Raising the minimum wage
May 25th, 2006 | by mbhunter |If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
This MSN article on the “living wage” movement is interesting:
Living wage: How about $9 an hour?
Some cities and even some states have passed wage laws that go beyond the federal minimum wage of $5.15/hour — an amount that hasn’t increased for nine years. Proponents of the living wage movement argue that the quality of life afforded by a full-time minimum wage job has declined over the years to barely above poverty — about 10% above the 2006 federal poverty level. Opponents contend that jobs will be lost because of the increased cost of doing business.
I was shaking my head a little at the comment from Wal-Mart spokesman John Bisio, not so much for what he said (which isn’t out of line) but because it places Wal-Mart on two sides of the wage issue. Chicago is working to pass a minimum wage specifically for “big-box” stores like Wal-Mart that would be $10/hour, plus benefits. Are they targeting Wal-Mart? Perhaps. But in October, 2005, the CEO called for an increase in the federal minimum wage — a move that would have less of an impact on Wal-Mart than on smaller businesses with smaller gross revenue.
Otherwise, I think the fewer wage controls, the better, for a couple of reasons:
- Higher unemployment. Someone has to foot the bill, and this means that fewer of the least-skilled workers will have jobs. Or the ones who keep their jobs will work harder.
- Wage controls are a temporary fix. Soon enough the employer/employee relationship will reach equilibrium again, but with fewer jobs, less growth, fewer new business innovations, etc. More disposable income will fuel inflation, driving up prices so that the poverty level is raised, and you’re back in the same boat.
- It undermines a society’s work ethic. On the face of it this seems like an uncaring statement (”The problem is that workers are poor!”) but OK: Say we raise minimum wage to $9/hour and millions of people are no longer surviving by the skin of their teeth. What has this accomplished? For some, this was exactly what was needed: hard-working people with some unfortunate situations beyond their control, like mounting medical bills, who are finally able to dig themselves out. But for others, isn’t $5.15/hour already way more than they deserve for what they contribute to the business or to society? Some fast-food restaurants I’ve been at had employees that didn’t deserve 15 cents an hour! And that’s the only kind of worker that the business could get, for whatever reason. So now we pay them $9? Are they going to get more polite, show up on time, etc., just like that? I doubt it. Now, the same losers that were being paid $5.15 are now getting paid $9. It’s like rewarding a fat, lazy person with a remote control and potato chips. There’s another set of workers — those who are able to do better for themselves, but aren’t now. A minimum wage of $9 is more comfortable than $5.15 — comfortable enough that some of them might not aspire to anything better.
With the way many events are unfolding in the world — outsourcing, terrorism, global warming, peak oil — this country will need a lot of hard-working people. I’m afraid that we’re heading toward times when minimum wage is a fond memory, a luxury of a much better time, and that increasing it is just going to make the fall all that much harder when that protection is gone. Then, the options will be work hard, or starve.
What are your thoughts?
13 Responses to “Raising the minimum wage”
By Dus10 on May 25, 2006 | Reply
I really an idea from your last paragraph, incorporating outsourcing… If it all of a sudden becomes more expensive to produce a product (what few products are still produced in the U.S.), it will become more attractive to outsource… do we really need to make outsourcing MORE attractive? Silly rabbits, minimum wages are for kids.
By Brock Haussamen on May 27, 2006 | Reply
From what I have read, your prediction that a large increase will simply reward a lot of fat lazy slobs who will stay that way, is not what happens. (See my Web site for more on the debate: http://www.raiseminwage.org.) In reality, businesses tend to become less tolerant of inefficient workers when the wage increases, and the employees, who face more competition for these better jobs, are generally more productive and reliable.
By Justine Kaley on May 28, 2006 | Reply
The minimum wage here in Hawaii is about $6.75/hr the last job I had my wage was $9.00/hr depends on the company on what they want to pay you though they do have to pay at least minimum wage I saw a part time job that pays $10.00/hr. so if you want more per hour look in the job section to see what people are paying now and if you want to apply go ahead and do it.
By Curious Stranger on May 28, 2006 | Reply
You can’t include your Higher Unemployment and Work Ethic point in the same list. On the one hand you say the less skilled workers will be layed off because employers can no longer afford the extra weight, and then on the other hand you say it will be rewarding those same less skilled (and apparently fat and lazy) workers by raising their wages for staying less skilled, fat and lazy. Which is it, are they being laid off or getting a raise?
By mbhunter on May 28, 2006 | Reply
Thanks everyone for the comments!
Curious Stranger, both are possible. One (loss of the least skilled jobs) is an immediate effect felt by some businesses that already are struggling to meet their payrolls. The other (raising the minimum wage for marginal employees) arises from a different set of circumstances, mainly in businesses that are less sensitive to wage controls. The first group of affected workers probably aren’t able to do anything else; the second just don’t want to do anything else.
Some will get laid off, and some will get more than they deserve already. Of course, not everyone will get laid off and not everyone will get more than they deserve.
Brock, thanks for your comment as well. I see your point, and that will be true as well. I have had experience with some businesses that can’t seem to get many good employees at all. I suppose this might be a management issue, though. But in any case, once all of the $5.15 jobs are gone and the same or similar jobs are replaced with $9 jobs, then $9 will be entry-level and will be perceived as such. If, as now, there are some areas that have higher minimum wage, then local competition for jobs will be more fierce than in areas with a $5.15 minimum wage. But once the bar is raised nationally, this competition goes away. Perhaps there will be fewer workers that are “dead weight” but they will still exist, and likely more people will be unemployed.
Thanks also for your website; some interesting links there.
By Curious Stranger on May 28, 2006 | Reply
And keepig the wages low reduces the number of fat lazy employees how? At worst its a wash, the same number of bad employees would exist. I don’t see how this is an argument against raising minimum wages.
By mbhunter on May 29, 2006 | Reply
CS — it probably wouldn’t reduce the number of said employees, but at least we wouldn’t be throwing more good money at them.
By Curious Stranger on May 30, 2006 | Reply
We’re not throwing good money at them. Their employers are. If their employers are then passing along that cost to us, that will ultimately hurt them. If you are the employer, than you need to look at your hiring practices
By Financial Freedumb on May 30, 2006 | Reply
Like you mentioned, raising the min wage will make it even harder for many business to survive, illegal tactics like “paying under the table” will become even more prevalent. Not to mention businesses hiring immigrants, especially the small ones that can’t compete otherwise. We will also become much less competetive in the global market…just imagine the trade deficit growing even larger as products become even cheaper from other countries…
I think providing incentives for businesses to pay better would be the way to go…Also, funding initiatives that make the US more competetive globally means a better economy, which means there’s more money to go around, which correlates to better wages.
It definitely does undermine society’s work ethic…makes sense that the minimum wage be in “poverty” levels…this way people would want to work harder to get out of it.
I do also feel for those who are working very hard and not getting paid what they deserve though. It’s definitely not an “easy” decision either way for me, but I do lean towards fewer wage controls.