Wednesday, March 20, 2013

Chicken Little & The Minimum Wage

'The sky is falling! The sky is falling!' Went Chicken Little's warning wail. Of course the sky didn't fall and Chicken Little lost all credibility.

So when will those who cry 'The sky will fall!' when it comes to raising the federal minimum wage cease to attract serious attention? When has the 'sky' fallen since the minimum wage was introduced in the 1930's?

You actually could have knocked me over with a feather when President Barack Obama proposed a minimum wage of $9 an hour in this year State of the Union address. Not because I don't believe in it. I just never thought he would do it. I was shocked all the more when he proposed that the minimum wage be tied to the rate of inflation. Again, not that I don't support it - I just never thought he'd say it.

Whenever the minimum wage is proposed, warnings that it will be bad for business; bad for adult employees, bad for employers and generally destroy the fabric of American civilization. There are even those who propose that there should be no minimum wage. Interestingly enough, no one supporting it's abolition is in favor of working for minimum wage or less. And if they truly thought about it, no one really wants to live in a world without one.

All wages are impacted by the minimum wage. Employers find a way to compensate for the increase without raising the prices of goods and services dramatically. And to the degree that it does impact the price of goods and services, indirect influences of the minimum wage compensate for the increase.

My only argument with Obama's proposal is that it doesn't propose a raise high enough. It should be $10 an hour.

According to the Economic Policy Institute, "Increasing the minimum wage to $10.10 would benefit millions of workers whose characteristics—in terms of their gender, age, race and ethnicity, educational attainment, work hours, family income, and family composition—contradict some prevailing beliefs about minimum-wage workers. In the first year, with an increase from $7.25 to $8.20, 14 million directly and indirectly affected workers would see higher wages. This number would rise to about 21 million workers with the second incremental increase to $9.15 in 2014, and to more than 30 million workers with the third incremental increase to $10.10 in 2015, as shown in Figure A."




Aside from this, several states already have minimum wages exceeding the federal minimum wage. Washington's minimum wage is already $9.19 an hour. California's minimum wage is $8 an hour. Nevada, Illinois and Vermont are all states with minimum wages above $8 an hour. Interestingly enough, Alabama, the poorest state in the nation has no state minimum wage. 

No one should work a full time job and be poor. We Americans are a funny lot. We don't want to pay for education. We don't want to pay for public assistance. We don't want to pay for health care. And we don't want to pay wages for work that would lift people above the poverty level. 

The minimum wage won't cause the sky to fall. But that type of thinking will...

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