To quote Jon Stewart:

"The Senate voted not to raise the minimum wage, which for the last nine years has been five dollars and fifteen cents an hour. So if you're working 40 hours a week, you're making 200 large.

Um, they did vote themselves a pay raise, but they didn't vote to raise the minimum wage. I think they were going to raise it to seven dollars and twenty five cents, so if you're working 40 hours, you're making 280 big ones. Maybe 300.

And I just want to say: "Good." I'm glad they didn't do it because you know....the lower strata of American soceity has been getting a free ride for too long. And if you were to give them 7.25, you know, it will just go..."up their nose and out their hose."

You don't want to give them 'walking around money.

So kudos to congress for literally taking a giant shit on the poorest people in America."

I've been hearing some reports that they might have increased it a bit, but not from anywhere I trust.

Your thoughts on this/the min wage.

$5.15 will buy you 2 gallons and 1 drop of low-octane gasoline. If you get 15 miles to the gallon, you can drive for 30 minutes at 60 mph.

That will also buy you 4 whole loaves of the cheap wheat bread at Wal-Mart and leave you with 50 cents. Yet you can not live on bread alone, even if you have a can of soda with it.

To cover rent of $350, you would have to work right at 69 hours. That's basically 2 weeks after covering the cost of bread and gasoline for that period. And remember that you spent 1-2 hours to buy the gasoline to mow the yard (if you have one); but willing to bet that doesn't come with the cheaper rents.

The rest of your 80 hours that month are what you can spend on clothing, utilities, toiletries, insurance and entertainment. Let's not forget your aspirins and cold medicine, batteries and the newspaper. Oh, wait.... let's look at how much "fun" that you will be able to have.

A paperback costs around $7.99, so that's 1 1/2 hours of labour to pay for it. A movie costs around that, so another 1 1/2 hours. The CD you want is $13.99, so you're working 2.7 hours to pay for it. That's 6 hours out of the 80, so can have something to do for one day... almost an entire day to pay for it. Maybe if you are lucky, you can barely manage to have cable or satellite T.V.? Or a dialup account to get onto the Internet?


If you think minimum wage is okay, then you're saying you'd enjoy a life of sitting in your cheap apartment, wishing you had a yard to enjoy or have your children playing in versus the street, watching cable television and nursing a headache after taking an aspirin with the single beer you could afford. But that the bright side is that you can rent 2 movies or go to the cinema once, buy one CD and go out to buy one book or a couple of magazines to read.

Minimum wage is $7.60 up here. Hurray for Canada!

I'm very much amused by this quote:

The obvious implication being that raising minimum wage will enable more of the people who work hard to escape poverty.

The Senator is correct in that belief, but unfortunately for the wrong reason. More of the people who are "working hard" will escape poverty after a minimum-wage hike, but not because more people start earning higher incomes, rather it will be because a great deal of the people currently working hard and living in poverty will lose their jobs. Thus they will escape hard work, not poverty.



Of course that's an oversimplified version of the issue. Price floors, of which minimum wage is an example, are always bad things, they distort the economy. We see corrections in the market coming from a variety of different sources, and unfortunately none of them actually do what minimum wage is "supposed" to do.



Firstly, as stated above, there will be a retraction in employment. Rising costs of labor mean that employers aren't going to be able to hire as many workers on the same revenue. Fortunately, that effect is usually small.

The largest change we will see is a response by hiring firms not in the number of employees they hire, but in the prices they charge for their product. To meet their government-mandated higher level of expenses, they will attempt to raise revenue by charging more. Now, usually price-hikes mean that fewer goods and services are bought; but in this case, the price-hikes are accompanied by (indeed, are caused by) increases in income. The shift in demand will be insignificant, because consumers have more money to make purchases with their newly-increased paychecks. The largest effect that the economy will see from raising the minimum wage, then, will be inflation. More people will thus only escape "poverty" if the government doesn't adjust its definition of the word to reflect the new general price level.

Finally, and most unfortunately, minimum wage increases usually result in changes to the composition of the labor market. Realize that most people working for minimum wage are in long-term employment, are not trying to support a family off of that income. Most minimum-wage jobs are filled only transiently, people who will quickly move from those jobs to higher-paid work or go up in pay-grade anyway. The people that are on an essentially permanent minimum-wage income, that are trying to support a family on that income, are those workers on the absolute lowest end of the job-skills scale, the least productive workers. When you raise minimum wage, more people enter the labor force for the lowest-paying jobs. High school and college students who would otherwise not be working, start seeking entry-level employment because they can earn much more money than previously for the most menial of tasks. Many of these new job-seekers will be more qualified and more productive than the people stuck at the bottom for the long-run. The result is that the people trying to support families on poverty-incomes are out-competed and lose their jobs to new entrants. The city of Baltimore recently went through a rather unfortunate case of this very effect.

Similarly to the last point, raising minimum wage also causes employers to turn even more to the employment black-market; people willing to work for less than the legally required minimum wage, usually illegal immigrants.


Unfortunately, few in our government understand this reality; and they act without thinking, worsening the problem they are trying to patch.

So what you are saying is that we should factor into the decision-making process that businesses will hire illegal immigrant workers? We should choose not to do something because we know that more laws will be broken because of it?

Just trying to get a clear idea of your stance on this issue and what justifications you have for trying to abolish/reduce or freeze minimum wage levels.


Added in Edit: Not disputing anything with you, btw. Keeping to that promise. :)

It's certainly something that a lot of people consider. And yes, acknowledging that a law will be broken is something we should do. It's a large reason why a lot of things shouldn't be illegal (alcohol, drugs, abortions); they may be "bad", but criminalizing them just makes the problem worse, or creates a whole new problem. So raising the minimum wage is just going to cause more problems for law-abiding citizens who can't legally compete with workers willing to hire themselves out for less than the minimum wage.

Personally, however, I think that's a very tiny component of the argument against minimum wage. The primary reason is that it doesn't do what it's supposed to but creates a whole mess of other negative economic distortions.

While I'm not disputing anything you say... :)


What would you suppose the primary reason would be for creating a mimimum wage law?

Usually the misguided belief that it somehow helps workers afford a higher standard of living.

Of course, there are also less noble reasons, like vote-fishing, appeasing union supporters whose pay is tied to minimum wage, etc.

So if there were not a minimum wage law in place and say the pay was about half of what it is now, their standard of living wouldn't be thought of as lower?

Standard of living is based on real purchasing power, which minimum wage doesn't affect, no. You have to remember that the minimum wage shifts both incomes and prices, essentially negating any real effects the laws are supposed to have.

So which do you propose to be done... freeze minimum wage or abolish it?

Ideally, go back in time and never implement it. Minimum wage causes a continuing economic distortion, but getting rid of it will itself be painful for a time, and is also probably completely politically infeasible. Barring that, we'd do best just to leave it where it is.

While I really, REALLY want to strangle congress for giving itself a raise yet again; I have to agree with LP.

Here's a possible scenario if minimum-wage didn't exist:

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Business in a small town within a depressed economic region within the United States has 25 employees and 25 openings. The nearest area which could support hiring even 10-100 times that amount is 200-500 miles away. The business owner wants the cheapest labour they can find. So they could literally do is to "bid" out the employment to the lowest offers for the new openings. People there are only earning $10.00 per hour for a job that pays $15-25 elsewhere. The applicants all want to earn at least half as much, thinking they'll eventually get raises to the current "standard" pay of existing employees... maybe in 3 months, or 6 or a year; past some probationary period.

With 500 applicants, there are 20 times as many people to choose from. Say 25% of those have no GED/HS diploma. And another 25% have no real qualifications and require some kind of on-the-job training. So that leaves 250 people... for the 25 jobs or 1/10th. So some kid with no experience and that dropped out of school can not compete locally or will be unlikely to have the resources to travel to any position elsewhere. Wonder how CHEAPLY they'd work? They'd probably take $2.50 an hour, hoping just to sweep the floors. But instead, the business finds out they can actually do the same jobs as the regulars at $10.00 per hour. So who is the business going to keep? They saved $7.50 an hour by finding someone trainable and very willing to work diligently while quite loyal. The person that had earned that regular pay for years maybe had a wife and child... and either wasn't given the opportunity to keep their position or would have had to take a pay-cut to say... $5.00 an hour. Then another employee is put through this... until the company can reduce wages as much as possible.. creating a competitive environment for the few earnings available.
---

Now most companies can't auction off jobs to the lowest bids, because they need the staff. But when company reductions are made, it's ALWAYS a logical practice to see where the payroll expenses are the highest and where the cut-backs in personnel can be made. Sure, morale would suffer greatly in the company example above.. and the wiser business owners would avoid too much conflict within the workplace. But if it's a sweat-shop, the last thing they are worried about are the people rebelling over-zealously. They are either to worn out from their labours or fearing of losing their single source of income with no real alternatives. Yes, you would think more companies would move into that region to benefit from the lower wages they could pay. But the 200-500 miles of transporation costs that might be involved with any tangible goods make it very unattractive when fuel costs are high... which are the biggest inhibitors to those local employees driving that far to work for them there.

Yes, it would be great if everyone followed the micro-economic principles without bias. But just like the entry-level workers, the management is human as well, often greedy in maximizing profits in the short term. And removing a minimum wage requirement would NOT ONLY increase the problems of illegal immigration but further promote what I consider to be "legalized slavery", the temporary agencies that hire their staff out and accrue hourly earnings over what they pay them. In other words, middle-men in the job market that manipulate the actual wage levels. So the experience, education and job skills no longer matter as much in determining who gets paid for doing what.

Plus, minimum wage earners are already considered right at or below poverty levels, unless maybe they work overtime. And even if measures were taken to reduce or remove the minimum wage floors, is that going to mean companies are going to reduce their prices?? Or that inflation percentage increases will halt? Aren't employers going to abuse how low they pay people?

Most of the time, people wouldn't shop around for new employees to fill jobs that are already being handled by competant folks. The training time cuts back on their efficiency for a time. But if a person found out they could "save" $2.50 or $5.00 an hour on EACH person they have on the payroll, they'd shop around themselves or have some kind of agent/agency doing so. If I had 20 people offering to mow the lawn but only needed 1... how much do you think I can get away with NOT paying them? Easy, call them up and say I'll pay so-and-so half of what you're asking. Ask them if they wouldn't do it a little cheaper still. If the facts were mis-represented, there is no recourse. So someone that does the job for $40 dollars might have to choose to do it for $10. And if it takes 2 hours for 1 person, maybe the mower hires some 14 year-old to do half of it for $2.50.

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I am not saying that minimum wage hikes should be automatic. Not even saying they have to match the inflationary rates. But if minimum wage doesn't increase within the last decade while compounding the costs of getting by with current costs; living standards going up or down??

It's undisputable that the minimum wage artifically inflates prices. But if were abolished or frozen in huge inflationary percentages per annum, the economy as a whole would enter a serious repression if not a full depression.


So I say, yeah... let's go forward with ridding of the minimum wage laws, or reducing or even freezing it. Let's not put price-ceilings on the necessities nor prevent price-fixing by competitors. Let's have all kinds of OPEC-style organizations determining the quality of life within the United States. If the corporate world is the ideal utopia, backed by focus upon business and finances, then let's agree now to a pyramid system of who's on top and who's on bottom. Bill Gates controls more wealth now than ever. Let's say he's in charge of the world now.. and let him pick and choose... because the corporation management would become the new government over people, not the elected representation that we call democracy.


Not disputing anything that was said before, those are all good reasons to look at the alternatives to raising minimum wages. But let's look at the entire picture and not just the economic forecasting models used to decide the direction. Non Post Hoc Ergo Propter Hoc.

Bear in mind that I'm not an economist, so I really have no idea what I'm talking about, but that really doesn't seem right to me. It seems to me that while it's true that raising the minimum wage might cause businesses to raise their prices, prices would not raise as much as wages would. The first reason for this is that often workers making minimum wage are not the ones to buy the products that their companies produce (yay Marx!). For example, a name brand shoe company that sells its shoes for $100 each to upper-middle-class teenagers is generally not going to be employing that same social class at minimum wage. As such, if companies raise their prices, often it's the upper-class that are more affected--so that what we have is moreso a lessening of the rich-poor divide than a total negation of the effects of minimum wage. The second reason is that raising prices is not the only way that companies absorb the costs of a wage increase. Other ways might include higher productivity, lower recruiting and training costs (the job is more appealing if it pays more), and increased worker morale. Basically, happier workers make more productive workers, which also increases the company's reputation as an employer so that more people will want to work there. Naturally, these aspects don't completely compensate for lost profit (or we wouldn't need minimum wage laws at all), but they do so enough that increased prices don't simply counteract increased wages.

Now, since I am, as I have already said, not an economist, I am going to steal some figures and studies here from my latest E-mail from Sojourners, which was about this issue. This informs me, for instance, that the real purchasing power of minimum wage has actually eroded by nearly 30% since 1979, thanks to the wonders of inflation. To have the same purchasing power it did in 1968, minimum wage today would have to be $8.88. Other programs, such as the EITC, are indexed for inflation. Why shouldn't minimum wage be? Since 1997, although there have been no minimum wage increases, Congress has increased its own payroll eight times. I think we can all agree that that shouldn't be happening. And as for whether minimum wage "works" or not, I will quote directly from the website here: "Another study found that federal minimum wage increases in the 1990s have reduced poverty rates (Addison and Blackburn 1999). Yet another study found that a minimum wage increase from $5.15 to $6.15 would lift nearly 900,000 people out of poverty (Sawhill and Thomas, 2001)." And job loss? After the last minimum wage increase, 11 million jobs were added to the economy in the 4 years following. Reasons for this lack of job loss are likely the reasons I listed at the end of my last paragraph.

All of these statistics are available at the following two websites:
http://www.epi.org/content.cfm/issueguides...wage_minwagefaq
http://www.sojo.net/action/alerts/C4NA_min_wage_facts.pdf

Very nice post, Nevin. Enjoyed reading it.


While I am a proponent of minimum wages, I am a bit mollifed at the amount of the increase. $7.25 an hour? Honestly, I'd be more comfortable with an increase of $1 per hour or up to $6.50. The reason is simple, you give companies time to "adjust" to their new payroll expenses. I'd heavily favour another decent increase in 3-5 years to the $7.25 or possible 50 cents more than that.

For the current minimum wage, the percentage increase is listed below:

• $6.50 = 126.21%
• $7.25 = 140.78%

A increase to $7.75 from the $6.50 figure is going to equate only 119.23%.



Yes, I'd still support the huge increase, because per week, it still results in a weekly pre-tax bump of $84. That's an average of $364 per month, or roughly what many advertising claims make that you can save on your car insurance.

And forty percent more means it can handle the inflationary rise of approximately 5% for almost the decade, considering some savings/investments would have to happen. Also, the government has probably realized how this probably throws all minimum wage earners into a higher tax bracket and does a tiny, tiny bit to help on the majour concerns of Social Security.

From my Sojourners E-mail.

Sometimes our government really ticks me off. This is one of those times.

They're economic forecasts based on what we've seen the economy do before. They're similar to weather forecasts in that short term forecasts are generally accurate but the further you move ahead it gets more and more fuzzy.

A couple things with this one.
A. Doesn't a higher productivity essentially negate what benefit you get from an increase?
B. Training costs are unlikely to be affected at all. If they are then it's likely because of the scenario LP painted earlier.

And I cited studies that found that minimum wage increases did help to alleviate poverty and did not result in job loss.

"A 1998 EPI study failed to find any systematic, significant job loss associated with the 1996-97 minimum wage increase. In fact, following the most recent increase in the minimum wage in 1996-97, the low-wage labor market performed better than it had in decades (e.g., lower unemployment rates, increased average hourly wages, increased family income, decreased poverty rates). Studies of the 1990-91 federal minimum wage increase, as well as to studies by David Card and Alan Krueger of several state minimum wage increases, also found no measurable negative impact on employment. Finally, a recent Fiscal Policy Institute (FPI) study of state minimum wages found no evidence of negative employment effects on small businesses."

From http://www.epi.org/content.cfm/issueguides...wage_minwagefaq.

How so?

Yes, you're probably right. I should have just said recruitment costs.

I never said the models were 100% accurate. Too be honest, the fact that it didn't could mean something is wrong...very wrong.

Well I misworded that, but I'm gonna drop that point anyways because I don't think I can explain it very well anyway.

Going back and reading an older thread, ran across a bit of a jewel in regards to this topic...

And the link still works for those of you having to reference it.

Edit: And no sooner did I get it posted than I see the very same person mentioned above in the news again. Now isn't that a kick??

http://news.bbc.co.uk/2/hi/americas/5329264.stm

Supply-side economics is what went wrong with Chile.

The problem with money is that any large scale change in the amount thats in the market (such as would be caused by an increase in minimum wage) increases inflation and lowers the value of the dollar.

If minimum wage is lowered, employees make higher wages, which means employers charge more for their products/services to cover the extra expense, and these raises lead to an increase in the actual amount of money in the market.

Money, you have to consider, is just a representation of its value in gold, and every dollar is backed by a set amount of gold (supposedly, there are tons of reasons to doubt but lets assume it's true since thats the perpetuated story). Now lets assume the total amount of money in the market is increased by a signifigant amount; now each dollar is worth less gold, thus inflation for everybody.

So to recap, increases in minimum wage aren't going to help anything, as it will just make the costs of living increase, and in the long term increase inflation beyond its already rediculous level.

And to make a final point, in a capitalist (and free market) there is no need to set a minimum wage because employers are forced to pay competitive wages to have any employees at all. The fact that we do have minimum wages raises the question of how free is our economy? Someone wanna open a new thread?

Feel free to yourself.

Congress gave themselves a raise........how nice of themselves.
This country doesnt give two shits about its citizens and it sucks. How is anyone supposed to live on 200 bucks a week? Its all about the rich getting richer, and the poor getting poorer.

Granted an increase in the minimum wage would have some diverse affects on the economy, what are these people supposed to do?

In an ideal, Utopian society that is under a capitalistic system... there would be no need for minimum wage. If you do not have a minimum wage, you have employers paying salaries much further below the existing standards of living that exist because of it... which is still borderline poverty levels.

Child labour laws had to be enacted to prevent employers from working young teens or even pre-teen aged children (ages 7 to 11) in the workplace. Family farms were the only exception for a while and even they have to be regulationed to a degree.

Before anti-trust laws, you had price fixing by competitors to drive prices up and monopolies charging whatever they chose for their goods/services. Utilities commissions exist to regulate the rates, to prevent them from unreasonable profits orpractices.

OSHA, worker's comp, unemployment insurance and unions exist because employers didn't look after their employees safety, care about their working conditions nor seek to actively cover any kind of expenses for on-the-job accidents or their health care needs.

Now you are going to simply state that minimum wage isn't necessary because businesses now know how to conduct themselves ethically? Might as well throw away all of those other protections you feel inhibit the extreme "laissez-faire" you want to see in our modern era?

The only time we have a truly free society is when you have dissolved into chaos and anarchy. There then will be the absence of laws. If they cease to exist, there is nothing to protect the individuals and their human, civil rights.

The law was passed.

And I'm happy with that.

I'm happy with it myself.

An individual can not make a living off of $5.15, even $6.00 an hour. The times call for something higher than that. It's about time that minimum wage is increased. Sure prices will be raised, but it isn't going to be an immediate thing. Inflation like that takes time. And then we will hopefully see another increase. =]

This way, the government makes more money too. Off of income taxes.

What are you talking about? All you have to do is work 79 1/2 hours a week, 52 weeks a year to get to poverty level, of course thats reasonable :rolleyes:

In all seriousness, I strongly approve this change. I've seen what people think, what sort of strain it would put on local businesses and all, but really, there is no solid argument against it that I see. This is more of an adjustment for inflation than a real raise.

And businesses have been adjusting for inflation over the years, while not doing much to address the actual pay given to its workers.