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Over the years, the minimum wage has not kept pace with the rate of inflation, represented by the red line on the graph.
Jobs, jobs, jobs: If there’s been one theme of the 2012 election, it’s been employment. And for the first time since 2008, some significant progress has been made: The unemployment rate is currently 7.8 percent, the lowest it’s been since President Obama took office.
But not all jobs are created equal. While 60 percent of job losses since the recession have been midwage positions, 58 percent of the growth has been in low-wage jobs. Many of these added positions pay the minimum wage, or little more than the minimum wage.
In light of the growing population of low-wage earners and the ongoing discussion of income inequality in the United States (the 99 percent versus the 1 percent, or the 47 percent versus the 53 percent), LearnVest wanted to take a closer look at the current minimum wage in the United States.
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In fact, this past summer, the Fair Minimum Wage Act was introduced in Congress to raise the minimum wage from $7.25 to $9.80 and index it to inflation, making it a current political issue. Though the bill is currently sitting with a committee awaiting further action, if it passes, it could significantly change millions of Americans’ answer to the question: Are you better off than you were four years ago?
The state of the minimum wage
The first minimum wage law was passed in 1938, guaranteeing workers at least 25 cents an hour. The heyday of the minimum wage was in the late 1960s, when the wage was high enough relative to the cost of living to provide a secure income. Since then, it’s risen slowly but surely to $7.25 an hour, which adds up to $15,080 a year for full-time employees.
While the dollar amount has increased over time, the real value has not — it has declined by 30 percent since 1968 because over the years the minimum wage has not kept pace with inflation, which is the increase in the general cost of goods and services over time. That means workers aren’t getting as much bang for their buck, so to speak.
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The yearly $15,080 made by a full-time minimum-wage worker, who typically works in retail or food preparation, or as a personal and home-care aide, office clerk, customer service rep, waiter/waitress or construction laborer, is below the poverty level for a two-person household. And for employees working for tips, the minimum wage is even lower — a measly $2.13 an hour.
While the minimum wage barely provides a solid living as is, studies have shown that workers earning the minimum are actually being underpaid by their employers. A 2008 study of low-wage workers in Chicago, Los Angeles and New York found that 26 percent were paid less than the minimum wage, 70 percent worked off the clock before or after their shift and 76 percent were underpaid for overtime hours. All told, this resulted in an average loss of $2,634 in earnings for these workers.
Proponents of the Fair Minimum Wage Act argue that raising the minimum wage to $9.80, and then “indexing” it to inflation so that it rises at the same rate would help ensure that these low-wage earners would take home enough salary to live on and pay for basic goods and services. But would it?
Reasons for raising the minimum wage
1. The minimum wage is below the living wage, exacerbating poverty in the United States
A living wage ensures that a worker can pay for basic necessities like housing, food, transportation to work and health care. A common definition states that the living wage should be high enough that no more than 30 percent of take-home pay needs to be spent on housing.
But full-time employees being paid the current minimum wage will have incomes below the living wage in most areas of the country. In dollar terms, that means that if you are a full-time worker supporting a family of four on the current minimum wage, your household income is $7,000 below the poverty line. Proponents of raising the minimum wage to a living wage argue that doing so would give workers and their families a better chance of climbing out of debt and poverty.
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As an increasing number of workers take on low-wage jobs, poverty in the United States has increased: In 2005, 12.6 percent of Americans were living in poverty, compared to 15.7 percent this year (almost 50 million citizens). That's the highest rate of poverty since 1965. Raising the minimum wage to a living wage would hopefully help to reverse this trend.
2. A higher minimum wage means more consumer spending overall
Higher wages don’t just benefit the individual earner. They also help the economy at large by increasing consumer spending. One 2011 study by the Chicago Federal Reserve Bank showed that every dollar added to the hourly minimum wage resulted in $2,800 in yearly additional consumer spending by that worker’s household.
Additionally, a 2009 study from the Economic Policy Institute predicted that upping the minimum wage to $9.50 an hour would result in $60 billion in additional spending over two years. Furthermore, this additional consumer spending would lead to more job creation — an estimated 100,000 new full-time jobs.
3. Workers making more than the minimum wage would also see their earnings increase
Many workers who earn more than the minimum wage — 28 million — would also see their earnings increase as a result of raising the minimum wage, according to the Economic Policy Institute. Why? The minimum wage is seen as the base number from which their wages are calculated, so if that number is raised, their earnings will increase accordingly, and that will lead to even more consumer spending.
Is there a good reason not to raise the minimum wage?
With all the seeming benefits to raising the minimum wage, is there a compelling reason not to raise it, at the very least to a living wage? And why shouldn’t it be indexed to inflation?
Those opposed to raising it often argue that doing so will put too great a strain on employers concerned with keeping costs down, which will ultimately lead to companies being forced to slash jobs to stay afloat. However, economists like Arindrajit Dube of the University of Massachusetts-Amherst showed that over a 16-year period, areas that raised the minimum wage did not see more employment loss than comparable areas with lower minimum wages.
Additionally, two-thirds of the low-wage workers in the United States work for large companies with 100 or more employees who are more able to absorb the higher cost of hourly wages, as opposed to small mom-and-pop operations. Looking at the 50 largest employers of low-wage workers (companies like Wal-Mart, KFC and McDonald’s), more than 90 percent were profitable last year, meaning that they are unlikely to be in a position where raising the minimum wage to a living wage would significantly affect their ability to retain the same number of employees.
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While more than 100 Democrats helped to introduce the bill in the House of Representatives during the summer to raise the minimum wage, most Republicans will likely argue that the fragile economy prohibits such a drastic change to the minimum wage. Though President Obama campaigned in 2008 on the promise to raise the minimum wage, he has not been active in that fight in some time, and in March, Mitt Romney retracted comments he had made as recently as January saying that he would like to see the minimum wage indexed to inflation.
Despite the likely political standstill on the minimum wage issue, recent polls have shown that 70 percent of Americans support raising the minimum wage and believe that doing so has the power to help the economy in these uncertain times.
This post originally appeared on LearnVest as 'How Raising the Minimum Wage Would Help the Economy'
Leave a Comment:
Raising minimum wage never works and it only helps temporarily. All that raising minimum wage does is eminently raise the base costs of everything else to cover for the increase where it eventually cancels itself out... and then people making minimum wage start complaining with their hand out again. Unfortunately we will probably always need people to clean toilets and dig ditches. Those jobs will likely never pay "enough". Therefore increasing minimum wage is simply an endless and pointless cycle. It is what it is.
Sid, come on, really? "....complaining with their hand out again?" These are hard working people that want a reasonable wage. And as the article points out, there are benefits to the rest of us when people earn a reasonable wage.
I was early taught to work as well as play,
My life has been one long, happy holiday;
Full of work and full of play-
I dropped the worry on the way-
And God was good to me everyday.
Rockefeller.
You took one part of my comment and failed to understand the rest. So lets try this a different way. Imagine something... anything... that no matter how much you give to it... that it requires more and more to keep functioning at the same capacity. How much do you give it until you realize that it is no longer efficient?... Maybe you might upgrade it? Fix it? Get rid of it? Think about it. Raising minimum wage more and more and more and more... it isn't the answer.
jimsepa,
Wake up, minimum wage is a starting point for someone without any experience, education, etc. It's supposed to be an incentive for someone to "improve themselves", and become more valuable to their employer! This is just another form of welfare. Get a job, and you have no need for a raise, or to be excellent at it when you can live on minimum wage!
I did understand but fundamentally disagree. I DO think the answer is that that minimum wage has to be re-evaluated with time. Imagine a person living on minimum wage established in the 70's - the cost of living goes up, but wages don't? A stagnated minimum wage is a recipe for financial disaster as more and more people fall into poverty. We only hear about those that want government assistant and yet here we have people who want to and are working. Let's keep them employed with a reasonable salary.
William, please, at least Sid was being reasonable. I don't even know what you mean by "Get a job, and you have no need for a raise..." or "this is just another form of welfare". The discussion is about people who HAVE a job.
Employers don't have to pay decent rates anymore. There are so many applicants for each job the employers can take those with the best experience and pay them low wages.
Raising min wage doesn't work. Businesses will raise the cost of products and services to cover the increased wages and we are back where we started.
jimsepa,
"The discussion is about people who HAVE a job."
Correct! Those who are making minimum wage, should be looking for ways to improve themselves (education, ways to do their job better, etc.), and make themselves more valuable to their employer. There's no incentive to do that if you can live on minimum wage! I was servicing a Denny's and the owner told me his manager started off as a bus boy (below minimum wage) for him. He said every time he looked the guy was doing something, and his cooks told him the guy was constantly asking them what he could do to help them so he could learn more about what went on. Then he said "come here I want to show you something". He took me out back by the parking lot, and pointed out two bus boys that were taking an unauthorized break standing around having a smoke when they were supposed to be working. And later told me I have no idea how many people he went through, and how much money he wasted in finding someone like his manager!
And you want to increase his costs?
i just love all the greedy "christians" here in america. the rich have never been so rich, but with that said, they think the poor should be even poorer. i guess that is why they want to ship jobs to china where people will work for 3 dollars a day. i hope all you greedy people know that jesus has a place for you when you hoard as much as you can. it is called HELL, and you wont be rich there :)
Why raise the minimum wage when people can go work 3 jobs in order to make the same amount of money?
William Root, you make an excellent point about the differences in workers in your comment #1.8.
But, if the minimum wage were higher, perhaps the Denny's owner you referred to would have an incentive to hire an unemployed person who was willing and able to work hard and learn, instead of those two addicted to smoking who apparently took too many breaks.
If the two smokers couldn't get a job otherwise, maybe they would have incentive to enter a smoking cessation program or learn basic life skills.
Too often, it seems employers seem reluctant to hire intelligent, hard workers -- perhaps for fear such employees will quit soon to take a better job -- or perhaps fearing these employees will open up their own business to compete with the owner's when they develop sufficient knowledge.
A higher minimum wage accompanied by training and incentives for persons to do an honest day's work seems to be a win-win situation to me.
Allowing workers frequent smoke breaks or to stand around and do nothing seems counterproductive to a business's operation. Perhaps a low minimum wage permits employers to pad their payrolls.
Bill,
Who said anything about "Christians"? I agree that I have seen several self centered and greedyCatholics and Christians. However I have also seen several who donate their time at soup kitchen and shelters and who not only tithe their 10% to their church but who also donate to charity on a consistent basis.
That is the problem when we start lumping people into groups wether it be e religious group, or a particular social class it starts to break down society. We need to look at each situation on the individual basis.
jameseg,
Right! Employers have a crystal ball that tells them applicants are intelligent, and hard working on the table they're interviewing them at! Everyone's full of vim, and vigor until they actually have to do the work they're hired to do. Maybe you should start a business of training employers on how to tell which applicants are actually hard working, and intelligent. You'd make a fortune! Of course you'd have to actually be right a lot more than you're wrong! Let us know how you make out. Good Luck!!!
You guys are as out of touch as Mittens. How is someone supposed to better themselves, when they can barely afford to eat on minimum wage, let alone pay for an education?
The quote above from your comment #1.13 is probably somewhat true, William Root.
Checking references and doing background checks might help some. But references can lie -- and often quality workers don't have quality references for various reasons. Background checks aren't perfect and take time and money.
Hiring persons part-time first could help. Reduce the hours of those who don't do good work and increase the hours of good workers.
Another option is replacing the bad workers until good ones are hired.
But I realize it takes time and money to hire and train new workers, so you have a valid point. There are no easy solutions.
Unfortunately, in many jobs the hardworking, dependable workers get paid little (if any) more than those who stand around doing nothing.
You may promote one hard worker to manager. But if a large business has a huge number of employees, there are only a limited number of management positions available regardless of the person's abilities. And for various reasons pay raises for persons in low-paying jobs are frequently small regardless of how hard and well the person performs. Many businesses don't pay more unless they are required to. Some would still use slaves if they could get away with it.
What happens to the business, that cannot afford to pay any more to their employees. They will have a choice to make...not necessarily of their choosing, but as a result on what is forced upon them.
Here's a simple question:
Suppose you work for a small company and make 500.00 per week and you have just enough to pay your bills. This small company has 10 employees and struggles most of the time to make ends meet, but manages to pay their bills and keep the doors open.
Along comes this "I want to do more for you" Politician who introduces this new law that promises you that he's going to insure you get $600. per week from your employer, and all you have to do is vote for him and his party. Sounds good, eh.
Now, the downside. The company you work for gets this new tax bill. It's more than they can afford and they have no choice but to pay it. What is their solution.
They can raise prices of their goods; but they may loose a number of their customers when they do, and that may hurt their business more.
They can reduce expenses only to a point that they need to operate, after that, it hurts their business.
Their last choice; I hope you don't mind when they say, "I hate to let you go; but I have no choice". We can't come up with the added tax that Politician John just forced upon us.
And if that's not enough expense cuts, they close their doors, Maybe your new employer, can afford those new taxes. Don't forget, he/she now has a choice of 9 potential employees from that small business closing, to consider instead of just you.
After receiving complaints from his fellow workers, I called an employee to my office to talk to him about it. Instead of addressing the complaints, he decided to voice his dissatisfaction with our company. He stated, "If you pay me more, I'll work harder," my reply: "If you worker harder, I would pay you more". It works both way, folks.
No employer enjoys letting someone go.... If you've ever had to be in that position, then you know what I mean.
Obama's taxes on the so-called rich, those couples making over $250,000:
The majority of small businesses are Sub-S Corporations. While they have a few of the advantages of larger "C" class corporations, they also have a number of disadvantages. I'm not talking about hedge funds or companies with 500 employees, but rather, those with 5-50 employees.
I think most would agree, while it's much better than those on a lower pay scale; $100,000 per year for a family is good money, but no where near being "rich".
You own a Sub S corporation with 10 employees and have a profit after expenses of $175,000 per year. While your company shows they earned $175,000, you never take that money out as income. This would be approximately 1-2 months of expenses if their company ran into a problem and they needed cash to continue operating. Sounds reasonable, eh.
YOUR 2012 TAX returns would show:
W2 Income for husband/wife salaries: $100,000.
Sub-S corp income: $175,000.
Your total reportable income for taxes: $275,000.
Even though you only took a reasonable salary of $100,000. from your company, you will get hit with a much larger tax increase since you are over the $250,000 tax Obama will be imposing on you.
You will have no choice but to take a bigger chunk out of your Sub S corporation to pay this new tax. How will this affect your company and your employees.
THIS WILL AFFECT ALMOST EVERY SMALL BUSINESS IN THE COUNTRY AND WILL INCREASE UNEMPLOYMENT.
Last example: Paul bought an operating restraurant with 29 employees. His first few years, he made decent money. Then a new administration in IL took over and within 5 years his expenses through taxes, etc., went up by 86,000.
I saw him at a local Sam's club and ask him how it was going, his reply, "If I can't sell it within 2 weeks, I have to close my doors". He stated that this new minimum wage rule that Gov. Blagoevich imposed pushed his expenses up by $1500.00 per pay week and his business was down.
Two weeks later, the restraurant closed. This was over 5 years ago. It is still closed today. I'm wondering if his ex-employees ever thanked the Governor for the increased minimum wage they earned for 30 days.
At the end of the day raising minimum wage results in the consumer paying the lost revenue of the companies that higher such people. That's not to say it isn't a good idea. Hey if it helps, then do it.
Nic
Did you know minimum wage is not even $500 a week? Do some more math buddy.
No mention of welfare hitting $1 TRILLION dollars -- a 30% increase since the BO admin on MSNBC -- why not??? Keep this up and everyone will be on some sort of assistance and who will be left to pick up the tab??? The rich will move (like in France) and we'll be fighting each other for scraps. But let's spend millions on advertising awareness in Mexico about how to get on the dole in America. WAKE UP!!!!!
I managed a convience store for many years, and yes you hire 6 people to get 1 good worker, but I also learned that you get what you pay for.
If you pay minimum wage you get minimum workers, because that is the way it is. This is what employers need to learn, if you want a good worker than you are going to have to pay the price of a good worker...........or keep hiring a warm body willing to work for peanuts, and then you spend all your time sweeping up the peanut shells off the floor.
As the so called richest, country on earth, there is no excuse for people working a full time job and not making enough to live on.
Maybe it's just me, but the story says each $1 they raise the min wage = $2800.00 a yr the family spends.. Seems to me they use Government math, which is sketchy at best. $1.00 x 40hrs = $40.00 x 52wks = $2080.00yr. Now the family will spend $2800.00 xtra! Now you can see how deficits work and our fearless Reps are all for it. Hey! ya know debt makes the world go round and you can spend your way out of debt, we just haven't spent enough to eliminate the national debt.
Plenty ideas on how to improve the lot of the rich. No ideas on how to improve the lot of the working class or the middle class (unless you believe that helping the rich first will help you in the end. Now, there's a good bet. The only certainty is that the rich get helped first. Go for it!
Scott, the assume that there is more than one wage earner per family. To get to their math, there needs to be 1.34 wage earners per family. Makes sense to me. I think they are right.
As I read this article I can't help but continue asking myself why someone would write on a topic and NOT even look at the economics of the topic?
The great Milton Friedman once said "The minimum wage law is one of the most anti-Negro laws ever passed by Congress" (keep in mind this quote is from the late 70's) but applies to today as well.
It is quite simple: A business will hire a person if their marginal cost (the the hourly wage plus any taxes/benefits) is LESS than the marginal revenue received. In other words if it costs a business $10 total an hour and the person brings in $11 of additional revenue he will hire that worker. If the same worker will only bring in $9 of additional labor he will NOT hire this worker.
So when you RAISE minimum wage you increase the marginal cost but the marginal revenue is the same. So if it costs more than the additional revenue then you don't hire the employee. So here we have teenagers and initially low-skilled workers. What is the best thing for them? To find an entry-level job, gain some experience, increase their value, thus their wages increase.
But when the minimum wage law doesn't allow them to find the FIRST entry-level job where are they going to get the initial experience? They aren't. Why do you think unemployment rate teenagers is near 25%? For black teenagers is near 40%? If they can't find the FIRST entry-level job to learn skills what chance do they have?
This logic and information is in EVERY economics textbook in EVERY high school and college in the country. So why do so many not know or understand this basic information?
Well, if you take the logic the other way, say we lower wages to $1.00 per hour, then the marginal cost of the next unit of production is much lower, except who has the income to buy it? Hopefully, it's some rich guy in India. If the job cannot be exported--such as a service job--then the higher wages can be passed along. Higher wages among lower income folks get spent which increased demand. Everyone benefits. In Friedman's approach, the optimal economy would be one rich guy and everyone else makes $1.00 per hour!
So why have a minimum wage at all? If you can't live on whatever someone chooses to pay you ,then starve.
Then the rest of us don't have to think about you. We don't care.
B707320C: Sorry, let me explain how economics works. In my example I said that if the marginal cost is less than the marginal revenue you will hire them - if not you won't. However, you will continue to hire until the marginal cost EQUALS marginal revenue.
So what does that mean? Quite simply if you have a value of $10 an hour you will be offered $10 an hour.
For example: Let's assume there is NO minimum wage and say a person is working at a grocery store being paid $3 an hour but bringing $5 of additional revenue per hour to the owner.
The owner is quite happy (obviously) but the owner of the grocery store across the street sees this person is a good worker and will also bring HIM $5 of additional revenue. So he offers $4 an hour.
The person is happy and ready to leave until his boss realizes he will lose this good employee that is bringing him $5 an hour of additional revenue - so offers $5 an hour.
The grocery store across the street no longer offers more money because it is "not worth it".
So now lets say the government initiates a $6 an hour minimum wage. This worker now loses his job because it will cost more per hour ($6) than what additional revenue he brings in per hour ($5).
This is how business works. And the above is explained in EVERY college economics textbook across the country.
And what else disproves your incorrect theory? Well, according to YOUR theory all of us would be making minimum wage. Why are we making more than that? Not because of government intervention but rather our employers see that we bring in more revenue to them than what we are making. This logic works everywhere.
And when government gets involved trying to "help" the lower income ironically what happens is they actually make it worse. I do believe the politician's intentions are good - but they just don't understand business and economics and make it worse.
Severed Head: Ironically you say people who don't believe in minimum wage "don't care" but actually just the opposite. We want people to have opportunities to learn, attain skills, and become more valuable in the workplace.
Minimum wage actually creates more unemployment among the young and unskilled and if they cannot find a job they will be stuck in a poverty level for life. Let's allow them the ability to become skilled and pull themselves OUT of poverty.
I have a better idea. ELIMINATE THE CAP ON SOCIAL SECURITY TAXES, RAISE BENEFITS AND LOWER THE RETIREMENT AGE!
This will get millions to retire and give their jobs to younger workers. The labor market will get tighter, automatically raising ALL wages.
Don't get me wrong. We should actually do BOTH. But if we restructure Social Security, we will probably not even NEED a minimum wage.
All these Bizarre talking points that come from the right...
"minimum wage is supposed to encourage you to do better and improve yourself via hard work/ education..."
"If you went to college expecting a degree to get you a better job you are entitled..."
"minimum wage is not supposed to be a livable wage or you would not better yourself"
"you shouldn't need welfare aka handouts, you should be working a job to support yourself"
Why don't you roll all your hypocritical talking points in to one short one by telling everyone to f**k off.... because you are not helping anyone find solutions by telling everyone "no!"
Probusiness,
Your "perfect world" works if you believe that additional costs can't be passed along as higher prices. In cases where jobs can't be exported, some costs can in fact be passed on. Obviously, in certain cases, say manufacturing, if you raise the minimum wage the job could be shipped off the China. But many service jobs are not exportable.
I am sorry but the minimum wage needs to be eliminated..... The higher this is raised the less jobs there are for people..... Hey if you want to earn more money then get an education and work to advance yourself..... O thats right these statements are not politically correct......
You can bet that any effort to raise the minimum wage will be fought tooth and nail by the Republican "Job Creators". I mean really folks; any Republican will tell you that raising the minimum wage so people can afford to buy luxuries like food will destroy the country.
Raising the minimum wage could prevent the "Job Creators" from getting a new Rolls Royce every year or buying that castle in Bavaria they've been wanting......... and that would be just horrible for them......
Yeah, OHGuy, just think how many jobs will be available at 25 cents an hour. Trouble is, there won't be any people to take the jobs, they've all starved to death.
Raising the minimum wage from $7.25 to $9.80 is a 35% pay raise. These same large companies have to provide healthcare to their workers. The companies have no choice, but to increase costs for their goods or services.
Since wages have stagnated relative to inflation for the past three decades, the discretionary income would decrease further for income earners outside of the impact of mandatory wage increases. This means that there would be less demand for restaurants and services.
Let's take a look at the largest retailer in the world...Walmart. Their structure starts with minimum wage workers and proceeds with levels of hourly managers that only make a little more than $1 more per hour than minimum wage or whatever their seniority would give them with their respective years of employment. This means that nearly every single hourly employee at Walmart with less than 5 years seniority would have to get a raise. Walmart's margin on produce, meat and some grocery items are in the low single digits. They would have to raise prices to cover the cost in wages.
Of course, the government likes this because there is more tax revenue generated. Especially if the wages are tied to inflation, because eventually, everyone's wages would have to increase, which would lead to more inflation. This means even more manufacturing jobs are shipped overseas. Eventually, it results in an economic bubble and we all know how that ends.
Suggesting a 35% pay increase! My high school economics teacher would have failed this author. My college economics professors would have laughed. If there are positives...there are always negatives, just because you may not be able to see them or do not want to see them, doesn't mean they aren't there.
If you think raising the minimum wage helps people, think about this:
Businesses will have to raise the costs of their goods and services to pay for the required increase; unions will require more wages for their members, contending that their wages are "only X above minimum wage; prices then index to the higher average wage (as they historically have). The minimum wage, relatively, then becomes equal to or less than what it was prior to the increase, resulting in the spending power of the intended beneficiaries of the increase less than before. And, unfortunately, there will be fewer people hired because companies can't afford them, and that especially includes those who work the lesser paying jobs, including kids in college who need work, young people first starting out, and older people who need to supplement their meager social security benefits.
I can't believe anyone in their right mind is still arguing in favor of increasing (or even maintaining) the minimum wage. Arindrajit Dube's 16-yr study has been thoroughly debunked by a slew of studies that show minimum wage increases eliminate jobs over time (primarily because the 16 years was over a period of strong economic growth, neutralizing the supposed correlations).
I started working at age 16, for $2.85/hr. Given it was during a recession, I was happy to get any work at all. But I soon realized, I wasn't going to be satisfied to make such a low wage, and I didn't delude myself that it was anything close to a "living wage." I started saving some money, ended up paying my way thru college (granted it took 7 yrs to do it), and made myself valuable to my future employers.
Seems to me there's too many people out there who are trying to make careers out of entry-level jobs. Raising the minimum wage simply reduces the number of entry-level jobs; is it then, any wonder, that there's such high unemployment among young people today, and so many missing the opportunity to at least get started on the road to betterment?
So if I have a job that needs doing and it is not worth paying the min wage I can't fill it even if someone comes to me willing to do it for the wage I am paying?
I can't pay a teenager $5 an hour to stock my shelves or muck out the barn? Even if they are willing to do it for the agreed price?
Probusiness,
Your example is a fantasy. Employers don't hire based on Milton F.'s "it gets me a dollar" model. They hire only when they are forced to, by an increase in demand. And only after trying to get by by working current employees overtime. If your textbooks were correct, there would never have been a recession.
We need to increase the minimum wage if we want to avoid an outright revolution in this country. Since 1970 there has been an 80% improvement in productivity of labor. Did wages increase 80%? NO. They increased about 8%.
We need to bring back the top income tax rates of the good old days of the 1950's and 1960's which were about 90%.
Sid, those who work for minimum wage also qualify for food stamps. So your argument is fallacious because it does not consider the fact that those earning that wage still must pay to live.
If we would only move the minimum wage to $100/hour, then we would all live in mansions and dine on caviar and champagne!
Idiotic pieces like this, written by some Consumer Affairs writer with zero understanding of economics are a waste of bandwidth. Government can't wish money into existence by waving its magic wand and demanding that a ditch digger is now worth $12/hour. All this does is throw 1/2 of the ditch diggers out of work and onto unemployment. Then, they bring in a ditch-digging machine and the jobs are gone forever.
Minimum wage sets the floor for prices. No matter how high it is raised it still sets the floor. If we paid $50.00 per hour as our minimum wage, the people making $50.00 per hour would still have the lowest wages and therefore be below the poverty level. There's always going to be a top wage and a bottom wage. So while it sounds good to raise the minimum wage, it really doesn't help the folks who are earning the minimum. Hard work is rewarded.
Scott
Ditch diggers make more than $12/hour. And that figure is better than minimum wage. So way to make a useless point based on nonsense. Those wages would not be affected. Sounds like you have zero understanding of reality.
Actually the Federal Reserve does have a magic wand. it use to be the printing press now it is just a computer.
Big John, way to focus on a completely arbitrary job and wage and ignore the main point of his comment.
If you index the minimum wage to inflation like the bill that Congress has wants to do, you're indexing an inflationary activity to inflation just creating more inflation, it's an idiotic idea that obviously wasn't thought out.
Mike,
You are the only one who made that point. You need to work on your reading comprehension. Nowhere did scott make those points that you made. I understand that pegging minimum wage to inflation will lead to more inflation. Because in this "christian nation" money is god and greed is king and no one wants a pay cut. Even if they make more money than they no what to do with.
My point is more of how conservatives lack basic understanding of math and numbers. When you cant even calculate what minimum wages are in a weekly salary your argument doesnt hold too much water.
And Big John, if you can't figure out that Scott was using an arbitrary rate to make a point (change it to $30/hr - there, does that make you feel better? I don't know where you live, but there are ditch diggers here making less than $12/hr.), then you're simply suggesting liberals (which I assume you are, based on your partisan remarks) are apparently incapable of grasping even basic economic concepts, incapable of seeing the big picture.
Totally wrong. The price of oil sets the floor for prices. Minimum wage is irrelevant.
First of all minimum wage is for losers, and people just starting out in the work force. It's not meant to be a living wage, it's meant to be a starting point for those entering the work force! An employer hires someone with "no experience" in his or her business because they think the person has the potential to be an asset to their business. Then they spend their time and money training that person. If that person does well, they usually get a raise because their employer doesn't want to lose their investment in training that person to a competitor, and have the knowledge they gave that person used against them in the market place.
If we continue to raise the minimum wage, and make it more of an expensive gamble for employers to take a chance on someone with no experience in their business. Jobs for those without skills will be even harder to find than they are now!
Yes, and many of those "losers" are people who have recently "lost" their job.
But what about the person who has a fairly low IQ--the loser you're talking about. People are born like that through no fault of their own. They are not capable of climbing the corporate ladder, yet they are productive members of society. Should they have to live like dogs despite working a lot harder than the middle-management parasites gossiping around the water cooler?
patter123,
There are many organizations that help the people you describe get jobs, and assist them in their living expenses! We're not talking about people with disabilities. We're talking about the average person. As far as those who have lost their jobs, homes, etc. through no fault of their own. You're not going to help them even a little bit by raising the minimum wage and putting more of a strain on the economy. How does that help them? Who's going to hire someone who's averaged $35K to $55K a year for minimum wage when they know the person's gone the second they find a job in their field? Jobs are a whole different subject!
THere are a lot of average people with below average intelligence that work very hard and should be compensated fairly. Some people were never meant to move up but should not be treated like dogs because of it. They are not disabled and do not qualify for these assistance programs.
I agree that minimum wage is a "starting wage". Where are the jobs these people are going to move to when they reach the "top" where they're at? Whether they go to higher education, and incur debt, they have no job to go to. Just ask some of the recent grads. But, I don't believe raising the minimum wage will get us nowhere, because the people that are making more aren't getting any raises, and prices go up accordingly, and the person making more than minimum just lost money.
Raising minimum wage is just a tax on the people that aren't making minimum!!
You're misinformed. These organizations of which you speak are overwhelmed, due to the number of people who are just trying to survive another day.
And the jobs you talk about are those same miminum-wage ones.
OK, William, that seems reasonable for new, inexperienced employees to make minimum wage. But, that should also mean that within a fairly short time that employee would be fired for incompetence or raised to a higher wage.
Shame on you. You shouldn't raise minimum wage. Those POOR, SMALL, BUSINESS OWNERS are so put upon. They should do away with it all together. Oh my lord my heart BLEEDS for small business owners...oh my GOD, they are AMERICA. How dare you insist on paying people. Those freeloaders should work for FREE. Endentured Servidtude for ALL. Lazy sob's would be NOWHERE with out these MAGNIFICENT JOB CREATORS. I'm going to swoon now. :).
Yeah, the guy who dips the fries in the oil at McDonalds should make more! You don't mind paying more for the fries do you? In fact the cost of living will rise across the board when increasing the wages of those who have no education, or desire to improve themselves. But people like you are not complaining about the costs of living in today's economy are you?
i hope they pay him enough to keep him from spilling them on the floor rolling them around in the roach feces and then placing them back in the box for your dinning pleasure. If its not enough to make ends meet there really is no reason to do the job. Ii agree minimum wage is a starting point but it should at least be enough to keep the employee engaged. I have witnessed this many times here in Charleston, a city known for low paying jobs.
Okay, I'm back to my original understanding of "you people."
I remember how you were during the boom. Anyone who wasn't buying a million-dollar house was scum, and you weren't sexy unless you were day-trading.
Then when it went bust and you lost everything you never actually owned in the first place, you began pretending you had learned a little humility.
But here you are, showing your true colors again. I can't write what I think of you, or I'll be banned. But I think you know--cause you're so smart. Just in case--here's a hint. I'm thinking now of dog vomit.
patter123,
"you people"? Where did you get that from?
William, the cost of living is going to increase no matter WHAT. Are you implying otherwise by keeping wages down? Real wages have been suppressed for over a DECADE. If at least minimum wage kept with inflation we'd have some form of MEASURE to know when the rest of us are getting shafted and underpaid in relation to inflation. Companies that feel they are immune (Cable and phone for example) to their price increases will see a DIRECT consequence of adding to inflation when they raise prices out of greed rather than "inflation". Cost of living index seems to be a bit of voodoo and is not talked about much. Having minimum wage assumed to keep up would take some of that voodoo out!
opinionated high horse,
Good point! But the only way to validate your point would be to guarantee "everyone who's working" gets the same costs of living increase in their wages also! That would be fair, now how are you going to implement it?
Jeff, that is the problem with America. Those people that don't take enough pride in their work to not serve fries that fell on the floor don't deserve anything. They feel like they're entitled to more money to do their menial task and if they don't get it, they are going to do bad work until they do? I say fire the person you described. The minimum wage is entry level. That employee should strive for more and work hard to get it. They shouldn't be given a certain amount of money just so they don't make customers ill out of spite. It was their choice to take that job for that wage.
Minimum wage did not cause gas and groceries to go up this year, because minimum wage hasn't gone up. Now it needs to catch up. Minimum wage leading inflation, instead of always lagging behind, would be an improvement.
All good arguments for raising the minimum wage. Based on the same arguments we should raise the minimum wage to $20/hours and all would be even better off.
"we should raise the minimum wage to $20/hours and all would be even better off."
Well, that would probably double (or triple) the ranks of the unemployed. Think again.
Over the last three years, employers have laid off everyone they could. They can't let anyone else go, no matter how much minimum wage goes up.
den o'synn,
sure they can, they can just close their doors.
Brilliant idea!!! I'm sure all companies would have absolutely no issue cutting the exec's paychecks so they can still give the customers the lamp-warmed meat by-product leaflet at the same affordable price of 8 bucks to make sure the pimply kid who never washes his hands and flips them can buy a better car for his date. Wait...what's greed? What's capitalism? What do ya mean common sense says this will never work?!?!?
This is basic economics, if I run a business and my cost are increased I am going to raise my prices. Going back in history and comparing the minimum wage to cost one will see that there is a connection between them. I started working ,early 70s, when the rate was about $0.75 an hour. A loaf of bread was about $0.30, a reasonable car was $2,500.00, and a average home was about $300,000. Now a loaf of is over 3 bucks and a reasonable car is about 25,000 and a home here in California is about 300,000.. There are many other examples like this but things are about 10 times more expensive and minimum was is about 10 time higher. Anyone see a connection?
an average home in the 1970's was never, ever $300,000.....
b dune:
lol... I think that was a typo... he probably meant $30,000.00.
guess you are right....would follow his line of thinking of everything being 10 times higher....thanks
I must ask for your forgiveness as that is a typo. It should be 30K.
I want to commend you b dune for your pithy comment and your thoughtful comments.
Throughout the '70's, minimum wage was actually in the $2.00 to $3.00 range.
Consumer spending would NOT increase as a result. Why? As companies like retailers raise their employees salaries to meet the new minimum wage requirements, they also raise their prices to compensate that increase.
Well... spending would technically increase... except we would be spending more to by the same amount that we buy now for less. That's why I always think it's funny to see reports about how spending has increased as if it's a "good" thing. People aren't spending more because we WANT to... but because we have to... lol.
And lay-off workers to save money...
Your basic premise is totally wrong. The price of goods is much more affected by the cost of fuel, than the cost of wages.
Den o sym,
it totally depends on the product. An increase in the cost of gasoline effects all levels of the product reaching the market. Raising the minimum wage would have the same effect.
The problem with just raising the minimum wage is this. The cost to living is very dependent on where you live.
i bet most minimum wage earners work harder than most jackasses that make 30 bucks an hour, so yes they do deserve it!
The less you do the more you make... An inconvenient truth maybe... but the smarter you are the less you have to physically do... However... don't confuse smarter with benevolence... as we all know most CEO's are most certainly evil... Businesses have only one goal. Profit. Empathy is not in the formula.
Nick, it is not how hard you work, but the value of the hard work you do. Different types of work are valued quite differently. The vast majority of CPAs make more than $30 per hour (a CPA friend of mine makes $325 per hour), yet they are not pricing themselves out of the market. Try raising a 'minimum wage' of warehouse workers to $30 per hour and you'll find significantly less employment in warehouse workers, as employers introduce automation to lower their warehousing expenses.
Romneys plan for his big business buddies to add 12 million jobs....lower the minimum wage to $5.00 and hour....
Really where did you glean these facts? From the Kool-aid package?
Let us all try and provide either facts or opinions but not BS k=like this
Romney made the statement that teenagers should be paid $1.00 an hour so that more of them would be employed! Who in their right mind would work at anything for $1.00 an hour?
Rumpus Cut, regarding the above quote form your comment #10.2:
I oppose having anyone work for less than the minimum wage.
But it might be great for teenagers to do volunteer work for their community, religious group, or some other organization to develop skills and get experience so they would be qualified for a job or a good job.
And during the Great Depression, some people reportedly worked for free for a short period to demonstrate their skills to a prospective employer on the condition they would be hired after a certain period if they did well.
I'm old enough to remember when, in Illinois, the minimum wage was raised from $1 an hour to $1.25. The righties and the C of C said that business as we knew it was over. Forever. And that businesses like fast food restaurants would be particularly impacted, and stop opening new stores.
What happened?
(This is also about the same time a cup of coffee went from 10 cents to 15 cents. People would, they claimed, switch to hot tea. Apparently not.)
These arguements against raising the minimum wage were the same ones probably used to argue against ending slavery. Think about what you're saying.
I have know idea if your idea is true. But it certainly doesn't refute the argument at all.
But ending slavery didn't destroy the nation, did it?
In most countries the free market destroyed slavery. Why keep slaves when a machine works so much better?
What this article fails to mention is that by raising the minimum wage, you will increase the tax base for both Federal and State coffers, by 10-15% per employee, and the tax burden increases also for the employer( who is responsible for half of the FICA tax) ie, raise the minimum wage to $9.60 from $7.25 is an increase of $2.45 , but when all said and told that increase cost is actually closer to $2.90-$3.00 PER hour, PER employee! If an small operator has 10 full time employees, that will cost him $4800.00 more per month to operate! That would surely throw my balance sheet in the RED and I would either close the business down, or have to raise my prices to make up for it, and would no longer be competitive, and have to close the business anyway....Redistribution in any form does not work.... Like Obama says, it's MATH
And the people who get the money have more money to SPEND and improve the economy by putting more money into circulation by buying more of the products so many of these businesses make. You act as if all this happens in a vacuum. If you have to close your business you probably weren't competitive anyway.
Regarding the above quote from mvrb's comment #13:
If all businesses must pay the minimum wage, then all would be affected. Why would your business "no longer be competitive" with other businesses?
Maybe as Yankee Boy-957719 indicates in comment #13.1, these people earning more money would spend more money on your products.
mvrb,
Hope you're not in Illinois (sanctuary state), those employing illegals will definitely put you out of business unless you do the same.
People just having more money doesn't improve the economy. That's why you see the absurd, yet accurate commentary of "why not $100/hour" whenever these articles are written. The only way to improve the economy is to improve productivity. I really don't get the "put more money into circulation" comment. Where was it before if it wasn't in circulation?
It's comments like this that cement in business owner's minds that people with your views actually don't care about businesses. What if this is a smaller guy competing with the big retail chains? You bitch and moan all the time about the ills of big business, but then you support policies that destroy the little guy or make him less competitive while ensuring the eternal future of the businesses you claim to hate.
While I do agree with all of you that prices will go up on goods and services I still disagree that they would negate each other. Prices would go up but not in as large of a proportion as minimum wage would go up. And honestly, the big benefit would go to the middle class when one looks at who is working minimum wage jobs.... high school and college kids. With student loans looking to be the next bubble to pop (just has housing was) it probably wouldn't be a bad idea to put in place something that would lessen the amount of loans one needs to pay off. Wouldn't it be nice if it was reasonable for someone to actually be able to work their way through school again.
Disagree if you wish... but not only has the cost of living negated minimum wage increases... it has eclipsed it. History disagrees with you. People at the bottom will never be able to be paid enough to live the way they would like. People who make $20 an hr don't live they way that they like. If people making minimum wage could afford a house, a car, and a family of four... why would anyone bother to strive for more? Minimum wage is not expected to make life comfortable.
Argueing that raising the minimum wage would raise unemployment was probably used to argue against ending slavery.
Say you have $25/hour to spend on employees to stay profitable at $1 per hour. You can have 3 employees. That's $7.25 plus $0.41 per hour in wages and FICA per employee. In total, that's $22.98 per hour. If the minimum wage goes up to $9.80 ($10.35 with FICA), as stated in the article, then that's $31.05/hr you must pay out.
Guess what happens next.
The author fails to quote where much of the comparison data comes from. Is she assuming a single full-time worker is supporting a family of 4? How big and nice of a housing unit is she comparing to? The average rate for a community? If so that is not even close to a good measure. One would expect people making average wages to live in average priced housing and people making minimum wages to live in the least expensive housing.
I had minimum wage jobs in high school and college. I fear that if the minimum is raised to the point where someone could support a family of 4, by working only 40 hours, there won't be jobs available for the young.
I now make more than the minimum wage and support a family of 4 (soon to be 5). I work a lot more than 40 hours a week to do it. I don't think working more hours is an unreasonable request for people in lower paying positions.
You do realize that raising the minimum wage to $9.80 will only get you $20,384 a year before taxes if you work 40 hours a week 52 weeks out of the year, right? You really think that is enough money that anyone (much less everyone) will say "hey, that's plenty to raise a family of four, no need to try for anything better!" And I don't understand your logic regarding one person working 40 hours a week taking jobs away from the young, but one person working 80 hours a week does not. No matter what the minimum wage is, the same amount of work would have to be done, so there would be more jobs if each person only worked 40 hours than if each person worked 80. Of course, employers don't like to pay overtime, so good luck finding a job that lets you work more than 40 hours a week. (That's actually why the overtime laws were enacted, to make it cheaper to hire two people to split the work, thus creating two jobs where before there was only one). And if each person in a low-paying position has to take 2-3 jobs to make ends meet, that definitely takes jobs away from the young.
Sid, I suggest a course in remedial economics, it will serve your little mind well.
Quality of life is the number 1 issue, and the US rank is somewhere between 15-20 in the world. Your analogy on incentive show a true lack (ignorance) of understanding of human behavior.
Raising minimum wage can spur inflation.
Companies have to balance the books. To pay for wage increase frequently raise prices.
That means the workers who have slightly more money face a world where everything costs slightly more. Net gain for the poor -- zero.
However, economics is complicated. What if inflation is rising faster than minimum wage, as this article suggests? The poor are already finding their wages worth less. Should wages be increased to match the rate of inflation? Are rising wages a natural consequence of inflation, or would an increase exacerbate the problem and make inflation rise even faster?
You all need to learn the new pledge:
I pledge allegiance to the trademark, and to the corporation for which it stands, one business under profit, undivested, with low wages and servitude for all.
If the person who cooks your french fries does not deserve a living wage, then cook your own damn french fries. The same principle applies to any task, ie sew your own clothes and haul away your own damn trash etc. A good day's work for a good day's pay, it's called work ethic.
THE CASE FOR ABOLISHING THE MINIMUM WAGE
There is on need for a minimum wage.
The minimum wage guarantees the least productive, least trained, and least effective employees a wage rate they could not earn on their own merits.
I've been in business for over two decades and leftist pigs who advocate for the minimum wage and/or to increase it seem to have NO IDEA about business or what makes the marketplace work.
Well, let me school you idiots!
In business you have to factor in your labor costs in the product or service that you are offering. If you increase labor rates, you necessarily have to increase prices to make up for that additional cost. You see, businesses don't exist to create jobs, they exist to make money for the owners by offering products and services people want to purchase.
Yes, there are times when a segment of the marketplace has extreme competition and there are pressures to keep prices in check - that means you find ways to cut costs to make up for escalating prices in commodities or labor or whatever area you are feeling price escalation.
Minimum wage whores also forget that the marketplace often has a prevailing minimum wage rate - when there is a shortage of workers, the labor rate to get good help goes up - this is as it should be - great employees should make more. When you have a plentiful market like now, there is no reason to offer such a high wage if the market also bears out this trend.
People who are unskilled, lazy, or are just putting in just enough effort to get a job should not be guaranteed any wage rate - that should be at the discretion of the owner and the employee has the absolute right to look elsewhere to find someone willing to risk labor rates on them.
I managed to have a higher than prevailing labor cost because I was very selective on my hires - I was willing to pay for someone who was going to bust their butt for me and I'd use higher than normal pay raises once that employee showed me a commensurate effort. There is absolutely no reason I should be forced to pay a minimum amount for an unknown person and I should not be compelled to increase their compensation by anyone if they aren't performing. I build teams for work and when you hire the best you can find, you also create a culture of success that raises everyone because the employees tend to demand an expectation from each other and that increases efficiency for me and I'm glad to pay for that.
There is absolutely no ethical and moral argument to suggest that the minimum wage should be a "living wage" - that is a bastardization by leftist pigs to justify the weakest and laziest potential workers to perpetuate underwhelming leftist standards in the marketplace. If employees understood that they are guaranteed nothing in wages, then they'll necessarily start producing to get more money. But if they know they can essentially "phone it in" to get a guaranteed rate, then there is a significant portion of our lazy population that will do just that. Those people cost me money - they don't do the minimum I need, the get more in compensation than they are worth, and they make the rest of my employees resentful for having to carry their sorry butts.
As a business person, I can SELECTIVELY take on unskilled or new workers that I sense I can shape into efficient and happy workers, but I shouldn't be forced to pay them a rate. I should also not be compelled to a time table to increase their pay and I should be able to use my intelligence and experience to reward employees on a case by case basis when I see fit. There is no Government Worker who has a clue about how to run a business that consistently increases sales and profits - and there is absolutely no correlation between a high profit company and low wages - I paid more, I made more, but I busted my butt to check potential hires to make sure I minimized my risk in acquisition since terminating employees is a woefully obtuse and repugnant experience - both in angst for me for thinking I failed to turn this employee around and in having to justify getting rid of pieces of human debris who end up being lazy and worthless people.
You need my sign in your front yard
Got Hate
Romney/Ryan
You see you also need people to buy the product that your fictional company is making. It is a two way street!
Glad I don't work for you.
I'm sure you'd be all to happy to pay your worst employee $.25/day and your best employee $.26 a day.
People like you are the reason there is a Federal Minimum Wage.
Well, I hate to break it to you, but the FMW is here to stay, so say your fond farewells to the sweatshop days of old - because they won't be coming back.
Mitt, is that you?!?
Ok, let's talk about the reality of Minimum Wage...
Those employers who operate under the principle of Minimum Wage = Maximum Wage, and there are PLENTY of them out there, get furious every time someone mentions raising minimum wage. They fire employees and/or cut back hours so that, in the end, their overall payroll costs stay the same.
A better solution would be - keep minimum wage where it is and instate COLA for everyone.
Haven't heard of COLA? It's short for Cost Of Living Adjustment
It's how you offset the rising inflation. For those making minimum wage, this turns it into Living Wage. For those making more, it means you're not crossing your fingers and hoping the gas in your tank will last until pay day.
Social Security gets it, soldiers over seas get it, Civil Service retirement gets it, Federal Pensions get it. A few good union jobs get it.
Everyone should have it. Not just fat-@ssed retired senators, postal workers, or that rude she-dog who answers the phone at traffic court.
Oh, and the best part? COLA is untaxed in your check.
So, let's say you make $8/hr, and pay 38% in taxes. Your gross pay per 40 hour week would be $320. After taxes, your net: $121.60. If your COLA is $180, your gross would be $500/wk, but your net would be $301.60, instead of $190.
Which brings me to one more issue...
Gross vs. Net
Calculations should NOT be based on a person's Gross Income, because they NEVER get that money. Let's say you're a recently single mom of 3 with only the basic skills and your work experience has been limited to smiling and cheerfully showing patrons to their seats, or running a cash register.
You quickly realize that you're not able to live paycheck-to-paycheck, so you seek out some assistance, only to discover "We're sorry, you make too much for any sort of assistance." Why? Because the calculations are based on your Gross, which you don't get, instead of your Net.
And since you can't opt out of taxes, you're stuck, or worse, you quit working entirely, as you wind up making more money as a "burden to society" than you do actually working - a situation far too many have become aware of in our current economic state.
What a bunch of aholes. Some people aren't going to go to college. You know the ones you went to school with. The ones who just couldn't learn from books. But could build a house with no problem, or do plumbing, or dig ditches. I worked digging ditches back in the 70's and made darn good money doing it. Then Jimmy Carter became president and I lost my job. I went to college and got a 2 year degree in a booming industry. It only took me 10 years to get back up to the wages I was making in the 70's. Jerks! We are not a 3rd world country. We no longer work in coal mines for $5 dollars a day jacka$$
I am against raising the minimum wage.
If a person is already working, he/she needs to ask the employer for a wage increase or a raise. Raises are usually given annually.
Secondly, we are degrading college graduates whose starting salary is $20,000/year or about $10.00/hour.
Why bother going to college and paying off debt?
First off there is no easy answer to this.
If the minimum wage were raised those folks who need it would benefit. What about the person making $11.00 would they get a raise maybe probably not, so we have diluted their earnings. If an industry relies heavily on low end workers their costs rise so does the consumers cost. If minimum wage goes up it may now be economical to develop equipment to replace the people, oops lost jobs. The middle class will definitely lose as their wages will not go up so their buying power shrinks
As i said no easy answers