Obama Spokespeople Describe Effects of Sequester

Would Obama's Minimum Wage Hike Proposal Have Any Different Result Than His Increasing Import Tariffs?

In his recent State of the Union Address, President Obama put forward the proposal to increase the minimum wage from the current $7.25 per hour to $9.00 per hour. A 24+% increase.

He reason for proposing this change was that working people deserve a higher wage - in fact a living wage - and that it was time to raise the minimum wage. Implicit in this proposal was the assumption that raising the minimum wage would only produce a "good" both for current people working for minimum wage and those future employees to be hired at the minimum wage. However, why does he think this increase will not both decrease the demand for additional labor (currently getting $7.25/hour) and either result in layoffs of current minimum wage employees or a change in work requirements to ensure employers get $9.00 per hour of value vs $7.25? Or stated more directly, why won't this increase in the minimum wage increase the unemployment rate for low skilled workers or require a higher rate of productivity for current workers?

Economists have varying opinions about the effect of raising the minimum wage and studies can be pointed to that will show a positive, negative or no effect from raising the minimum wage. However, what makes the question of the effect of minimum wage increases particularly interesting in this case is the fact that the Obama administration has made policy decisions that seem to reflect their belief that raising the price of an item or service will lead to a reduced demand for that item or service. In 2009 the administration imposed a tariff increase on Chinese tires of 35 percent in the first year, 30 percent in the second, and 25 percent in the third year. The stated purpose of these increases was to reduce the demand for Chinese tires by making them more expensive and thereby increase demand for (then cheaper) domestic tires. I don't remember any statements from the administration about consumers or businesses being able to easily absorb the added costs and/or reduce their incomes or consumers accepting a lower disposable income by paying the higher prices for Chinese tires. No, in fact the implicit purpose was to increase the cost of Chinese tires and thereby reduce demand for them. It seems they believed higher prices for tires would result in decreased demand. 

So why does the same administration not think this will happen with an increase in the minimum wage? The price of the good (wages of low skilled workers) would go up with an increase in the minimum wage and the same economics says that just as in the case of increased tariffs on Chinese tires, less minimum wage labor should be demanded or used.

Of course the result is the same. Businesses will either hire fewer low-skilled workers thereby increasing the unemployment rate among this group or they will extract more work/value per person in order to justify the increased cost.  

Since some amount of minimum wage labor will still be needed - albeit at a higher level of productivity to justify the higher wage cost - those workers kept employed can be considered to be better off if they don't view a need for increased productivity a negative. However, this is little consolation for those employees that will be laid off or never hired because they can no longer be justified at a higher minimum wage.