Lately, there are a myriad of issues and concerns arose regarding
minimum wage. As of January 2014,
minimum wage in the state of Florida is $7.93 an hour (not counting tipped
employees). Due to the recent upsurge of
liberals in office continuously fighting to raise the minimum wage, some
conservatives are being seen as out of touch, only looking out for the rich, or
even worse, nonchalant about the strife of hardworking
Americans. Nothing could be further from
the truth. Instead of just refuting
these erroneous statements, let me first explain what I feel the paramount conflicts
are:
1.
Liberals claim that minimum wage is not enough
for the public to adequately provide for their families. This is where one of the first issues lies.
People should not be supporting their families on minimum wage; rather, minimum
wage-paying jobs should be utilized by the younger population (such as high
school and college students) to earn additional spending money. Instead of concentrating on increasing the
minimum wage so people could provide for their families, let’s concentrate on
increasing their earning potential.
Instead of just giving people an additional couple of dollars an hour, let’s
instead concentrate on utilizing that money to improve people’s marketable
skills and even more importantly, to bring jobs to the community.
2.
If we increase the minimum wage, people will
earn more, therefore eradicating poverty.
This seems pretty straight forward: $2 more an hour will equate to $80
more a week, or $4,160 a year. However,
it is not as simple as that. Once businesses
are required to increase the minimum wage, a couple of things may happen in
order to offset the increase in wages:
a.
The business will be forced to lower the hours
of some of their employees – Business owners may decide to cut the hours of
their employees in order to stay at the same level of revenue as they were at before. Fewer hours for employees means less
purchasing power for them, which may lead to them being in the same
situation or worse than before.
b.
The business will have to increase the price
of the product/service they offer – In order to keep revenues at the same
previous level, the business owner may be required to increase prices. If prices for goods begin increasing across
the board, then this will just offset the increase in the minimum wage.
c.
The business may have to lay people off in
order to be able to afford the increase in wages – If people are laid off
by the business owner, it will not only put some people in a worse financial
situation than before, but it will also cause a new strain in government
welfare and unemployment funds.
d.
The business can potentially close its doors –
If the business closes, then various people will suffer, including the owners
as well as the initial people that the minimum wage increase was trying to
help.
As you can see, the crusade to increase minimum wage by the
liberals, though probably being sought after for the right intentions, will not
really benefit the general population.
This will be a temporary improvement at best, if people even benefit at
all. Conservatives, with the best
intentions in mind as well, are trying to resolve the issue long term. Again, let us focus on fixing the actual
issue, which is not “minimum wage is too low” but rather that people are trying
to support their families on minimum wage.
Let us focus on how to improve.
I’m a little surprised at the number of counter-points being omitted from your argument. Fixing the minimum wage is not as clear-cut at keeping the jobs to the younger generation, and just raising everyone’s marketable skills.
ReplyDeleteFirst some numbers.
-There are about 156MM employed workers in the US (1).
-Approximately 75.3MM are paid hourly rates (2), or ~48% of the employed workforce
-From the hourly workers, 1.6MM earned at minimum wage, and 2.0MM made below the minimum wage (2).
~Combined, that’s ~3.6MM workers, or about 4.8% of the hourly workers (2.3% of the overall workforce).
Let’s now look at your points.
1. “…Minimum wage-paying jobs should be utilized by the younger population (such as high school and college students) to earn additional spending money….”
Statistically speaking, people at or below the federal minimum are ages 16 to 24, or about 51% of the hourly workforce. So the first solution would address the remaining 49% of the 3.6MM (1.8MM) workers. The government can’t/doesn’t know how to fix the educational/vocational skilled mess we’re in. That’d be a whole other debate.
2. “…If we increase the minimum wage, people will earn more, therefore eradicating poverty…”
It’s not about eliminating poverty. It’s about increasing purchasing power. And for all the capitalists, that’s what we all want right? Real purchasing power today is about where it was four decades ago — and below its late-1960s peak.
Your four other sub-points, I’ll address with the following.
Wal-Mart (and companies like it) educates it's employees on how to obtain health insurance through Medicaid, food assistance through SNAP/EBT, and low income housing programs locally. Seriously. They have team meetings for low-wage part timers and resources to get them into the system. So companies like them can pay their employees nothing, and Joe Taxpayer picks up the tab - And then we shop there!
This is after the taxpayer subsidizes their construction, property acquisition, and every other aspect of their business, and as much as possible of the profits are refined into un-taxable income by creative accounting and tax loopholes, so Big Business and the people that own it don't pay shit and the burden of everything is on the middle class. I’m digressing.
Look, the S&P 500 is making record profits, more than a third more profit than before the recession, but median wages are falling. Businesses have the money to pay their workers, they just choose to lower their pay because lots of people are seeking work and they can exploit that.
But what about all the small businesses that pay employees minimum wage? Coffeeshops, dry cleaners, bakeries, independent restaurants, bike shops...are they making record profits? Can they afford the hike in wages without scaling back employee hours?
Well, if they can't afford to pay a living wage, they can't afford to stay in business. Small businesses that don't pay their employees enough to actually survive aren't actually helping the economy.
I invite you to try a game to get in the mindset of living check-to-check:
http://playspent.org/playspent.html
So beers this weekend?
1 - http://www.bls.gov/cps/cpsaat01.htm
2 - http://www.bls.gov/cps/minwage2012.htm#1
Gabe, thank you for taking the time to put together such a thoughtful response. I know that fixing minimum wage is not a simple straightforward fix, from either side. The number of unemployed Americans truly has no bearing into what minimum wage should be or how to fix it in my opinion. Though I will say that one of the sad realities is that many people are resorting to part time work after being laid off since they cannot find fulltime job. However, these employees usually do not find minimum wage jobs, rather, better paying hourly jobs such as contractors or temp jobs. The catch, of course, being the lack of benefits offered.
ReplyDeleteLike you stated before, the 16-24 age group is the “targeted” group that I previously mentioned. As far as the vocational/skill trainings, I agree that it may be a mess and need to be addressed. I know it is not as simple as just me saying “we should do this” and it gets fixed.
My point was just that, increasing minimum wage will not increase purchasing power, as in my opinion, more people will lose their jobs and/or cost of goods will increase to the point that it will offset the amount the minimum wage increased.
Wal-Mart is a good example of what increasing minimum wage brings to the table. Let’s say that the minimum wage is increased across the board and on average, Wal-Mart has to provide an additional $1 per hour to every employee. What do you think will happen? Will Wal-Mart happily oblige? Will they just roll over and raise the wages without any additional repercussion? If we say this will affect approximately 100,000 employees (and that is a low number in my opinion), increasing the minimum wage $1 for an average 4 hour workday will increase Wal-Mart’s expenses over $2M per week. If we calculate it based on an average 30 hour workweek, the number rises to $3M. At this point, Wal-Mart will either cut more hours or potentially cut its workforce even more. At this point I am neither condoning nor approving the way that Wal-Mart does business, which could be discussed at length at a later time, but I am simply pointing out that just increasing minimum wage will potentially hurt the people that they are trying to help.
As far as a small coffee shop or bakery, lets say they have an average of ten employees, 30 hour workweeks and increase $1. Yes, that is only an additional $300 in wages a week, but who are we to step in and force this employer to increase these wages? In an ideal world, I would say that the employee chooses to work at that coffee shop that only pays them minimum wage, but I know your next argument will be that they have no choice now since the economy is bad and they do not have another choice. That again boils down to either not having enough jobs, or not having enough people trained to fill the jobs that we currently have. Many of us worked part-time and fulltime jobs while going to school, after that was over, we either decided to stay in the job we were in or decided to search for better opportunities with our experience and education.
I played the game, which highlights a LOT of other issues besides just minimum wage, specifically lack of jobs, and as I stated before, the lack of training prevents people from getting better jobs.
I am out of town this weekend, but we can try to meet sometime next week?
Jose while I do not have the time available to put together such a thorough rebuttal as Gabe did...I find it troubling the you would post about such a well studied subject without citing a single reference or source. Instead you choose to base your position on a fundamental micro-economic principal that has been proven either inconclusive or wrong when observed in real life practice due to countless variables.
ReplyDeleteThere have been studies such as Washington state vs Idaho where there is a over $2 disparity in the minimum wage and they directly refute some of the points you raised...
http://m.washingtonpost.com/blogs/govbeat/wp/2014/01/08/raising-minimum-wage-doesnt-seem-to-affect-employment-in-3-charts-and-2-mcdonalds-meals/
This is just one example, PA vs NJ has also been studied in detail...point is that you are going to espouse a position you should always reference supporting evidence.
Finally while cherry picking the notion that higher wage costs would inevitably lead to less jobs you ignore the additional demand that would come from the influx in disposable income to Walmart customers, the working poor. This demand as many studies show cause a shift in the equilibrium point of supply and demand a would allow for a market that supports higher wages...
Finally as a capitalist you should be very upset at the burden placed upon or government and tax payers by for profit companies by socializing the costs of proving medical care, housing and food for their workers. It is inexcusable that we allow this to go on...the only reason it does is corruption and ignorance.
I agree that I should cite references when available, and since I was doing an opinion blog, I decided on not doing so. However, since I did cite some numbers, I guess I should have erred in the side of caution. Though I may not have cited sources, I truly believe that increasing the minimum wage will not really solve issues, but rather cause them.
ReplyDeleteI am a firm believer in a free market. There are companies out there that are willing to pay their employees much higher wages than those required. The issue is not that I want people to stay in low paying jobs, my issue is that the fix to this is not simply forcing companies to raise the minimum wage, but rather, train the workforce to earn more money. By doing so, people will be better prepared to earn more money. In an article written in Forbes, it states
“In a comprehensive, 182-page summary of the research on this subject from the last two decades, economists David Neumark (UC-Irvine) and William Wascher (Federal Reserve Board) determined that 85 percent of the best research points to a loss of jobs following a minimum wage increase.” (http://tinyurl.com/m2e59kc)
Like I stated earlier, the Wal-Mart case could be argued ad nauseam, and I agree, what they do with their employees troubling to say the least, but it is not the main problem here. If people have the skills necessary to get better paying jobs, I believe that they will be able to compete for higher wages. More than likely, there are articles and data to support both sides, and as stated before, I believe both sides are trying to do what they think is best, I just personally feel that raising the minimum wage will hurt the economy instead of helping it.
Other articles I suggest reading:
http://blogs.wsj.com/economics/2014/03/19/minimum-wage-increase-could-slow-future-hiring-employment-survey-shows/
http://online.wsj.com/news/articles/SB10001424052702304185104579434930602728574
http://www.economist.com/blogs/economist-explains/2014/01/economist-explains-11
There are fair points to be raised by both sides and no sane person would argue that empowering the workforce with relevant and needed skills could help address issues of class mobility and income inequality, however the world needs ditch diggers too.
ReplyDeleteThe question at the heart of the call for government intervention in the marketplace is, should a ditch digger working 40 or more hours earn so little that they and their family be relegated to depending on assistance from others just too eek out an existence and meet the basic needs of their family? Is there a minimum quality of life that we would expect for all hard working Americans? Are food, shelter and medical care too much to expect for full time employment in the most prosperous nation on earth? For me the answer is clear, but everyone must draw their own conclusion.