The Logical Floor
Moderate minimum wages do more good than harm. They should be set by technocrats not politicians
(From The Economist)
ON BOTH sides of the Atlantic politicians are warming to the idea that the lowest-paid can be helped by mandating higher wages. Barack Obama wants to raise America’s federal minimum wage by 40% from $7.25 to $10.10 an hour, and more than three-quarters of Americans support the idea (see article). In Germany, one of the few big rich-world countries still without a national wage floor, the incoming coalition government has just agreed on an across-the-board hourly minimum of €8.50 ($11.50) from 2015. In Britain, which has had a minimum wage since 1999, the opposition Labour Party is keen to cajole firms into “voluntarily” paying higher “living wages”.
For free-market types, including The Economist, fiddling with wages by fiat sets off alarm bells. In a competitive market anything that artificially raises the price of labour will curb demand for it, and the first to lose their jobs will be the least skilled—the people intervention is supposed to help. That is why Milton Friedman called minimum wages a form of discrimination against the low-skilled; and it is why he saw topping up the incomes of the working poor with public subsidies as a far more sensible means of alleviating poverty. More
(From NY Times, Laura D'Andrea Tyson)
The last several decades have been especially hard on American workers in jobs that pay the minimum wage. Adjusted for inflation, the federal minimum wage of $7.25 an hour today is 23 percent lower than it was in 1968. If it had kept up with inflation and with the growth of average labor productivity, it would be $25 an hour.
Congressional Democrats have proposed legislation to raise the minimum wage to $10.10 an hour and index it to inflation, and President Obama signaled support in a recent speech highlighting the economic and political dangers of growing income inequality. Predictably, opponents of an increase in the minimum wage are once again invoking the hackneyed warning that it will lead to higher unemployment, especially among low-skilled, low-wage workers who are the intended beneficiaries.
I heard the same refrain in 1996 when I served as chairwoman of President Bill Clinton’s National Economic Council, and he worked with congressional Democrats to raise the minimum wage to $5.15 an hour at a time when it had fallen in real terms to a 40-year low. To hear Republican opponents and lobbyists for retailers and fast-food companies, we were about to inflict a cold-hearted fate on young people and minority workers. The same chorus is voicing the same dire predictions today....
...
Contrary to the warnings of its opponents, a higher minimum wage would, under current economic circumstances, mean more employment, not less.An increase in the minimum wage would also increase the effectiveness of the earned-income tax credit to reduce poverty and increase demand among low-income households with high propensities to consume. As David Neumark asserts in his recent Economix post, since the mid-1990s, when President Clinton championed a sizable increase in the earned-income tax credit, it has provided much greater income support to low-income families than the minimum wage. But as Professor Neumark acknowledges, the earned-income tax credit and the minimum wage are not substitutes for each another. They work together and can lead to better outcomes than either policy alone. Full Article
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Your Thoughts?
13 comments:
It is definitely time for an increase in minimum wage. Working class citizens struggle to pay their bills, buy clothes, and feed their family. I think Obama's idea of increasing the minimum wage to $10.10 is a good starting point. I think it is still low, but it is a good amount for the first increase. I thought it was very interesting that if the minimum wage from 1968 had been adjusted it would be $25 an hour. That amount is drastically different from the current $7.25. Although it seems a little high, a person who makes $25 would actually be able to pay for necessities.
considering how high priced everything else in life is at this point in time, a wage increase is past overdue. everything has risen within the past half century except wages. the free market is not meant to keep people struggling below the poverty line. as for britain "voluntarily" asking firms to pay higher living wages, how can they "voluntarily" persuade firms to do that? unless there is a new law or perhaps just enforcement then firms wouldn't really pay higher living wages. that brings me to my next point. minimum wage isn't the same as a living wage. a living wage is the amount of money someone would have to make to be able to provide for the necessities, and at the current wage, that is not enough. obama's plan of 10.10/hour is a good start, but eventually something more long term will have to come to fruition, or at least a wage that evolves with the times.
A wage increase IS overdue, my question is why it has taken so long for people to realuze that, or why anyone would be opposed to it. All politicians should strive for a better America, and the working class really is the backbone of our country anyway. So there really is no valid reason for a wage increase to have been put off this long. Some of these people getting paid 7.25 an hour have little mouths to feed at home, not to mention bills to pay and other everyday expenses. Basic expenses can be a struggle for even middle class families these days. So how can we keep expecting people to make do with such a small amount? Kudos to Obama for taking the first step; I hope he can follow through on a plan for the increase.
Raising minimum wage is a good idea, because it definitely has not kept pace with inflation. However, the need for a higher minimum wage has been blown out of proportion. The article below offers statistics about the number of americans working for minimum wage, and their situations in life.
http://blog.heritage.org/2013/03/05/busting-5-myths-about-the-minimum-wage
I think it would be totally apporporate to raise minimum wage to living wage. There are people out there, a large group of Americans, who are not as fortunate as us. They could not afford to live in largely affluent suburbs, or attend any college at all. Sometimes, minimum wage jobs are the best that they can get and they deserve to have wages that can support a family. It is unfair that wages have not raised with inflation and the crippling economy. The poverty standard in America has not been updated since the 70's. There are a lot of regulations regarding impoverished Americans that are left untouched. I recently read an article detailing how some republicans wish to cut the food stamp program by 40 billion dollars in the next ten years. Poverty in America is alive and well and the government needs to help those who are struggling to get by. I have attached said article below
http://www.nytimes.com/2013/09/05/us/as-debate-reopens-food-stamp-recipients-continue-to-squeeze.html?pagewanted=1
The history of all hitherto existing society is the history of class struggles.
Our epoch, the epoch of the bourgeoisie, possesses, however, this distinct feature: it has simplified class antagonisms. Society as a whole is more and more splitting up into two great hostile camps, into two great classes directly facing each other — Bourgeoisie and Proletariat.
The proletarians have nothing to lose but their chains. They have a world to win.
http://www.marxists.org/archive/marx/works/1848/communist-manifesto/
Why are we so insistent on being selfish? It upsets me in the first place that we need a minimum wage because business owners are willing to just pay a decent salary on their own. But fine, capitalism is great and everything so that would be unreasonable to request. Except for that is what happens in Great Britain the first Capitalist nation. I'm not saying abolish all requirements because everyone deserves free pay. I'm no Bernie Sanders but it seems as though people should know better. Maybe I'm getting a little more left-wing than normal because I am sitting behind my Apple Computer drinking herbal tea and listening to U2 from the previous posts, but come one people now. Smile on your brother. Everybody get together. Try to love one another right now.
I think an increase in minimum wage is LONG overdue. I mean it makes sense why many people and corporations are opposed to it because economically it would be increasing their cost of resources which would lead to a higher inflation rate. However, I think the living cost for people has greatly increased since when the current minimum wage was set. Speaking of inflation, it increases every year so the real value of the minimum wage has decreased drastically over the years and truly the families living on minimum wage are getting less clothes and less amounts of food off the current minimum wage. Obama's idea is a good start and I realize the issues that will come along with it and it's also understandable that it would only created larger inflation issues but I think it's crucial that we finally take a stance towards creating a better standard of living for the people living on minimum wage.
Also, nice to see you there Iman.
It upsets me that in 1968, the minimum wage was 23% higher than the federal minimum wage of 7.25$ today. This is very unfair because the prices of goods and services in 1968 were much lower than they are now. I believe raising the minimum wage to at least 10$ is a no-brainer because it really should be even higher than that and increasing the minimum wage to 10$ will reduce poverty and people would be able to spend more money, thus, growing the economy.
I believe It is time for an increase in minimum wage. These days most people in our society struggle to pay their house and car bills and still have left over money to pay for food and clothes. If minimum wage isn't considered a "living wage" how are people supposed to support themselves much less families off of it.
Let's remind ourselves that it is 2014 and yet we are still struggling over minimum wage debates. We should also remind ourselves that the cost of living has risen drastically from just ten years ago. We need to understand the struggles of the lower middle class who still need to work excessive hours to feed, clothe, and shelter their families. $10.10 is a great place to start, however when calculating in 1968's $25, I feel like with a little negotiation we should be able find a minimum wage that can truly benefit those of the lower economic strata.
I don't really know why we are still having this conversation. It baffles me that there are still people out there that believe that $7.25 is enough to live off of. I mean really, have you been living under a rock? Have you missed the part where our cost of living has rapidly increased in the past decade? I don't mean to be offensive when I say this, really I don't. I just don't understand how you can not see that $7.25 an hour is not nearly enough for a person, or a family, to live off of. How can you not see that $7.25 an hour cannot buy the food, clothing, and other goods that it takes to live a comfortable life? Everyone deserves a comfortable life, and $7.25 is just not providing that anymore.
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