There are the rumblings again of raising the minimum wage. The argument once again is that a family cannot afford to live on one person’s income at the prevailing rate. Yes, that is true. A family of four cannot live on $10,712 (Federal) or $14,040 (California) per year. The poverty level for the 48 contiguous states and D.C. for two adults with two children is $18,850 (Federal) and $17,463 (California).
The problem with this argument is the assumption that:
1) There will be only one wage earner in the family
2) The earner is locked into this wage/job forever and
3) Raising the minimum wage will lift the earner out of poverty.
These are my takes on these positions:
1) There will be only one wage earner in the family
While it is the ideal to have one adult working and the other home with the kids, it isn’t really feasible in today’s world. To maintain a middle class life style at descent wages requires both adults to work. If one parent decides to stay home, adjustments have to be made to life style. This is the choice of the individual, there is no “right” to have more children than you can afford on the money you earn. The government is not responsible to pay for your decision to have four kids when you only make $6.00/hour.
2) The earner is locked into this wage/job forever
The minimum wage as it was originally set was to give a baseline for employers for beginning employees. It was a place to start while the person learned the job and got experience working. When the employee put in a certain amount of time, the employer should recognize the added worth of the employee and increase his wage. If the employer will not give a raise, the person is free to leave and seek employment with someone else, but now they have work experience and will be worth more in the next position. Minimum wage is just a starting point for low skill positions. Nobody should plan on working at McDonald’s or a car wash as a career and expect to make enough to support a family.
3) Raising the minimum wage will lift the earner out of poverty
This just isn’t going to happen. The economy is always going to have bottom wage earners and the minimum wage affects everyone’s wages. If the burger flipper or the car toweler gets paid more by fiat of the minimum wage law, the employer has two options to stay in business and make a profit (for anyone who forgot, profit is the reason to own a business):
1) Keep his prices the same, but let people go to reduce his overhead. This is good for the retained employee, but devastating for the guy getting the axe.
2) Raise his prices and keep all current employees. Now the customer will pay more for his burger and to get his car washed, so his cost of living has now gone up. To compensate for this, he requires a raise. Because he needs a raise, his company raises their prices and on up the chain. Now the cost of living has risen across the board and the Poverty Guidelines rise, so the minimum wage earner is still in the same position as he was prior to the increase. The paycheck just looks bigger.
In the long run, increases in minimum wages really do nothing to better the buying power of the person they were intended to help. It is another of those “feel good” legislations that are written only to make the people think the government is looking out for the little guy. The only way to get yourself away from this trap is to learn your job well enough that the employer will pay more to keep you, move to another company that recognizes your worth and pay you more or work to improve yourself though training and/or education.
Nobody owes you a living, you have to go out and earn it.
3 comments:
Salient points, but the real problem with the minimum wage is that it is not being indexed for inflation, thus rendering the wage inadequate to maintaining the same type of purchasing power one had the year before. In effect, minimum wage workers are making less and less as time goes by.
It's criminal not to raise the minimum wage in this circumstance, when the rate is entirely determined by the Congress' arbitrary willingness to change it. It has never been conclusively shown that a rise in the minimum wage hurts employers' ability to hire new workers.
Rick Santorum was sponsoring the last minimum wage increase in March of last year, to $6.25, btw. Not quite up to the poverty line level, but something.
Check this for some interesting ideas about the minimum wage:
http://www.epi.org/content.cfm/issueguides_minwage_minwagefaq
Thought I'd stop by and say hi, fellow blogger and Rott denizen. Gotta pad my nice guy status, you know?
Ron, glad you dropped by.
One thing I didn't make clear was that I was specifically talking about California. Our Minimum Wage is already at $6.75/hr and they want to raise it again.
Raising the Fed rate is due $5.15 is low and hasn't been adjusted since 1997.
I did read the article at EPI and I can understand their conclusions and how they arrived at them. Looking at the founders, after I read the article, it just highlighted that we approach the economy from diffent sides. I'm not saying they are completely wrong, just that I don't completely agree with them.
That said, I still think my positions are applicable.
If you make minimum wage and are the sole wage earner, you cannot afford a wife and two kids.
If you are going to "flip burgers" for a career, you're going to be poor.
Even if there is no conclusive evidence that raising minimum wage causes unemployment, the second half of the equation still kicks in. If I'm paying more for basic sevices, my cost of living goes up. I get a raise to compensate for it and everything levels out at the same buying power in a few years. We all make more but have gone nowhere.
Continuing to reindex the minimum wage for infation will not cause a jump in real prices, it will only appear to. Basically, the cheap shelf prices of some goods and services right now are a result of egregious underpayment of low wage workers. Once this discrepancy is corrected, real wages and real prices will be in line, both will go up with the ordinary rate of inflation. I'm not saying jump the wage beyond the poverty level.
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