Why Middle Class Incomes Haven't Increased

As of the end of 2014 and with the latest data available from the Census Bureau and the Bureau of Labor Statistics, the average middle class family's buying power is about where it was in 1996; barely moving up from its 2012 lows.

Click on graph to enlarge

While all too many Democrats think the solution to the wage stagnation problem for the middle class is to give people pay increases by raising the minimum wage, just the opposite is happening.  Giving entry level workers big raises only drains the funds the employer would use to give everyone else a decent raise.  As of January 1, 2015, 29 states and the District of Columbia have minimum wages that are higher than that of the federal minimum wage; and many went even higher as of January of this year.

Simply, the way to grow middle class incomes is to allow the free market system to do its job. The fact that the middle class isn't seeing their incomes rising is symptomatic of just one thing:  Too few new jobs being chased by too many unemployed and underemployed workers.

In order to truly give all Americans a raise, government has to get out of the way.  The Dodd–Frank Wall Street Reform and Consumer Protection Act passed by the Democrats and signed into law in 2010 by Barack Obama, has raised the bar for new businesses and existing ones to borrow money for startup and expansion.  The minimum wage increases that seem to be all the rage right now, have too, raised the cost of any new business start ups. Then the employer mandate of ObamaCare has made it more costly to start or expand an existing business when it has or will have at least 50 full time employees.  Also understand that, in a way, the middle class raises are the cost of having to provide health care.  So, in essence, the money that would have flowed into the economy to stimulate it, is going to the health insurance companies.

When I hear Bernie Sanders and Hillary Clinton talk about raising the national minimum wage to $15, I cringe.  That will only result in the further death of the middle class.  When the two of them talk about going after the wealthy, the banks, and Wall Street, that's a lot of seed-money that will be attacked that otherwise would have been used to start new businesses and grow existing ones.  We can already see what Dodd-Frank has done to the economy.  We have the slowest growing economy since World War II.

The bottom line is that we need a new President who understands how the free market system works.  While that might be someone like Donald Trump, that may be a bitter pill for the country to swallow as far as all other aspects the Presidency are concerned.  I think any of the current Republican candidates would be smart enough to bring a team on board that could restart our economy, and, in the long run, really give America a raise.


References:

Source of the Above Graph: https://research.stlouisfed.org/fred2/series/MEHOINUSA672N

The Dodd–Frank Wall Street Reform and Consumer Protection Act: http://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp

ObamaCare Employer Mandate - ObamaCare Facts: http://obamacarefacts.com/obamacare-employer-mandate/

State Minimum Wages | 2016 Minimum Wage by State: http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx

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