Senator Elizabeth Warren, a Democrat from Massachusetts, told a Senate committee that the right value for the minimum wage to be set at today is $22/hour. According to the wise senator, based on productivity in 1960 compared to today, that would be the fair thing. Why? She asked Dr. Arindrajit Dube, a University of Massachusetts Amherst professor who has studied the economic impacts of minimum wage, "So my question is, Mr. Dube, with a minimum wage of $7.25 an hour, what happened to the other $14.75? It sure didn't go to the worker." You see, any or at least most increases ought to go to the worker. They shouldn't go to the owner, the corporation, the shareholders, or even to the cost of doing business. They ought to go to the worker! That's only right! Dube, of course, knew better. If wages had kept pace with the the top 1%, the minimum wage would actually be closer to $33/hour. That would be much more fair. Because there shouldn't be a "top 1%".
Now, of course, to be perfectly fair, neither Dr. Dube nor Senator Warren were making the case that either $22 or $33 should be the minimum hourly wage. They were both pointing out that it would be more fair. But they're just setting their sights on more like $10/hour. Because that's more reasonable.
So, why should we raise the minimum wage? Well, 73% of Americans support it. And it would give low-wage workers more money to spend. It would keep more teens in school. It would decrease "income inequality", because that's bad. And, of real importance, making minimum wage contributes to obesity. Why? Well, it's cheaper to buy a cheaper fast food meal than more expensive healthy food. But, of course, that could be solved simply by putting "tariffs" or something on fast food, right? So, I don't know about that one.
According to the Bureau of Labor Statistics, almost 59% of American workers are paid hourly. Of those, 4.3 million were at or below federal minimum wages. So 6% of hourly workers (or about 3% of the total number of workers) are at or below minimum wage. About half of all of these minimum wagers are under age 25. Minimum wage earners are made up of about 7% of women hourly workers and 5% of men. Surprisingly there isn't much variation in race or ethnicity. Most are never-married people, part timers, and possess a high school education or less.
Given these statistics, it does seem less likely that a minimum wage increase would have a large impact on the economy. If there were more than 4.3 million, it certainly would. But with that few, it's not likely. On the other hand, the stories we're being fed aren't quite lining up with reality. "You know," they assure us, "a husband and wife earning minimum wage couldn't support a family today." Well, maybe. Maybe not. But the likelihood of such a couple, based on the raw numbers, the ages of most minimum wagers, and the fact that most are "never-married people", is very low.
But the one factor that people don't seem to take into account is the entire concept of economics. I mean, look, why $22 or $33/hour? Why not just make it a blanket $100/hour ... for everyone. You know, minimum. I mean, I don't know about you, but I'd love to make $100/hour. I'd have a lot more to spend. I bet a large number of Americans would love it. At least 60% (you know, all those hourly workers), right? And I could buy healthier food, right? (Wait, I'm salaried. Would that carry over to salaried people? Hmmph! It had better!) So why not?!
Well, here's how economics works. A company says, "I have this much money. I want to invest that money in order to make more money. So, if I put that money toward Bill and Ted, they will produce more than this much money, which I wouldn't have produced if I didn't hire Bill and Ted. So I'm giving them a job to make me more money." That's how it works. Businesses aren't charities put in place to support workers. They're put in place to make money. If it costs more to hire than it would make, it is not economical to hire more. So raise everyone's income to a $100/hour minimum and we'll have more to spend ... except I would no longer be able to pay the lawn guy or the pool guy, because I can't afford $100/hour for them to do my work. And I'd have to find cheaper places to shop because those prices would be going up to cover the cost of workers. Bob, the local hamburger joint owner, would find that he really wouldn't need all those teenage workers at that price and could likely make do with a few less. You see, those low-end workers might be producing $10/hour worth of profit, but certainly not $100. So it would make no economic sense to keep them.
That's how it works in economics. Hiring Bill and Ted for $7.25/hour might give the owner $10/hour in productivity. He's making $2.75/hour on Bill and Ted being employed. Good for the owner. Good for Bill and Ted. Push that minimum wage to $10/hour and now the owner is not making $2.75/hour on them. Now it makes no economic sense to employ them. See? And that's the basics. Without the ripple effect.
So who gets hurt if the minimum wage increases? Unfortunately, it's not the 1%-ers. It's the low enders. The closer to the bottom you are, the more it will hurt you. Some would lose their jobs. Some would lose their businesses. Some would have to cut back their living expenses to continue to afford the higher prices. I'm pretty sure there would be a serious morale problem (at best) when all those "slightly higher than minimum wage" earners with more experience and education suddenly got swallowed back into the "minimum wage" crowd. And those hated rich folk would just keep going.
Economics isn't a matter of legislation or even morality. It's economics. Despite the current government view that "we can just print more money!!", it just doesn't work that way. Economics is about a limited set of resources, and mandating how that is divided without balancing it from where it's taken is just going to unbalance it. Passing laws doesn't make it work any different. Legislating $10/hour rather than $7.25/hour doesn't make Bill and Ted worth $10/hour. That's just being unclear on the concept.
8 comments:
"Now, of course, to be perfectly fair, neither Dr. Dube nor Senator Warren were making the case that either $22 or $33 should be the minimum hourly wage."
You are right, they are not making the case, but my only question is why not? The answer is that this is a political issue made to order for making Republicans in the house look bad. Dem's can always be depended on to jump on this wagon when Republicans control the house. No one seems to notice that when they can easily get these economically destructive bills passed, they usually don't try. I can remember a man on the street interviewer asking people, after Clinton lost the house in 94, "why did Clinton not raise the Minimum wage when he could"? The ultimate problem, of course, is not crafty politicians. The real problem is in American ignorance. That scares me more than anything else.
Oh and here is this.
I remember that one (and others similar recently from other writers), which, along with this recent headline about Warren, was what prompted me to write this one. I particularly like your line in that piece you linked to:
"Politicians survive off votes, businesses off of profits. Therefore, politicians are motivated by votes, and business owners profits."
Simple but true. So, why do so many Americans miss it? If we could link (in their minds) "votes" to "profit", there wouldn't be such disparity between what the government does and what business needs. And that would likely result in a better economy.
But today's average voter is thinking "Poor guy. Making minimum wage and can't make it. Let's legislate that." That it makes no more sense than the government printing money, it "feels good". And that's all we're going to get from the average American voter. Will really hurt too much first, or will the collapse that "it feels good" brings hit first?
Children are trained to feel, not think. All your points, as well as reality, are lost on their limited and illogical feelings. Unless feelings can be enlisted to show that emotion is not sufficient for governing ones own life, much less a nation, then these politicians will continue to profit in money AND wealth, and the poor will become worse off, their minimum wage be damned.
And I'm pretty sure minimum wage is set because of the strength of a dollar. As inflation happens, it takes more of a dollar to buy the same product. Increase minimum wage so drastically and the dollar becomes meaningless. Instead of gas costing $5 now it would cost $50, or some such. The more the lower class make, the more things are going to cost so that companies can continue to make a profit. But that's just on the national level. Who knows what that would do internationally. Minimum wage should be increased in small increments because of the dollar, not for some nebulous "fairness".
I could not disagree more David. Any number that politicians come up with as to what is a legally minimum law is purely arbitrary. It is price fixing, not to mention, as I already have, purely political. The dollar would not become meaningless. Unemployment would simply sky rocket. We can't nor should assume that when a price is fixed that the demand would remain the same. If workers cost $100.00 and hour then there would be much less demand for workers.
Can anyone find in the Constitution the right of the government to tell businesses what they must pay their employees?
There is no constitution, only Judges who dictate constitutionality by fiat through the majority.
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