by Gary Alexander

June 15, 2021

Supplemental benefits for the unemployed are currently scheduled to expire on September 6, 2021, which is still ironically called “Labor Day” in America, yet for almost 15 months America has encouraged an elongated labor strike for the unwilling or unable, pledging a cornucopia of benefits made up of (1) the average state unemployment benefit of about $330 per week, (2) a federal supplement of $300 to $600 per week, plus (3) food stamps and other benefits. (4) In addition, non-workers can save through avoiding commuting costs, clothing costs, and day care costs for children out of school. (5) In many cases, they are also free to work off the books at home without masks or dealing with hostile customers or co-workers.

The paychecks alone average $630 per week ($32,760 per year, or $15.75 per hour), roughly twice the nation’s minimum wage. That beats the pay scale for millions of job openings currently going begging.

Unemployment Benefits Images

As I showed here three weeks ago, noted labor economist and Treasury Secretary Janet Yellen said on May 7 that she “doesn’t think” this level of income causes anyone earning that much at home to stay home until the benefits expire. Neither does our President. On May 27, Mr. Biden lashed out at anyone bold enough to use such logic. In doing so, he unwittingly revealed his plan for raising the minimum wage: “When it comes to the economy we’re building, rising wages aren’t a bug, they’re a feature.”

In saying that, the President seemed to imply that paying someone $15.75 for not working is a pre-meditated plan to force businesses to pay $15+ (plus benefits) for the least skilled workers among us.

His tautology boiled down to, “If employers paid their workers more, then they would find more workers.” That goes without saying. Businesses could reply, “If customers paid more, our profits would be higher.”

Corona Virus Relief Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

President Biden continued: “A lot of companies have done extremely well in this crisis, and good for them,” but “corporate profits are the highest they’ve been in decades. Workers’ pay is at the lowest it’s been in 70 years. We have more than ample room to raise worker pay without raising customer prices.”

Whoa there, Nellie! “Worker’s pay is the lowest in 70 years?” Not so! I’m almost as old as you, sir, and I recall working for under $1 an hour in 1963, when I was putting my way through college as a freshman night janitor. I asked my supervisor, Mr. Lindsay, why he paid me so little. He answered, “Because, legally, I can’t pay you less.” Sure enough.  I just checked the Fair Labor Standards Act, which said:

“The minimum for workers newly subject to the Act was set at $1.00 an hour effective September 1961, $1.15 an hour in September 1964, and $1.25 an hour in September 1965.”

In addition, students could be paid up to 15% less than other workers, so in my freshman year Mr. Lindsay paid me $0.90 an hour, which, adjusted for inflation, would be $6.85 today – less than half today’s $14 minimum wage in California, where I worked, and under the national rate, $7.25.

So, please don’t let anyone (even this pro-Union President) tell you about “wage stagnation.” As economist Ed Yardeni recently showed, citing several historic series, “All of the major measures of real hourly compensation were either at or near recent record highs during Q1-2021.” For instance, using the non-farm business deflator, real (after-inflation) wages have risen 55% to 105% in the last 40 years.

Real Hourly Compensation Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

25 States (So Far) Have Cut the Gravy Train

About half of our 50 states (so far) have decided in May or June to cut off the extra $300 a week on top of regular state unemployment benefits during the summer months, so this is a real-life experiment of whether President Biden’s theories of forced wage competition work. Check out your state’s latest status:

Checks Stopping Checks Good through September 6 (for now)
  Alabama   California
  Alaska   Colorado
  Arizona   Connecticut
  Arkansas   Delaware (+DC)
  Florida   Hawaii
  Georgia   Illinois
  Idaho   Kansas
  Indiana   Kentucky
  Iowa   Louisiana
  Maryland   Maine
  Mississippi   Massachusetts
  Missouri   Michigan
  Montana   Minnesota
  Nebraska   Nevada
  New Hampshire   New Jersey
  North Dakota   New Mexico
  Ohio   New York
  Oklahoma   North Carolina
  South Carolina   Oregon
  South Dakota   Pennsylvania
  Tennessee   Rhode Island
  Texas   Vermont
  Utah   Virginia
  West Virginia   Washington
  Wyoming   Wisconsin
  Source: Fox Business, “These 25 states are ending $300 unemployment benefits this summer.” 

Jobs are plentiful, and so are workers, but workers are not applying for many jobs, since “Uncle Sugar” is paying them too much not to work. That may (or may not) end on Labor Day, since those benefits have been extended in the past, and they could be extended again. If the President’s motive is truly to raise the national minimum wage to $15 by stealth and force, then he may try to extend these benefits once again.

It’s time to revive a saying from the 1930s: There Ain’t No Such Thing as a Free Lunch (TANSTAAFL).

No Free Lunch Images

No matter how this experiment ends, three salient facts remain: (1) not all teenagers or first-time workers (like me at age 18) are worth $15 plus benefits. The best way to be worth $15 an hour is to prove you are worth $10, then $12, then $14 an hour first. (2) America is a diverse nation: $15 may seem generous for unskilled workers in America’s mid-section, but it is chump change in some coastal cities, so it makes no sense to pass “one size fits all” wage schemes for a massive nation of 50 independent states; and (3) Political rhetoric may sound noble, but it can be insulting: For instance, citing record corporate profits has nothing to do with a small mom-and-pop business trying to find good new workers after a pandemic!

There was ample justification for the original paycheck for jobs forcefully taken from Americans in 2020, but there is no justification for bribing workers away from businesses trying to re-open after a pandemic.

In conclusion, let me wish you all a happy FLAG DAY (June 14) and Magna Carta Day (June 15).

“Resolved, that the flag of the 13 United States be 13 stripes, alternate red and white; that the union be 13 stars, white on a blue field, representing a new constellation…White signifies Purity and Innocence; Red, Hardiness and Valor; Blue signifies Vigilance, Perseverance and Justice.” – U.S. Congress, June 14, 1777

“No freeman shall be taken, or imprisoned, or outlawed, or exiled, or in any way harmed, nor will we go upon him, nor will we send upon him, except by the legal judgment of his peers or by the law of the land.” –Signed by King John I of England, June 15, 1215, the first triumph of law over royal power.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
Inflation Continues to Surge at Fastest Pace Since 2008 (or 1992)

Income Mail by Bryan Perry
G-7 Bulls in A China Shop

Growth Mail by Gary Alexander
“Nice Work If You Can Get It

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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