at least some government planning and direction of the economy in order to promote stability. Like an ostrich with it's head stuck in the sand, some just can't seem to comprehend that part of the role of government is to help offer at least some management to the economy and prevent crisis situations. Even the average housewife manages her family budget or economy, unlike the government. And further, pathetic conservative explanations blaming small minimum wage increases for increased unemployment will certainly play very poorly with most November voters, only driving millions towards voting for change of the White House and some in Congress. John McCain certainly won't win election if he advances such outrageous explanations. Lower wage earners are a victim of the huge hyperinflation in oil prices, not a cause of any unemployment uptick.