Battling steep inflation, Hugo Chavez announced today that he will increase Venezuela’s minimum wage by 25% over the next eight months, with a 10% bump taking effect in March and the remaining 15% in September.
According to Associated Press reports, the Socialist nation has endured 25% inflation over the past year, forcing the move in an effort to curb the general unease among Venezuelans ahead of September’s election. In addition, the country has been subject to rolling blackouts and a sharp decline in social services like trash collection and basic law enforcement.
On the same day, the U.S. Labor Department released economic data for 2009 revealing that inflation-adjusted income dropped 1.6 percent, which was the biggest drop in 20 years. Inflation itself is near all-time lows, but a lack of credit, miniscule wage increases, and increased energy costs are producing the same effect as in Venezuela: Americans are getting less bang for their buck.
As President Obama and Hugo Chavez share the same ideological beliefs, it is not hard to envision that Obama will make a strong push to raise the minimum wage this year, especially considering he faces the prospect of losing control of both the House and Senate. Furthermore, Obama has – as he did in the Democratic debate in 2007 – advocated raising the minimum wage.
Such a move would likely engender short-term goodwill – and motivate turnout in November – among low-income voters. However, the long-term effects of income-redistributive polices have been well documented. Just take a look at Venezuela or the Soviet Union.