Once again states and the federal government are discussing increases in the minimum wage. Three things cause this type of discussion: 1. Someone notices it has been many years since the last increase and poor workers are poorer than ever. 2. A few powerful lawmakers realize that many of the workers in their district are earning slightly more than the minimum wage, so that an increase now will guarantee they'll be reelected for life. 3. The economy is so good for those comfortably above the minimum wage that the government decides to let everyone share the excess. Obviously number 2 is the reason the issue is hot now. I propose a solution that will make the issue never appear again. What if the minimum wage-like Social Security benefits-were adjusted annually to keep pace with the cost of living? An increase from $10.00 this year to $10.04 next year, $10.06 the year after and $10.10 after that will not cause one business to close and few to raise prices on all products, thereby slowing inflation without further government interference. Since those living at the minimum would be minimally comfortable, they would all want to move up through better employment, knowing the government will never do that for them. Most importantly, many employers will dodge the problem of annual adjustments by offering a bottom wage sufficiently above the minimum that it might take 10 years for the COLAs to catch up, thus leaving fewer workers at the minimum hereafter. This requires some hard work though, but only once. The government must actually figure out what a person making the minimum wage at 40 hours per week really needs to support himself for a lifetime-not a year-a lifetime. A person who has a relatively new car, full wardrobe and excellent health can easily live one year on the minimum wage because only the essentials of life must be purchased. Within five years he must replace that car and make changes to his wardrobe. Tvs, radios, microwaves, toasters, furniture, beds and pillows don't last forever. What we need therefore is a wage that not only covers a person's needs for one year, but a 50-year plan involving eight used cars, four sets of wardrobe, five tvs, three beds and replacements of other items at least twice. Divide that by 50 and a single healthy man will have a few blissful years at his new wage, saving up for the new things he knows he must eventually buy, assured that if his wage never goes up beyond the minimum he will have only himself to blame if he has some bad years along the way.
Increases should reflect productivity criteria, not cost of living. This serves two roles. First, helping to reduce 'underpayment' market failure. Second, reducing the profit from low wage labour such that upskilling is encouraged.
Until the person who pushes the carts back into the store stops returning carts with clunky wheels into service, I do not support him/her making anymore. They are already overpaid if such a simple task as flagging a broken cart is above their skill set.
Note that basic economic theory actually informs us that underpayment increases as we move down the wage distribution.
The minimum wage was never about anyone earning what they're worth. As a bad salesman, unsuccessful fundraiser and unlucky self-employed businessman I made less than the minimum wage and my employers lost money over time by keeping me in some cases. As a hardworking reporter on salary I earned less than the minimum wage because I worked extra hours investigating stories, editing, creating features and taking photographs. In one hourly job with the task of scheduling appointments by telephone for commission sales reps the employer charted the sales generated by the appointments against their profits, added the bill for the long-distance phone calls to my paycheck and at one point told me they had lost $14,000 by having me there for the year. They did not add the later income they would generate through sales of paper, toner, repairs and additional equipment. They fired me three times over the course of six years, still behind schedule overall, but their continued business from these clients will someday put them ahead as new revenue comes in years after my payroll has stopped. The cart attendant mentioned above would be a disastrous cashier, stocker or backroom clerk, so by spending eight hours doing a mundane task with minimal harm, more efficient employees can do what they do best without dividing their time on his task. Would Lincoln have been a better or worse President if he had spent six hours a week washing the dishes?
Its certainly the case that the minimum wage cannot eliminate underpayment. However, economic theory predicts underpayment and the empirical evidence shows that the minimum wage reduces it (essentially reducing inefficient wage differentials that aren't related to human capital criteria) Its also interesting that countries with insufficient minimum wage protection tend to have a low skilled equilibrium (where labour demand is skewed in favour of low wage labour). This demonstrates that the usual supply-side tales just don't work!
In TheGrapes of Wrath the Joads arrive ata peach plkantatiomn to findstrikers blocking them. Through heavy security they are directedto a cabin and the men are hired to pick peachesat 4 centsper bushel. They work all day, get paid and the matriarch buys food forhamburgers. The store is owned by the same person who owns the plantation and the pricesare high. Tom takesawalk andtalks to the former minister who camewith them. He says they cut therate from 4 to 2cents as soon as they have too many pickers. With the store every cent goes back to the owners, so a man with children finishes the harvest literally starving and penniless. A fight breaks outand Tom kills a man making him the hero. Theminimum wage would solve the problem of the men having to starve only if a second store with cheaperprices wereavailable. The combined higherwages and fewer shoppers would soon make the plantation unprofitable, so itwould be sold to a developer who would buildoverpriced luxury homes. at the next economicslowdown the homeowners start having to sell the homes for a loss and cut spending, hurting purveyors ofuseless trinkets, causing useless trinket salesmen to economize, etc. T h er e
I like the concept but why limit it to minimum wage? Why not require all wages and salaries to keep up with inflation?
All I can do is refer to the economics. Theoretically, the minimum wage will not impact on employment levels because underpayment is the norm. Empirically, the minimum wage isn't found to lead to significant disemployment effects. So the question really is: why do people think otherwise? Cheese in their ears?
It may be assumed that where no government or union is present workers get roughly what they deserve. My former employer RGIS introduced a program about five years ago by which workers were literally told what level of productivity was expected of them at each work assignment. Salaries were readjusted to set levels company-wide based on career-long statistics (except for team leaders who were also reset to fixed levels slightly above their ranking). They next introduced a system that would increase your rate for the week based on exceeding expectations. What started as a reward for good workers became a penalty for bad workers a couple of years later, as the least productive could actually make less than their fixed hourly rate (down as low as the local minimum wage for really bad weeks. So many of their workers literally earn a different hourly wage most weeks. Obviously a supervisor who doesn't like someone can put them in places where they will surely not meet expectations, and reward his friends. That was done so obviously when only long-term pay increases were at stake that the system needed reform, but this is almost brutal. I-and several others no doubt-were quietly terminated by not being given shifts for 200 consecutive weeks. (My productivity declined because of medication, others perhaps with arthritis or failing eyesight.) This is all dishonest but not illegal. They get away with it because they have a near monopoly in their industry in some states and their nearest national competitor is terrible to work for as well. The sad thing is the gap in wage increases. A person near the minimum wage might get an extra quarter per hour each year and never move up, jump from job to job for small increases in starting pay then wait five years for a raise. Someone who made $25,000 this year, including overtime, might get a raise that takes him to $28,000 next year including overtime. The next year might bring an equal raise but that year there might be no overtime so he sinks to $27,000. I think the average $100,000 per year workers next raise might put him past $110,000. People at that level usually get big bonuses too. Upward mobility doesn't begin until you've reached a plateau most will never see. The numbers at the top are obscene, but making the poorest people a little richer won't change that.
Really? Only if the owner / stockholders will accept lower profits, and/or those earning above minimum wage will donate some of their pay and/or customers will pay higher prices. Empirically, minimum wage does lead to significant lack of employment for the unskilled, unemployed.
A quick Google search supports your story. Did you research RGIS before you took the job? They get away with that crap because people will work there.
You can only assume that if perfect competition exists! Monopsonistic power is delivered very easily: imperfect information (i.e. job search frictions); heterogeneous job preferences etc. As soon as the firm has wage making power there will be underpayment, by definition
I took the job in October 1993, trying to supplement andeplaceatelemaketing job where I was in imminent dangerof being fired. I thought itwas a local firm in Worcester, Massachusetts. The first week was a three-day session ata hugestore. i left early the first night (around the 12th hour.) In December mothersawan inventory at ourlocal stoe, andI learned thatwas adifferentdistrict. (Everywhere they sent mewas at least20 milesaway. I transferred in thespring. In January 1995 I becameteam leader and gota 50 cent raise. Partofmy new duties was scheduling people (with long-distance phonecallsfom home uncompensated fortimeorexpenses). In March 1996 they demotedmebut I kept thesamepay. I left at the end of 1996 after my grandmother'sdeath. I returned in 2002. Thingswerewose but thewagewas higher and hours were shorter. I joined the class action suit for people forced to stat woking up to 15 minutes early without pay andeventually got $650. The company was sold fom the original 1957 owners and things changed for the worst,including the above. I've just been fighting for my life all along, and lately losing the battle.
The president's call for a rise in the minimum wage from$7.25 an hour to $9, with subsequent increases in line with inflation might have a positive impact on the economy. How so? Well! The current level of minimum wage is very low by any reasonable standard. In fact, for almost four decades, increases in the minimum wage have consistently fallen behind inflation, so that in real terms the minimum wage is substantially lower than it was in the 1960s. Meanwhile, worker productivity has doubled. Yes! You can argue that even if the current minimum wage seems low, raising it would cost jobs throughout the retail world. But studies have shown that if one state raises its minimum wage while others do not, there is evidence that points to little if any negative effect on minimum wage increases on employment. Why is this true? Well! Workers aren't bushels of corn or wheat, they're human beings, and the human relationships involved in hiring and firing are inevitably more complex that markets for various commodities. And one byproduct of this human complexity is that "modest" increases in wages for the least-paid don't necessarily reduce the number of jobs. Simply put --- The main effect of a rise in minimum wages is a rise in the incomes of hard-working, but low-paid Americans --- which is what the president is trying to accomplish. Furthermore, it's important to understand how the minimum wage interacts with other policies aimed at helping low-income families who help themselves. The tax credit --- which has traditionally had bipartisan support --- at least up to the current Obamaphobic obstructionist period, that started with Barack Obama's election in 2008. "We the people . . . need to remember that the tax credit is also "good policy." Ironically, some of its benefits end up flowing not to workers, but to employers, in the form of "lower" wages. But guess what? An increase in the minimum wage helps correct this "defect." It turns out that the tax credit and the minimum wage aren't competing policies, they 're complementary policies that work "best" in tandem. It's clear that the RINO in Congress clearly feel disdain for low-wage workers. Bear in mind that such workers, even if they work full time, by and large don't pay income taxes (although they pay plenty in payroll and sales taxes), while they may treceive benefits like Medicaid and food stamps. And you know what this makes them in the eyes of the RINO --- "takers," members of the "contemptible" 47% who as Mitt Romney (remember him?) said to nods of approval, won't take responsibility for their own lives. Let me leave you with the following thought --- The "good" news is that not many Americans share that disdain. Just about everyone except the conservative Obamaphobes believe that the lowest-paid workers deserve a raise. And they're right (no pun intended). "We" should raise the minimum wage --- just like China, sooner rather than later.
Thank you for that post. I wasn't sure what his exact proposal was. $9 is still below the state minimum in several industrial states. Many national chains set their starting wage at or slightly above the highest state minimums to avoid complications. The initial impact would be most seriously felt in southern rural states. Down south people don't need heated apartments, or pay for gas for their stoves with a little heating the apartment for the handful of cold weeks each winter. As global warming continues that will be needed less everywhere. Rural people use fireplaces for cooking and heating, and still burn logs. The standard of living is lower for most products because farms are nearby and have longer growing seasons. Many low-wage workers are supplementing farm income-and I think farms are exempt from minimum wage laws because many employees get room and board for the harvest season. The exemptions to the minimum wage laws are critical: waitresses, bartenders, piece workers, salesmen and non-union contractors get different deals, sometimes going weeks without pay. Salaried employees usually get more than the minimum wage, but not always. By the time local Congressmen hammer out the deals to exempt their top businessmen we'll have what we usually get: a law that looks good but barely matters. Obama should seek a way to get people away from that minimum wage job, because as long as you're making the minimum, you're always the lowest paid person in sight, even if it's a 100 million way tie for lowest.
I would like to see the minimum wage raised so that my tax dollars are not used to subsidize employers who gain their profits by paying a less than livable wage. I would gladly pay an extra dollar for a Happy Meal if I knew the people behind the counter made enough money to not need any charity. The thing is, if you are working a minimum wage job you are trapped in total survival mode. There is never enough money to pay your bills and buy food let alone do anything or go anywhere that costs even a few dollars. You feel lucky if the local food bank is within walking distance so you can save the bus fare to pay your electric bill. Missing even one shift at work pushes your finances over the edge so getting sick is not an option. Lately, some national employers have instituted on call work for part time employees. They will call you in whenever they need you to work, for as few as two hours at a time. If you refuse even one call in you might be called in again but for fewer hours. This has made it impossible for workers to count on a steady income, pay their bills, get another part time job or pursue an education or do anything else with their lives except sit with their phone waiting for a call to come to work for an hour, or two, or maybe a whole day, they never know. This is not illegal in most states, but it is in many developed nations and should be in the US. The position that people are always paid according to their productivity was debunked long ago by Adam Smith. It is a myth and people who profess to believe it are economists of purely mythological realms, which goes a long way in explaining so many of the economic arguments from the right have validity only in some alternate mythological universe.
I think that most Americans agree that the income gap between the rich and everyone else has grown in recent years. In fact, a new Pew Research Center survey shows that two-thirds of all Americans agree that this gap has increased in the past 10 years. As expected, an overwhelming majority of Democrats and a large majority of independents believe that government should do "something" about this growing "inequality." Among Republicans, 48% say government should do "nothing" or "not much." On this issue, one thing is "perfectly clear" --- "inequality" will play an important role in both the congressional and presidential elections this year and next year.
PBS Newshour last night did a long segment about how almost no one moves out of the bottom 20%. That sounds bad until you realize that for someone to move up someone else has to slide backwards. The country will be no better off if the people from 81-85% switch places with those between 76-80%. Here's homework: what could the government do to drop Warren Buffett from 1% to 20% without causing massive problems for most other people?
It appears that President Obama wants to make "income inequality" the focal point of 2014, and he's expected to propose specific steps to address our country's wealth disparity in his State of the Union Address this week. Unfortunately, the Obamaphobic obstructionists in Congress will disagree with the president on anything he says.
