One of the first things that new economics students are taught is the perverse effect that minimum wage laws have on the people they’re purportedly intended to help. That while the per unit price for labor can be adjusted by government decree, the total amount employers have budgeted and can afford to pay still stays fixed. Ergo, the only solution to the math problem is for employees to work fewer hours. So instead of helping “the poor” (”unskilled” is a better descriptor), minimum wage laws hurt them overall.

With the bad – middle of recession – timing of the recent increase in the federal minimum wage, lots of stories have come out in the press on this subject. Caroline Baum at Bloomberg has one of the best:

There is never a good time to raise the minimum wage. Just ask the people working in low-skilled jobs that are laid off as a result.

Now is a particularly bad time. Yet the federal minimum wage is scheduled to rise to $7.25 on July 24, the third step of a $2.10 increase enacted in 2007. In more than half the states, the minimum wage already exceeds the current national minimum of $6.55 an hour.

While President Barack Obama and his economics team have been mum on the issue, I’ve got to think they are worrying, at least among themselves, about the impact given the current state of the labor market.

A total of 14.7 million people were unemployed in June. About half of them joined the ranks of the unemployed since the start of the recession in December 2007. The U.S. unemployment rate stands at 9.5 percent, almost 4 percentage points higher than it was a year ago.

And these statistics understate the toll the recession has taken on those at the bottom rung of the job ladder. The unemployment rate for people without a high-school diploma is 15.5 percent. Teenagers and minorities have been hit even harder. These are the folks most likely to be working in low- skilled, minimum-wage type jobs. And yes, these are the same folks a minimum-wage increase purports to help.

Fred Barnes also makes a similar point in a slightly broader – and harsher – column at the Weekly Standard: Obama’s an Economic Illiterate:

At his press conference, Obama endorsed a surtax on families earning more than $1 million a year to pay for his health care initiative. This is no way to get the country out of a recession. Like them or not, millionaires are the folks whose investments create growth and jobs–which are, after all, exactly what the president is hoping for.

Another tax hike–especially on top of the increased taxes on individual income, capital gains, dividends, and inheritances that Obama intends to go into effect in 2011–is sure to impede investment. It’s an anti-growth measure, as those with even a sketchy grasp of economics know. But Obama doesn’t appear to.

The president also spoke favorably at the press conference of taxing “risky” ventures by Wall Street investors. It wasn’t clear what risky investments he had in mind. Never mind. Reckless risk-taking is hardly a problem at the moment. It’s the lack of any risk-taking at all by investors that’s holding back the economy…

Then there’s the matter of corporate profits. You’d think Obama would love profits since they nurture a robust economy and job growth and are largely responsible for the rise in the stock market last week to its loftiest point since January. And strong profits may foreshadow an economic recovery. But the president’s opinion of profits ranges from ambivalent to hostile.

He declared it “a good thing” that banks are profitable again, but he couldn’t leave it at that. He went on to bemoan the absence of “change in behavior and practices” among bankers. As for the “record profits” of insurance companies, he had nothing but disdain. “What’s the constraint on that?” he asked, as if those profits should indeed be constrained.

A good example of Obama’s economic shallowness is his unrelenting defense of the $787 billion “stimulus.” Enacted in February, it has had minimal impact on the economy. Yet Obama has no second thoughts. He says he wouldn’t change a thing about the stimulus. It has “already saved jobs and created new ones,” he said at the press conference, neglecting to note that 2 million jobs–a net 2 million–have been lost since it was passed.

It’s only fair to point out that Obama isn’t responsible for the minimum wage increase – Congress passed the law back in 2007 and tied the increases to an emergency war spending bill that President Bush needed to keep funding our troops during one of the most difficult times in the war. The economy was booming at the time and the war certainly had precendence then.

That said, everything that was in the Barnes piece about demagoguery and ambivalence towards business can not only be said about Obama, it can be said of  most politicians from both parties these days : in the past 200 years of history our country has come to be ruled by a permanent political class that requires anyone who wants to be successful at it to start at a young age and commit himself to polling cycles and soundbites at the expense of gaining real world business experience. (I’m not counting a handful of years spent on Wall Street as real-world business experience, because it’s not – it’s just a different segment of the privileged class structure with its own round of cars and drivers and suits and expensive lunches, only in a different city. Unless you’ve ever had to worry about making payroll, you don’t have real world business experience…)

The founding fathers didn’t have this political class in mind when they designed our system of government. Yes, Jefferson was in favor of the everyman citizen-farmer ideal and Madison promoted a more elitist system that favored merchants and industry (and their wealth), but what both groups had in mind was that government would be secondary to everyone’s everyday lives, including the politicians themselves. Politicians would be citizens first and leaders second. Under such a system we wouldn’t necessarily have to worry about economic ignorance from Congress and the president because a.) they would have real world experience to draw on and interests to protect and b.) an idea like a “federal” minimum wage wouldn’t have even been considered because it was by definition beyond the scope of the federal (and not national, as we think of it today) government.

I need to flesh this idea out more, because I think it is a signifcant piece of many of the challenges we have today as a country. State and local governments, the governmental levels that are closest to citizens’ everyday lives and should theoretically have a greater influence on them, has been and is slowly being neutered and consumed by an ever expanding state colossus. The reasons for that are myriad (although I have two personal favorites that complement one another), but regardless of the reasons why, that the political class is dominated by politicians first and not citizens has a profound effect on the effectiveness of its work, in particular with regards to economics and the rights of business.

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UPDATE: Here’s Boortz on the minimum wage increase. As always, he does a very good job of explaning in a very personal and vernacular kind of way, but that’s his job, after all.