Minimum wage: a different kind of waste
Saw this article on minimum wage when I tried out Digg.com. It's a good explanation of the problems with minimum wage, and there are some surprisingly good comments on the article at the Digg website.
I oppose any minimum wage. The incumbent in my race supports an increase in minimum wage. That is a clear difference between us. Most Democratic politicians support higher minimum wage, while many Republicans waffle. The wafflers either don't understand the issue (or don't care), or they're trying to seem moderate for election purposes.
The standard "liberal" argument for minimum wage is that it's too low to support a family of four, so let's raise it to ... $8/hour? $10/hour? $13/hour? Different liberals have different targets. When someone with economics training criticizes minimum wage, the liberal answer is that there are no consequences.
Really? I suppose that a minor increase in the minimum wage would have minimal effects, but then, it would also have minimal benefits. But if there's no consequence, why not raise the minimum wage to $200/hour? As one friend of mine cynically puts this, the liberal position is that the government should give everyone a million dollars, make everything free, and we can all go dancing in the fields (at which point you're supposed to flap your arms up and down gently indicating that we're all flying freely).
There are many problems with minimum wage. First, the vast majority of those receiving minimum wage are not supporting a family of four. Many are teens in their first jobs. I'm now an employer, and while none of my employees (okay, my employee - I only have one so far) make minimum wage, I understand that an employee's work has a value to the employer. Some jobs do not create more value per hour than the minimum wage, and those jobs will disappear. If some of those jobs disappear, then teens and other job market entrants will have fewer opportunities to develop workplace skills. The higher you make minimum wage, the more jobs you will destroy. If the jobs don't disappear, then the price of the associated products and services will go up. And the people who work minimum wage jobs are disproportionately supplying poor people, so you're raising prices for poor people.
It would be easy for someone to criticize me, a well-paid lawyer with a $200/hour billing rate, as being out of touch. For starters, remember that billing is not take-home, but I had many low wage jobs when I was younger. In high school I delivered newspapers for dirt, and worked for Dairy Queen and Burger King for roughly $3.50 an hour. After high school I worked at a local camp (Ben Becker's Camp Nassau) at something like $2/hour (I think they had an exemption on minimum wage). I took these jobs happily (though I didn't stay happily at DQ and BK). In college I drove a shuttle bus for maybe $6/hour (I don't even remember). During college summers I lifeguarded for about $6/hour. In law school in 1994 I was making $10/hour as a Westlaw representative. So I remember the low-wage days.
I hope a supporter of minimum wage will post a comment on this blog post stating what the right minimum wage is, and explaining why that's the right number. It would be too much to ask for McNulty, Gillibrand or Sweeney to step up, but I can hope. :-)
I oppose any minimum wage. The incumbent in my race supports an increase in minimum wage. That is a clear difference between us. Most Democratic politicians support higher minimum wage, while many Republicans waffle. The wafflers either don't understand the issue (or don't care), or they're trying to seem moderate for election purposes.
The standard "liberal" argument for minimum wage is that it's too low to support a family of four, so let's raise it to ... $8/hour? $10/hour? $13/hour? Different liberals have different targets. When someone with economics training criticizes minimum wage, the liberal answer is that there are no consequences.
Really? I suppose that a minor increase in the minimum wage would have minimal effects, but then, it would also have minimal benefits. But if there's no consequence, why not raise the minimum wage to $200/hour? As one friend of mine cynically puts this, the liberal position is that the government should give everyone a million dollars, make everything free, and we can all go dancing in the fields (at which point you're supposed to flap your arms up and down gently indicating that we're all flying freely).
There are many problems with minimum wage. First, the vast majority of those receiving minimum wage are not supporting a family of four. Many are teens in their first jobs. I'm now an employer, and while none of my employees (okay, my employee - I only have one so far) make minimum wage, I understand that an employee's work has a value to the employer. Some jobs do not create more value per hour than the minimum wage, and those jobs will disappear. If some of those jobs disappear, then teens and other job market entrants will have fewer opportunities to develop workplace skills. The higher you make minimum wage, the more jobs you will destroy. If the jobs don't disappear, then the price of the associated products and services will go up. And the people who work minimum wage jobs are disproportionately supplying poor people, so you're raising prices for poor people.
It would be easy for someone to criticize me, a well-paid lawyer with a $200/hour billing rate, as being out of touch. For starters, remember that billing is not take-home, but I had many low wage jobs when I was younger. In high school I delivered newspapers for dirt, and worked for Dairy Queen and Burger King for roughly $3.50 an hour. After high school I worked at a local camp (Ben Becker's Camp Nassau) at something like $2/hour (I think they had an exemption on minimum wage). I took these jobs happily (though I didn't stay happily at DQ and BK). In college I drove a shuttle bus for maybe $6/hour (I don't even remember). During college summers I lifeguarded for about $6/hour. In law school in 1994 I was making $10/hour as a Westlaw representative. So I remember the low-wage days.
I hope a supporter of minimum wage will post a comment on this blog post stating what the right minimum wage is, and explaining why that's the right number. It would be too much to ask for McNulty, Gillibrand or Sweeney to step up, but I can hope. :-)
posted by Albany Lawyer at 9:36 AM
15 Comments:
I find it interesting when most republicans speak against minimum wage they state the obvious, that most americans dont earn minimum wage.
What you fail to forget is when you raise minimum wage wages across the board go up, it happened last time and it will happen the next time.
Many jobs use their starting wage vs minimum wage as a selling point to attract employees.
This is kind of a slight of hand because even $7.00+ is not enough to live on in MOST parts of the U.S.A .
The question I have is what is so wrong with someone who actually works earning enough to live on?
Many conservatives will say that min-wage is just a starting point, that one should use that job to learn skills and move up, but there are 2 flaws to this arguement.
1. even if one tried this his/her odds are against them, to many things can go wrong, someone is more likely to loose his/her job because of car trouble being unable to save money to move up and become a better employee.
2. this way of thinking fails to concider that many people are starting over be it divorce, outsourcing, or just a screwed up economy.(like any number of people who live in factory towns inwhich their father and grandfather worked in the same factory).
Is it any wonder why conservatives are viewed as heartless?
Responding to Mortalez, first of all, thank you for your comment. Second, you didn't asnwer the question I asked. What is the right level for minimum wage? You say $7/hour is not enough. Are you suggesting it should be $10/hour? $15/hour? Pick a number and justify it.
If you are correct that raising minimum wage will raise wages across the board, then prices will go up. Or do you disagree with that?
As for the heartless comment, I prefer it to brainless. Mortalez, along with many other liberals, simply doesn't want to think through the consequences of his preferred policy choice.
And by the way, most Democrat economists agree that minimum wage is bad policy. It's not just Republicans and conservatives. Many "conservatives" and Republicans don't care about this issue. The position I take is not politically popular. But it is the better policy choice.
Everytime minimum wage is increased the cost of living should be factored in, the cost of goods, services, housing and utilities and to be fair let an independent panel work out the figures make them public and it can be put to a national vote. In my city of FT.worth TX. you could live ok on $9.00 an hour with a 40 hour week while in dallas(40 minutes away) that would not get you out of the hood.
And good way to balance out the different costs of living is to offer federal tax breaks or exemptions for companies that hire X amount of employees at a pay rate 20% OVER the federal minimum wage base on cost of living in said population and percentage of workforce that is being paid above min-wage.
And deduct the cost of any medical benifits.
It is true that it will cause the federal government to loose millions
but that will be balanced out by the millions that will leave the welfare roles. and said medical benifit deductions will save our medicade/medicare systems millions because large corperations pay less in healthcare for workers than medicade/medicare.
And I said nothing about conservatives being heartless I merely stated that the actions and opinions of most conservatives make people view them as such.
And as far as librals being brainless it is interesting you would say that being that most of the most talented people in the world be it artists, poets, professors, actors, journalists, programmers, hackers,socialogists etc etc tend to have a liberal mindset since those paths requier creative thinking and creative people tend to be more emotional.
Even your line of work is full of liberal thinking type but they usually become defence lawyers (you know defending the rights of the public).
Responding again to Mortalez, notice that he refuses to state what the right number is for minimum wage. He seems to suggest a process for setting a minimum wage, but that would allow for some variation. But that's not what minimum wage is. The federal minimum wage is a mandatory minimum across the US, and does not allow for regional variation.
Mortalez' approach would create yet another bureaucracy in another attempt to control our lives. Minimum wage is simply bad policy.
As for the heartless/brainless thing, it looks like Mortalez is trying to provoke a fight. This is unfortunately common behavior on blogs and the web in general. I most certainly did not say that all liberals are brainless (I'm often accused of being a liberal).
OK for 1 I was not starting a fight, now getting that out of the way.
You would not have to set up a new bureaucracy we already have a census bureau. I would ad that it is easy for one who has not made minimum wage in some time to think it is a bad idea but it is a new world, the craddle to the grave job market has long since dissapeared, no more walking out of the doors of your highschool and into the doors of the local factory(where your father and grandfather worked) and starting your life.
No more working 20 years and getting a fat pention, no more getting paid per job.
Now we have greedy companies that want to pay less than the job is worth. We have the people who work the hardest getting paid the least.
Many people working these crap jobs had much better job prior to their current situation, what happens to these people? is it just hard luck and too bad for um?
Again no person working should have to live like a peasant in the richest country on the planet, and if that is the case what makes us different from those others countries we speak poorly of inwhich 99% of the population is eating trash and wearing rags while 1% of their population is sitting on gold plated toiletes?
Now because I have had this talk before with many others I know you (may) feel that those factory workers should have learned new skills, and you may be right but it was not in the plan because they most likely had no idea it would happen to them being that dad and grandad made a good life working at the plant they just got laid off from, and how will he learn new skill's working for $5.15 an hour, he will have to have 3 jobs so when will he sleep if he goes back to school?
So the number I pick is $12.00 hr since that would be livable in hawaii(I picked that state because it is the most expencive state to live in).
And job loss should be minimal if the proper employee based tax cuts are added to the bill.
Example:
For years I was a security guard and though I only made $6.50 an hour then the company I worked for was charging the client $24.00 an hour.
My productivity was nowhere near that(since someone was not trying to break in 24/7 or no daily fires).
The reason it was worth it for them to pay so much for me to be there reading all night was because security was a tax right off and they got a discount on their theft & fire insurance.
If you cut taxes based on employee numbers and pay then it gives incentive for said company to hire more people and pay them more. But only if the tax cuts are based on the criteria mentioned above, otherwise said company just pockets the money.
Mortalez picks $12/hour as the correct minimum wage, because Hawaii is an expensive place to live. So if a person makes $12/hour, working 2000 hours a year (40 hrs/week times 50 weeks, unless Mortalez is going to insist on more vacation time too), that's $24,000/year. FICA takes 7.65% of that so the employee is now down to $22K take home pay.
Figure any reasonable place to live for a family of four in Hawaii will cost $1000/month, and this working family now has $10K left for the year, or about $200/week.
In my personal opinion, that's not going to cut it. $12/hour isn't enough in Hawaii.
And now let's look at what happens in rural New York when you impose a $12/hour wage. Local non-profits and mom-and-pop shops that have been paying $6/hour to their employees now have to pay double what they were paying before.
How will the Fulton County YMCA keep its doors open Mortalez? Should it raise its membership rate from $300/year to $500? Eliminate services? Will the local pizza place raise prices 50%?
It's easier (though still wrong) when you think you're sticking it to Walmart. You can fantasize that they'll just cut back on dividends and all the fat cats will suck it up. But when you're sticking it to a non-profit or a mom-and-pop shop, it ain't so easy.
Has Mortalez ever had an employee? Probably not. Once you have employees you start to realize it's not so easy.
And look at some of Mortalez' underlying biases:
"Now we have greedy companies that want to pay less than the job is worth. We have the people who work the hardest getting paid the least."
"Greedy": Does Mortalez think companies are not supposed to make a profit? If he's correct, why would anyone ever start a company? Why would a business owner want to create jobs if the business owner wasn't going to make more money by creating the jobs? In Mortalez' world, the jobs just exist. In the real world, someone has to create jobs.
Also a myth is that people who work the hardest are getting paid the least. I work awfully hard. I work at least 60 hours a week, maybe more. I take calls from 7 am to 9 pm, 7 days a week. I turned my phone off for my wife for our 10th anniversary. The typical successful executive works 60 hours per week or more (see this week's BusinessWeek).
Government employees often work 40 hours/week or less, and are often paid well compared to comparable private sector jobs. Maybe Mortalez wants to reduce the size of government? :-)
Errrr you know alot of future voters are reading this in shock that you are comparing "executive work" to "REAL" work lol. You are actually going to compare answering phones in a climate controled office for 60 hours a week to standing over a jack hammer in the blistering sun for even 20 hours a week, or mixing cement in the freezing cold, or unloading trucks in a stuffy warehouse, how about standing in a smokey kichen flipping burgers, getting acne and burning fingers as hot grease splashes your hands, you know REAL work.
Or the cop who dodges bullets in gang heavy areas or the fireman who someday might have to save you from your burning climate controled office, all these people get raises after min-wage is increased and these are the people you dont think need more money for the HARD work they do, yes some of those jobs make more than min wage but their contracts are tied to min wage.
Now back to hawaii you say 200 a week would not cut it, well you already said that that was after their rent was paid, figure bills would be aroound $400 a month that leaves atleast $400 a month left factor $200 a month in gas and that atleast $200 a month they can save or invest but thanks for proving my point because at $12.00 an hour they would be scraping by but still able to save a little, at $5.15 an hour they would have to have 4-5 families living in one dwelling.
Notice how Mortalez has defined in his own mind which kinds of jobs are worthy and which are not. Also, he refuses to address the consequences of a high minimum wage. Mortalez does not see the dynamic nature of the economy. It's a simple pie and he wants to split it fairly. He refuses to accept that some policy choices shrink the pie - or he just doesn't care. He has his agenda and he's going to stick to it regardless of the facts and consequences.
Much as I have enjoyed his comments, I'm going to stop accepting them unless they answer the important questions. Comments like the above will not be approved. Mortalez - if you rise to the challenge and answer the real questions I've asked, I'll post your comments. But not the mindless drivel.
Mortalez is a job bigot, he is prejudiced against people who use their minds and vocal abilities as a means of making an income. Does he go so far as to deny that they have a productive function in the economy?
He believes that it is the proper role of government to arbitrarily set minimum wage floors to react to living costs, as if the government has a handle on the complex dynamics that creates an economy. In NYS, the evidence is clear that government central planning and intervention in private contract is highly destructive to say the least.
Aside from the economic fact that an arbitrarily set minimum price on labor hurts those people who it professes to help by pricing a small minority of people out of the market for entry level jobs or making those jobs disappear completely, the minimum wage is a political red herring. it is a sort of largess that politicians can hand out and coerce certain employers to pay for, making them appear noble and caring to their constituents.
There’s nothing more politically useful than tugging at the heartstrings of the inattentive voter, to divert the eye from the real problems that the politician would rather not face head on.
_ _ The only numbers that should be discussed is how
ridiculous a gap in wages from $7 per hour to $200 is.
.
_ _ I've heard an extremely-high-paid professional (such as A. Lawyer) justify his enormous paycheck: (1) there was a time when things weren’t so easy for him (working low wages, plus long hours) (2) education cost a fortune, and (3) bosses expect long hours much of the time from professionals.
.
_ _ But what if the dues paid by "elites" were no more costly than dues paid by "mundane" workers? Government pays 100% of education. The 40-hour week law protects everyone. And students receive a base salary... after all, learning is work too. Once these hardships are removed, all arguments for any difference in wages go out the window. If you think being a lawyer for 40 hours a week is too harsh, you are in the wrong career. Try ditch digging.
Responding to David, like others he does not answer how the "correct" mininum wage would be determined. Now it's not that $7/hour is too low, but that the gap between $7 and $200 (my hourly rate as a lawyer) is too big.
#1, a lawyer's hourly rate is not take-home pay. Expenses get deducted from that and I can assure you I'm taking home a lot less than $200/hour, though it's certainly a lot more than $7/hour too.
#2, my work week is hardly limited to 40 hours. Many lawyers, especially "successful" ones, work 60 or more hours per week.
I'm not sure what his last paragraph is about. Government does not pay 100% of education. Many young lawyers (and other professionals) owe over $100K in student loans.
In any event, his utopia does not remove all arguments for wage disparities. For those few of us left who still believe in capitalism and markets, the wage rate should be determined between the consumer of those services and the worker providing them. Those wages will vary depending on the circumstances of the various markets involved.
His approach would remove the incentive to improve your education and skills. If we all get the same wage, the monetary incentive is gone.
An article in the May/June issue of Dollars & Sense answers some of the questions you raise about the effects of raising the minimum wage. Here's the url: http://www.dollarsandsense.org/archives/2006/0506wicks-lim.html
(I'm not sure the url is going to make it into the blog, so: go to dollarsandsense.org, go to the archives, go to May/June 2006, and it's the article by Jeannette Wicks-Lim.)
Thanks for reading our blog, by the way! I for one was interested (and not enraged) by your article. I am acually sympathetic with the idea that it is difficult to determine moral grounds for what the minimum wage should be, what counts as a 'living' wage, etc. (e.g.--as you point out, $7 would be hardly enough in most places!).
I read the article Dollars & Sense refers to. While it does talk about related issues, it doesn't really address the fundamental question I asked.
The article talks about the impact of increased minimum wage on employers, taking into account both minimum wage earners and those who earn near that wage and get an increase due to a "ripple effect." The author states that this typically imposes an increase in cost to employers of 1-2% of revenue, and boldly states that this is easily absorbed by increasing prices.
That is not trivial. Some businesses do not have the market power to raise prices. Price increases reduce the number of customers and revenue may not increase. If employers could easily raise prices by 1-2% with no consequences, they would have already done so.
Minimum wage is just another example of liberal quasi-economics, where people who reject markets believe that government should control our economic lives. I'm still waiting for someone to tell me the mechanism by which the "correct" minimum wage would be determined. Why don't we just make minimum wage $100K/year and then we can all go dancing in the fields?
Thanks for your comments, I am in college and I just had an argument with my friend about min wage. She used the family of 4 non-sense. I loved your quote. "...Different liberals have different targets. When someone with economics training criticizes minimum wage, the liberal answer is that there are no consequences" I took a simple introductory economics course in high school and I have no idea what liberals are thinking... It seems that they feel that America is somehow above economics and that by giving out more money people somehow get richer. In reality it brings up prices to. Sorry if I'm not making much sense Its early... Thanks
DJT
I think that minimum wage should be a million dollars a person- so that we can all not about worry about money, then once we are burning our money because it would be easier to burn then to take bags of bills into the store we will then have heat for the college students with out jobs... For real though, isnt inflation just the overall price raise, so if the bottom 9.2% of society gets more money would the over all prices eventually rise with that, b/c businesses will have to recover their money. Sorry, for the lack of knowledge on this subject, I am interested in it, but I have not been in economics for a couple years, I am a little rusty...I agree from the research I am doing that price floors are bad, but I never read anything on inflation-is it even a factor?
Post a Comment
<< Home