I was having a debate with a friend last night about improving our economy. I'd like to know what you guys and girls think about the US mandating a living wage around $10 - $12 an hour. Also, what other steps, if any, should the US take to reduce income inequality?
First of all, the term 'living wage' is a biased term used by only one side of this debate. Let's call it what it is, and that is a 'minimum wage'. A minimum wage of $10-$12/hour would cripple small businesses and would lead to the loss of many jobs. So while some janitors and high school roller skating rink personnel would be jumping for joy, many of their peers would see their 'living wage' reduced to $0/hour as they are laid off. Artificially distorting the labor market with a minimum wage leads to inefficiencies and reduced risk-taking. This in turn leads to economic contraction, ceteris paribus. If a business does not have the capital to grow, new jobs will not be created. When you force a small business owner to double the amount of money directed towards non-skilled labor (minimum wage earners), then you are taking money out of other areas that could grow the company. The government's increased intervention into the private sector is a bad idea, more often that not. Mandating what a person should be paid does not match wages with skill. In a perfect economic model, a person's wage is equal to the marginal benefit to the company of their work. Minimum wages distort that. My advice to minimum wage earners: Learn a skill. Become more valuable to your employer. The best way to achieve a raise is not by convincing your employer that YOU need the money. It's by convincing the employer that HE needs YOU and that you bring value to his organization. We as a society are better off investing money into education than we are artificially inflating salaries paid to non-skilled workers.
Improve our horrible public schools so that people have the education to compete in a global economy. Allow vouchers. It is a travesty that kids are forced to go to crappy schools
On May 25, President Bush signed a spending bill that, among other things, amended the FLSA to increase the federal minimum wage in three steps: to $5.85 per hour effective July 24, 2007; to $6.55 per hour effective July 24, 2008; and to $7.25 per hour effective July 24, 2009. A separate provision of the bill brings about phased increases to the minimum wage in the CNMI and American Samoa, with the goal of bringing the minimum wage in those locations up to the general federal minimum wage over a number of years. http://www.dol.gov/esa/whd/flsa/ Your President saw fit to raise minimum wage. Since there is always a percentage of unemployed there is always more of a supply of low skills workers than there are jobs for them. A free market of wages would spiral down to very little. Minimum wage laws are recognized as necessary by most of the nations in the free world. For one thing they protect the public welfare by insuring that honest work can provide the basic necessities of life. reducing the temptation to engage in dishonest work. So, once you accept the premise that minimum wage laws are necessary then the only debate is at what rate the minimum is set. I think it should be calculated from the bottom up. What is the lowest acceptable standard of living, including food, housing, transportation, health insurance, utilities, emergency savings, taxes etc. ; then take that number and divide it by 2000 hours of work per year and make that the minimum wage. My guess is that level would be around $10 an hour, like $1700 a monthy or $20,000 a year. A lot of people live on less than that but I don't see how. Surely they have no retirement plan. If you want to have kids or a new car or take a vacation of course, you'll need to get skilled but for the average human being if you just get out there and make an average effort at least you won't starve or have to resort to cime. I would make birth control mandatory until you prove financial ability and parenting skills though so I guess I am Big Brother.
Not to fret.....with the imminent onset of hyperinflation, $10-$12 minimum wages are only a matter of time
Not that you were implying this, but I don't think the teachers/schools themselves are crappy. What happens in these bad schools are the kids are so unruly, the teachers can't even teach. Thus it becomes a bad situation overall for everyone. There need to be harsh punishments for children who disrupt class. Or another option would be to teach kids specific crafts/trades while in school. Start them young like in middle school, and then maybe they will have something to look forward to when they graduate.
No easy fixes. But... -Having a more efficient health care system that would less burden employers. Talk about a major disadvantage to smallish employers under the current status quo. -Open up labor pools. Migration is critical as is investing in education. If there are not the workers, non-skilled, skilled, technical, and white collar, etc--capital will just continue to flood to other nations. Capital is global and it isn't going back. That is the critical flaw to those with protectionist/populist trade arguments and with anti-migration aruguments who believe the average joe would benefit from such. -Don't like the livable wage idea (though I don't care if a few cities impose it and feel it won't hurt them much--NY, SF, etc). Letting the Bush tax cuts expire (including cap gains, inheretence) and perhaps uncapping SS and Med tax to bolster our safety net is much better way to address societal inequities than a mandated national wage.
I would rather approach inequality other ways--more progressive tax code, government medical care for all, secure/enhance SS, enhance food stamps (though I would prefer to hand out free healthy foods), than try to address inequity through min wages defined as you do. Their are a mix of young (trainees/interns), part time and old workers who mainly may want to work to supplement their family or retired incomes or acquire new skills. I would not want to inhibit this with the wage structure above.
OK, but think about supporting me for Supreme Ruler of the New Utopia. I promise forced population control and robots!
It was bound to happen at some point. A T_J post that I agree with. In addition to the post reprinted above, a hike in minimum wage has two unintended byproducts: 1. Inflation. Employers will charge more for goods and services in order to pay for increased wages. And those minimum wage people will have the same buying power they had under the lower wages they had before. 2. If that inflation occurs, and you are a salaried employee, your wages must go up or your buying power decreases. In an economy such as ours is now, anything done that decreases the buying power of people will only serve to take some families that are hanging on and push them into insolvency. Politicians increase minimum wage not for any sound policy reasons, but because it sounds good to the uninitiated, and gets them votes.
That's the right answer, Everyone wants to put some economic wedge in place, but it all boils down to edumacation. Americans who try to compete against low wage earners and computers will always lose. Vouchers are the way to go.
Nothing should be done about it, because most people who are poor are poor because they're not as smart or as hard-working as those who aren't poor. This is AMERICA, and no matter where you're born, if you're smart and you work hard, you will succeed. If you want proof of that, just look at all the people who live in a nice house and drive nice cars and compare them with poor people - it's obvious that those with the better things are smarter and harder-working than poor people who earn minimum wage.
The biggest difference between rich people and poor people is opportunity. To suggest that minorities and women are more poor than white men because they're less intelligent and less hard working is stupid.
I know lots of women and minorities that developed a career path, worked hard to get where they wanted to be, and became doctors, lawyers, and executives. There are programs in place to allow people who come from poor backgrounds access to college educations. Student loans, Pell grants, etc etc. I went to a high school where there were kids who drove BMWs to school, and there were the kids who were kind of in the middle (ie me), and then there were the kids bussed in from Acres Homes. What I saw a lot was that the kids from the poorer neighborhood had little interest in the education. They just wanted to get out of HS, and generally, they were the most disruptive in class. This is based on my personal observations. In short, I don't think it has a damned thing to do with race. It has to do with socio-economic strata, and how each socio-economic class views education.
A living wage would assist many small business owners by putting more money in the pockets of their customers.
And that money will go straight to pay the unemployment benefits of the people laid off to make room for the above-market wages paid to the unskilled workers. Oops.
