Increasing the Minimum Wage

Last night, President Obama talked about raising the minimum wage, and invoked Gov. Romney in his speech: “So here’s an idea that Governor Romney and I actually agreed on last year: let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.”

States have already been considering minimum wage increases before the president’s speech last night. The Albany Times-Union reports that New York’s Gov. Cuomo included a $1.50 an hour increase in his executive budget proposal, which would raise the minimum wage in the state to $8.75 this July. Washington Post columnist Matt Miller argued last week that he believes that the minimum wage should be $12.50 an hour, plus health benefits, which would come at a cost to taxpayers and consumers in the form of subsidies for low-wage work and slight increases in prices. A wage you could live on?

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24 Comments / Post A Comment

josefinastrummer (#1,850)

That would be amazing to actually have minimum wage be a living wage. Then other salaries would have to increase. I know the cost of things will go up, because that’s capitalism, but other countries do it and don’t die.

Morbo (#1,236)

@josefinastrummer
The cost of things would go up because of inflation, not capitalism.

josefinastrummer (#1,850)

@Morbo They wouldn’t have to go up if businesses weren’t out to make such huge profits, would they? What’s that called? Do you really think it costs that much money to produce the things we use?

@josefinastrummer All other things staying the same, raising the minimum wage would lead to inflation because people would be getting more money for the same amount of economic output. Fortunately, all other things don’t tend to stay the same outside of economics textbooks and the imaginations of right-wing think tank pundits.

As I argued below, the cost of this change would very likely be paid for through a reduction in corporate profits (paradoxically, corporations actually don’t really like having huge huge profits, because it means they have giant piles of money they need to either invest somewhere, return to their investors, or pay taxes on. Since investors don’t like dividends anymore, for a variety of complicated and poorly understood reasons, most big corporations try to keep their profits as low as possible while also growing their revenues and the value of their company.)

sockhopbop (#764)

I think it’s a great idea, though I’m also bracing myself for the storm of people who are going to claim that raising the minimum wage will mean that employers hire fewer/lay off workers. Doing preemptive research to find studies that refute that claim right now!!

The more important proposal here is the idea of indexing the minimum wage to the cost of living (which is actually what Obama was talking about when he said he and Romney agreed, I believe). Thanks to inflation the real value of the minimum wage peaked in the late 1960s. Since then worker productivity has, what, tripled? I mean, in the 70s Taco Bell was paying their employees the equivalent of 12-15 2013 dollars an hour to chop up lettuce in the store. It can be done! Especially since most minimum wage jobs are in the non-tradeable sector and so are not subject to foreign competition.

@r&rkd Not necessarily. When there is an increase in labor productivity — as there has been over the past few decades since the value of the minimum wage hit its peak — that extra economic value can accrue either to labor (workers), capital (corporations), or to consumers via lower prices/better quality.

What we have seen since the early 70s is that capital and consumers have benefited from increased productivity at the low end, but labor has not, for a variety of reasons. If we decide to increase the share of value added that goes to labor, that increase does not necessarily have to come at the expense of consumers — it can also come out of capital’s share.

Given that most U.S. corporations are experiencing record profits, which they really have nowhere productive to invest due to low demand, and given the relatively high corporate taxes in the U.S., it seems likely that any increase in low-end wages would be paid for by reducing corporate profits rather than increasing consumer prices, especially for firms that care a lot about their market share and perception of value (i.e. most large employers of minimum-wage workers).

aetataureate (#1,310)

The only valid argument I’ve heard against raising the minimum wage to a “living wage” is that not everyone who has a job needs to live on that money — we may effectively bar kids from jobs they take in order to save for college or for a car or whatever.

josefinastrummer (#1,850)

@aetataureate That’s really interesting. I remember kids in high school having jobs that paid more than minimum wage, maybe in telemarketing? And who is to say that a “kid” doesn’t need that money? Maybe he or she is supporting a family? Would we say the same to a bored housewife who doesn’t “need” to work? I don’t think it’s anyone’s business what you spend your money on, just that you are earning a decent wage.

RachelG8489 (#1,297)

@aetataureate I know that some states already have a different minimum wage for minors- perhaps we could/should include that standard in the national minimum wage? Maybe with a rule that this only applies if they are working under a certain number of hours, so that if you have minors who are for whatever reason working heavy hours to support themselves or help support their families they can still get a living wage.

aetataureate (#1,310)

Yeah, I’m not saying I AGREE with the argument, but it definitely has legs and is thought provoking in a helpful way. Maybe the solution would be to allow employers to hire minors at super part time, like 10 hours a week. Who knows. Or more internships, where some kind of educational value knocks out part of your hourly wage?

Everything creates a slippery slope that can be taken advantage of, but that shouldn’t stop us from trying, I guess.

josefinastrummer (#1,850)

@aetataureate I wasn’t saying you agreed with it. I was just asking questions out loud. It drives me nuts that we would pay a 16 year old less than a 24 year old for doing the exact same job. Will we start doing this to senior citizens as well? Kind of like how right now we pay women less than men for no other reason than because they are women.

WhyHelloThere (#1,398)

@aetataureate Aack! The internship racket is bad enough as it is!

I don’t think I believe in two-tiered pay scales. If teenagers are competing with grown-ups for jobs, then they should all be paid the same amount. It’s not fair to grown-ups to be passed over in favor of a teenager who happens to be cheaper, and it’s not fair to teenagers to value their labor less just because they’re young. Plus, a lot of teenagers are saving for college, and given what college costs they probably need the higher minimum wage!

r&rkd (#1,657)

@aetataureate
The more common argument against any minimum wage is that it pushes up unemployment by: (1) encouraging employers to substitute capital for labor, i.e., fewer workers accomplish the same level of productivity by using more expensive tools and machines; and (2) causing employers to just not start businesses that would only be profitable with wages at the mandated minimum.

This is related, though, in that the real-world impact of (1) falls mostly on teenage workers.

jr (#3,151)

I am no business expert but companies themselves need to want to pay their employees more. More pay opportunities makes less turnover. This means less time spent training new people. You will be able to then invest in your current workforce instead of constantly refilling it. Less turnover creates a better workplace. A better workplace gives the customer a better experience.

For companies to want to do these we need to give them tax incentives to bring employee pay to certain levels. Give them incentives if they cap CEO/executive pay to 100x the lowest wage. If they want more money for bonuses/top level then raise the pay of the bottom level.

$9 an hour is a start but it isn’t enough. I have no problem paying more in taxes knowing that it will go to benefit the average person and not the top.

josefinastrummer (#1,850)

@jr I’m with you. Sadly, I think a lot of companies just want to make money and don’t care about turnover. I’ve worked at these companies and it’s a terrible business strategy but it’s pretty popular, especially when the bosses can get away with paying their employees crap thanks to the poor job market.

WhyHelloThere (#1,398)

I think the problem here is that it’s so easy to fall into a zero-sum mentality. I mean, I’m not earning anything like minimum wage, but I’m barely earning a middle-class income, and even “slight” price increases would hit me pretty hard. The payroll tax increase has already hit my budget pretty hard. So when I hear about things like this, my first (ugly, irresponsible) impulse is to think “holy crap, I can’t afford more price increases”. And if a self-identified progressive like me has those instincts, I suspect a lot of other people are going to feel that way, too.

But I’m not sure that it really is a zero-sum game, and even if it were I would be willing to suck it up and deal with the price increases, because everyone should earn a living wage. And for all that my budget is tight, I don’t ever worry that I’ll go hungry, which is not something that every full-time worker in my neighborhood can say.

boringbunny (#3,260)

I fully believe that if you work 40 hours a week, you should earn enough to be able to support yourself. But I don’t understand the argument that raising the minimum wage won’t reduce the number of jobs. Where is this money supposed to come from? Ideally, it would come from some fatcat boss but 1) fatcat bosses won’t cut into their salaries if they don’t have to; and 2) there are so many businesses where the bosses aren’t raking in enough big bucks to cover these increases. Also, prices can only increase so much before customers turn away. I like the idea of offering incentives to increase the minimum wage because the government certainly has this kind of money but across the board raising the minimum wage seems like it would hurt jobs.

WhyHelloThere (#1,398)

@boringbunny People who earn a living wage will be able to buy more stuff than people who work full-time and live in poverty. They’ll also be able to pay taxes and will require fewer taxpayer-supported services. It’s not like that money just gets sucked into an economic hole. It gets pumped back into the economy.

jr (#3,151)

@boringbunny if these big companies want all their tax breaks then they should have a responsibility to their low income workers to better their lives. Don’t just give them free money because they created shitty jobs. Give them money for creating a job that will give them the opportunity to change lives of current and future generations.

boringbunny (#3,260)

@WhyHelloThere I think what you’re saying is that raising the minimum wage will eventually lead to more jobs. That is possible but I’m saying, that raising the minimum wage will lead to a loss in jobs, right now, unless businesses have the money to pay this wage or raise prices to pay this wage and then pay it, rather than cutting employees. And to the extent that businesses have to raise prices to pay this living wage, that might negate any gains that those earning a living wage achieved. And then we’d be back where we started.

WhyHelloThere (#1,398)

@boringbunny Luckily for us, Salon has addressed this issue. Many economists believe that raising the minimum wage doesn’t lead to job losses.

Morbo (#1,236)

Raising the minimum wage should be a no-brainer, considering how its been repressed since the mid-1980′s.

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