What Are the Benefits of Raising the Minimum Wage?

by Emily Guy Birken · 37 comments

My very first job was working at a little mom-and-pop bagel shop in suburban Baltimore. I was 15, and I was thrilled to be earning a dollar more than the then-minimum wage of $4.25. Over that summer of 1994, I worked just over 30 hours a week making bagel sandwiches, wiping down tables, and running a cash register.

Something I learned early on, however, was that the mom and pop who owned the bagel shop were not sweet and cuddly. They paid the teenagers who worked there a decent wage, and generally treated them well. But the adult employees — the ones I thought of as lifers, because they depended on their paychecks to live — faced Pop’s consistently bad temper and worked for just about the same amount of money as the kids did.

This was an important early economics lesson for me: when you have a captive workforce, it’s easier to get away with treating them poorly.

The teenagers were likely to leave their jobs if Pop screamed in their faces like he did with the adults, so he kept his temper in check. The adults were dependent on their low wages (which were admittedly still higher than the minimum), so they weren’t likely to ask their volatile boss to stop yelling — let alone for a raise.

As I listen to the arguments on either side of the minimum wage debate, I think back to that experience. I’ll be honest: I tend to believe that raising the minimum wage is a good idea, in part because I can remember the names, faces, and stories of my adult co-workers who were in an untenable employment situation. I do recognize, however, that raising wages is both a global and a personal issue.

For that reason, this week and the next, I’ll be looking in-depth at the pro and con arguments of raising the minimum wage to $10.10 per hour from its current position at $7.25. This week, I’ll look at the oft-talked about benefits, and whether they’re as clear cut as they seem.

Here are some of the expected benefits of increasing the minimum wage:

Stimulating the Economy

One theory about raising the minimum wage is that it will help to boost the American economy as a whole. It seems perfectly logical: when workers have more money in their pockets, they spend more.

And according to economists, for every $1 per hour increase in the minimum wage, adult workers earning the minimum spend an additional $700 per quarter.

However, it’s not just that these earners spend the money they make. These workers apparently take on more debt in the short term in order to purchase durable goods (like cars), and it is this increased borrowing that stimulates the economy.

But considering the fact that banks have seriously tightened their lending standards for low-income borrowers since 2008, a minimum wage hike may have no effect on the economy.

Add to that the fact that employers may hire fewer workers, lay workers off, or raise prices in reaction to the minimum wage hike, and the potential stimulus may be even further blunted.

Basically, without knowing how employers and lenders will react in the wake of a minimum wage hike, it’s impossible to know how much it would stimulate the economy.

Improving Entitlement Programs

Raising the minimum wage offers two potential benefits for entitlement programs like Food Stamps and Social Security. First, raising the minimum wage will theoretically lift many of the working poor above the poverty line, meaning they’ll no longer need to rely on food stamps or other assistance programs. Secondly, an increased minimum wage increases taxable income — meaning there’s more money going towards programs like Social Security.

However, these two potential benefits aren’t necessarily straightforward. For instance, the Congressional Budget Office has reported that only 19% of the increased earnings due to the hike would go to families below the poverty threshold — and 29% of the increased earnings would go to families earning more than three times the poverty threshold. These would be the teenagers (like my prior self) who are earning money in low-wage jobs.

The CBO concludes that a minimum wage hike would raise the wages of 16.5 million, and lift about 900,000 people above the poverty threshold — but there are roughly 45 million who are projected to be living under that threshold during the wage hike timeframe.

In addition, while raising individuals above the poverty threshold is certainly a good thing, low-wage workers may find themselves in the unenviable position of earning too much to qualify for assistance, but not enough to keep afloat on their own.

Decreasing the Turnover Rate

My boss at the bagel shop certainly understood the importance of low turnover: the more turnover you have, the more you spend to hire and train your staff. That’s why Pop treated us kids well, since he didn’t want us quitting after seeing the bulging forehead vein of anger go off in our direction.

Theoretically, offering higher wages to employees means that they’re more likely to stay on, reducing overall costs to the company and improving the bottom line.

However, it’s not possible to predict how employers will react to a wage hike. For instance, they may decide to lay off some employees, without reducing their production expectations, which would make work more stressful for the remaining employees. This could, in turn, increase turnover (or at least have no positive effect on it).

The Bottom Line

The expected benefits of increasing the minimum wage are all based upon educated predictions and assumptions, but we can’t know for sure what a wage hike will bring. The benefits are unclear — and, as we’ll see next week, the expected drawbacks are similarly difficult to pin down.

Do you find these benefits of raising the minimum wage compelling?

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current Verizon FiOS promotion codes and promos to see if you can save more money every month from now on.

Related Posts

{ 37 comments… read them below or add one }

Aldo @ MDN May 12, 2014 at 6:51 am

I personally believe that raising the minimum wage can only bring good things – of course I’m looking at it from a compassionate human being and not from an economist point of view. I’m not sure if $10.10 is the right amount but $7.25 is way too low.

And I know some people might say to go get an education and get a better job, to which I agree, but we have to understand that people’s situations are different and this might not be as easy as it sounds.

I also understand that some businesses might have a hard time paying their employees more, but some are going to be just fine (I’m looking at you fast food restaurants).

Reply

David Ning May 12, 2014 at 3:09 pm

I’m not sure if raising the minimum is always good for everybody. If raising wages pushes employers to find ways to cut (even more automation, kiosks instead of cashiers at fast food joints), then people who need those jobs lose.

I’m not saying I’m for or against this, but I don’t think the minimum wage issue is that clear cut.

Reply

Stefanie @ The Broke and Beautiful Life May 12, 2014 at 7:10 am

The fact that the minimum wage is $7.25 is absurd to me. I think minimum wage needs to be enough for a single adult to live on without falling into poverty. For me, my own personal minimum wage (the number I won’t work for less than) is $15/hour (and that’s only for a friend or someone in an emergency), most of the time I charge $20/hour minimum.

Reply

David Ning May 12, 2014 at 3:12 pm

I agree that a full time job should allow someone to live above poverty, but some of these jobs, like working as a cashier at a fast food restaurant, shouldn’t be a full time job. Perhaps minimum wage shouldn’t be based on a per hour basis but rather a minimum compensation level as long as it’s 40 or more hours a week?

Reply

Marcia May 15, 2014 at 11:10 am

So, why should being a cashier at a fast food restaurant not be a full time job? I don’t understand this, really.

It involves working with people, working with others, and working with money. Speed, accuracy, inter-personal relations. It’s not what I would call an “easy” job by any means (I did it, for awhile, in college – let me tell you – the college students were rude. I was rude right back. The only reason that I didn’t get fired? I actually showed up for work. Most of the other employees would roll in an hour late or more.)

There are a wide variety of jobs out there that need to be filled. As time goes on and we see outsourcing, how many left are “good jobs”? We will always need someone to work at fast food restaurants, until we convince Americans to stop eating there. We need people to dig ditches (did that too in college!), clean toilets (yep, that too), wash cars (uh huh), bag groceries (a few years of that), work the check-out at the grocery store. When I was busy working these jobs, I made a lot of friends who did this as a living.

Back then, there was nothing shameful about working a manual labor job, and working hard at it. You may start at minimum wage, but you wouldn’t end up there. Getting more experience would allow you to make more money, maybe move up from a bagger to a stock person to a cashier. You weren’t living high on the hog, but you could make a basic living (with shared housing).

It seems though in the last couple of decades, it’s become shameful to work certain jobs, and people should “better themselves”. Maybe it’s just the crowd I run with has changed. The fact of the matter is – there aren’t enough “good jobs” to go around, so in the unlikely case that everyone got a college degree or training, you’d have people scrubbing toilets who have degrees in accounting, or whatever.

Who gets to decide what should be a full time job?

Reply

RustyGee May 15, 2014 at 11:23 am

Marcia,
You wrote “It seems though in the last couple of decades, it’s become shameful to work certain jobs, and people should “better themselves”.” and I would like to disagree with you that it is not that it is shameful, it is more of I want the better job NOW. Working with teens years ago, some had the big $$ signs in their eyes and talked of making lots of money to get the things they wanted. Working now with 25 to 35 year olds, it is the same. Some are ready for promotion to a manager the day they are promoted to supervisor and if they don’t get it within 2 to 3 years, then they move on. I am a firm believer that one MUST prove themselves first before they are ready for more responsibility later. I also believe that a person can be developed and coached/mentored to take on more responsibility and prepare them for the next level of leadership/management. The challenge is, are we willing to help people develop today so that I can move up to the next level and they are ready to take my place?

Reply

David Ning May 15, 2014 at 4:01 pm

I want to clarify that I do not think fast food jobs, or a janitor for that matter, is a shameful job. I worked at a fish and chips place when I was younger, and it was an incredible experience. It was fast pace, and like you said, some customers were rude. The job certainly wasn’t “a walk in the park”.

Yet, I was young, inexperience and native when I was hired. Though I had a certain educational background by then, anybody could have gotten that job. And that’s exactly why I was hired. The owner could have picked anybody and he just happened to pick me out of the bunch of applicants. So how can I demand the owner to pay a certain amount per hour even if I have to put food on my table? He doesn’t owe anything to me other than pay me what we both agree upon. He’s got his choices, and I’ve got mine. If the salary was too low for me, then I don’t have to work for him. If I’m forced to work for him to put SOME food on the table, then I better moonlight and try to find other sources of income.

I apology for saying that a cashier shouldn’t be a full time job. I should rather say that some jobs shouldn’t be worth a full time living and leave it at that because I simply don’t know where to draw the line. Let’s say I’m away and I need someone to take the mail from my mailbox every couple days.

I think this task is worth a part time income for someone if we can make the numbers work. But surely you agree that this can’t equate to a full time job. In fact, if I have to offer a person minimum wage for doing this for me, then this job is lost because I just can’t afford it. But where do we draw the line? I don’t know. Do you?

And you asking “Who gets to decide what should be a full time job?” is a good question to ponder. I think the government raising the minimum wage, rightly or wrongly, is in effect dictating which jobs should be full time and which shouldn’t.

In absence of a minimum, the free market will dictate which jobs can sustain a standard living in the local area. With minimum wages, then the government decides.

Reply

ChrisCD May 12, 2014 at 10:54 am

I don’t think minimum wage is meant to provide an income that would keep someone from falling below the poverty line.

If you can’t live on that wage, you either get a 2nd job or find a better paying one. I worked two jobs most of my life. I never expected an employer to have to cover my expenses.

I think the law of unintended consequences will end up biting “us” in the behind. On the surface, it seems reasonable to require a certain wage to be paid. On the other hand, these are “for profit” companies. Usually, when you try to tell a company they have to pay a certain expense, they just find a way to make it up elsewhere such as higher prices, less workers, less hours, etc. Rarely is a company going to willingly give up profit or even lower their executive salaries for the benefit of those on the lower tiers.

Reply

Emily Guy Birken May 12, 2014 at 2:46 pm

Chris, I’ve heard several people say that the minimum wage should not be meant to keep you from falling below the poverty line. But there always has to be someone to take the low-paying jobs that no one else wants. The world needs ditch-diggers, janitors, and fast food employees. The people who work those jobs should be able to live on them. That doesn’t seem like an unreasonable expectation: being able to live on the wages from an honest day’s work.

As for the for-profit aspect of these companies–you may be right that companies will not willingly give up their profit in order to benefit the lowliest employees. But shouldn’t we expect more of our companies? Shouldn’t our society demand that all employees are deserving of respect, not just the ones at the top?

I will say that my time at the Mom-and-Pop bagel eatery I mentioned really soured me on the business itself, because I knew that Pop was (relatively) wealthy on the backs of people he abused. After I stopped working there, I never set foot in the place again and I urged friends and family to avoid the place, too. Because just because the bakery made great food did not make it okay that they abused their employees. Sure, businesses have every right to make a profit. I have no beef with that. But abuse (whether financial or verbal) is too much–I expect more from the businesses I patronize.

Reply

ChrisCD May 12, 2014 at 2:57 pm

Emily,

Assigning a minimum wage though only attacks one side of the equation. So the for profit companies will most likely not lose anything. It will really be born on the backs of those buying the products or born on the backs of those let go. The executive making $30MM a year, still will. Now, your example of not setting you foot back in the bagel shop is how it should be. Let your $ do the talking.

People that want to pay some fantastic wage and have a utopian business should infact start that business, but guess what, they never do. They realize just how much work it really would be and instead try to complain the loudest to make others pay. :O)

I delivered newspapers for a good part of my life. For a number of those years, I was responsible for collections and had to take the loss if people didn’t pay. Talk about baloney. But, that was the deal. I could take it or leave it. I took it. And at 16, was making pretty good $. At 22 it wasn’t so much, thus I had to get a 2nd job. It wasn’t meant to be my soul source of income anyway.

I agree that people should be paid a decent wage, but I also agree that others should use their voice to dictate that, not the government. Like you said, those that didn’t want to pay the better price for the articles, received much less quality.

Reply

Phil May 12, 2014 at 12:49 pm

Sadly, I don’t think there should be a minimum wage at all. It teaches people to not improve themselves, accept their mediocre environment, and that the government and who you vote for are what is going to fix whatever is ailing you.

As soon as some people read this, they are going to assume that I am heartless, that I don’t appreciate the up and downs of life, and that businesses are going to “take advantage” of people.

But I will counter act each of those arguments with this: will you mow my lawn for a quarter? Of course not. How about $2.50? No. $25? Maybe, depending on how big it is. Now we are getting somewhere. I am no longer heartless, I provided a good wage to a person no matter where they are in life, and I took advantage of no one.

Seriously, our society would be much, much better without a minimum wage.

Here is another way to look at it though…If you truly believe that you can start a business and make so much money taking advantage of others by paying them less than you think they deserve…go for it! Something tells me you will start to appreciate the business owner’s dilemma.

One final point, there are soooo many jobs out there that are willing to pay sooooo much more money. But people don’t have an education. I tell my students (yes, I am a teacher) all the time that businesses are screaming to hire you AND pay you way more than me, but you must have the skill set they are looking for. This is why we give visas to citizens from India and China. They can do what we need them to do.

Reply

Emily Guy Birken May 12, 2014 at 2:37 pm

Phil, I’ve heard several people say that there should be no minimum wage, since it is up to each individual to seek out better employment or circumstances. And in an ideal economic model, that is exactly what would happen. Individual actors within the economy would always act in the most rational way for their own best interests, and they would each improve their situation while allowing the market to pay what it will bear. But we don’t live in that ideal model. That ideal economic world assumes that all opportunities are equally available to everyone, which they are not.

In addition, companies don’t need to be in the business of specifically taking advantage of people in order for people to still get taken advantage of. For instance, I am a freelance writer online. When I first started writing, I was offered opportunities to write for $15, $10, $5, free for 500 word articles. My work is worth a great deal more than that. So–I turned down those opportunities, and the sites offering that little money hired someone who didn’t have my skills (I say with pardonable pride) and got lesser work as a result. That’s basic supply and demand in action.

But that didn’t happen in a vacuum. I am in a position where I can turn down insultingly low-paying work because my husband and I live on his income and use mine for savings. If I were struggling to make it on my own, I would have to choose between writing for very little (which is better than nothing), or not eating. That’s hardly a choice. And the reason why it’s an issue is because there is no required minimum for the cost of an article. I’m not saying that there should be (although it would make my negotiations much easier), but it is a microcosm of what a world with no minimum wage would be.

Basically, what I’m saying is that there is ALWAYS someone willing to do the same work for much less money. Always. Entirely eliminating the minimum wage puts the people who are most vulnerable at the most risk. Because those individuals without an education are not in the best position to negotiate their salary for a number of reasons. Yes, they could get an education (although that’s not an easy solution for many people). But the world also needs ditch-diggers and janitors, and they deserve to be compensated in a way that will allow them to live with dignity–because education isn’t for everyone, but dignified work is.

Reply

Phil May 12, 2014 at 8:41 pm

“If I were struggling to make it on my own, I would have to choose between writing for very little (which is better than nothing), or not eating.” I often listen to Dave Ramsey, and I like it when he calls someone out when they only provide two choices. You have more than two choices. You could find a profession with a strong market that pays a lot of money. But if writing is your passions…go with it. But don’t complain that it doesn’t pay enough. Also, know that I hope you make it big. I hope you make millions of dollars. I really do. And if you do, I will say you deserve it, because people were willing to pay that much for your “product”.

“But the world also needs ditch-diggers and janitors, and they deserve to be compensated in a way that will allow them to live with dignity.” Two things: “with dignity” is a very ambiguous phrase. So $10.10 is the number we apply to “dignity”? Secondly, if someone were to do something with dignity, I would not say their pay would be dignified through threats of legal action from a government entity with guns. The market is the market, and the government should stay out of it. Capitalism is a beautiful thing. Even the poor have a microwave, TV, Cable, internet, and, increasingly, a smart phone. Believe…the middle school where I work at with 70% free and reduced lunch…those kids have smart phones!

Reply

Emily Guy Birken May 13, 2014 at 3:25 am

Phil, you are absolutely correct that I have more than two choices. That is because I am educated, I have experience in a variety of fields, and I have access to help (like good daycare for my kids for instance). Writing is absolutely my choice, and one that I make because it has the greatest *potential* income for my particular talents and education. It is also my passion. I am very very lucky and don’t want to come across as feeling anything but. I simply think that paying for writing is one place where the market is wrong–because we have all gotten used to getting our content for free. (But that is a side issue that I also happen to be passionate about.)

But many individuals whose skill sets only make it possible to work in low-wage jobs do have only a few choices available to them. It may be as simple as “take the too-low wage or not eat” because they do not have the necessary financial investment or even the cognitive ability to get an education. For them, saying “why not go to school and get a higher paying job” might be as unattainable as saying “neurosurgery pays well–why don’t you do that?”

Reply

Paul May 15, 2014 at 12:47 pm

I had my first and only minimum wage job while I was in high school. I worked in an architecture office running the blueprint machine. I was living with my parents, so earning a “living wage” was not a requirement. Getting work experience was my goal, and that work experience influenced what I studied in college.

If my employer had been forced to pay me a “living wage” I probably wouldn’t have been hired in the first place. I would have lost out on that experience which helped me to be more practical about college and eventually becoming an architect. Many of my college classmates in architecture school graduated, but never became architects. They would have benefitted from having the low-paying job I had early on. Certainly, raising the minimum wage would make those first jobs harder to obtain.

David Ning May 16, 2014 at 4:12 pm

Thanks for the anecdote Paul. Perhaps if minimum wages go too high, these jobs that mainly provide experience would be offered without pay instead!

Emma @ Make Money Without a Job May 12, 2014 at 1:28 pm

What really frustrates me about minimum wage is that here, in the UK, the minimum wage is circa £6.50. Which is fine. But the living wage, that is, the wage one needs to be earning in order to have accommodation, feed and cloth themselves and have any sort of life, is £7.50 an hour. For years I was earning under this “living wage” and also supporting my boyfriend through unemployment. It was extremely tough and I’m glad that things are better for us now.

Reply

David Ning May 13, 2014 at 9:00 am

It’s awesome of you to help your boyfriend out Emma. I’m guessing you mean that boyfriend has a job now when you said things are better for the two of you, so try to bank the extra £5.50 an hour for the rainy day!

Reply

Antonio May 12, 2014 at 3:04 pm

It saddens me greatly that education in our country is so woefully inadequate that this thought process exist. The discussion we seem to be having is whether our economy should be based on Socialist/communism, Fascist or individual freedom.
Please note that Capitalism is not a system but rather the absence of one. The rules are simple, individual guided by their decision made of their own free will decide what is best for themselves and their families. They are free to pursue any and all goals as long as they do not impede anyone else’s life, liberty or possessions through force or fraud. History has time and again shown that the synergy that this created is immense. I agree that a culture of perseverance, innovation and moral principles favors the outcome, but it does not make the system flawed.
My early encounter with minimum wage came with the Carte years. I was a newly hired grocery bagger at a very well to do neighborhood. I cheered when the minimum wage was raised. That was short lived when the manager called me to the office and fired me. He was unable to employ me at the higher wage rate. Now here is the final lesson. I continued to go to work at the grocery store bagging and carrying groceries. I made huge tips. The people who were actually employed were always tasked to sweep and stock the store, leaving me to bag at the busiest time of the day. I got to choose my days and times. I made more money than the employees who had to pay taxes on their earning. I learn early on that Gov. Separation from business should be as important as separation from Church.
Unfortunately, the citizenry’s limited knowledge of history economics and finances will sentence all to the serfdom that they are trying to avoid.

We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission
Rand

Reply

Phil May 12, 2014 at 8:48 pm

Wow, that is well said. I am not being sarcastic. You should write a book. Thank you.

Thinking of books, everyone should read “Basic Economics” by Thomas Sowell. He really opened my eyes. He provides the history you mention. Keep rent prices low? People rent two places because they can, making it so that the poor have no where to rent. Pay freezes? Now the “in demand” employer must be compensated through unusual means leading to health care being attached to employer provided benefits.

Sadly, liberal thinking does not help, but often rather hurts through their good intentions.

And since you left with a Rand quote, I will also leave with a great quote:

“The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.'”

Reply

Phil May 12, 2014 at 8:52 pm

And this was said about Thomas Sowell:

Controversies[edit]
Patricia Roberts Harris, who was an official in the Carter Administration, once said that Sowell and Walter E. Williams “don’t know what poverty is.” Sowell called her position “a pathetic sign of intellectual bankruptcy,” saying that he “was almost 9 years old before [he] lived in a home with [hot] running water” and that she “was a campus social leader in an ‘exclusive sorority’—meaning that it was for middle-class (light-skinned) women” while he worked full-time and went to the same college at night

Reply

Marcia May 15, 2014 at 11:14 am

Interesting, but two comments:

1. You are supposed to pay taxes on your tips.
2. When I bagged groceries, we made minimum wage but were forbidden to take tips. Can’t win either way!

Reply

RustyGee May 13, 2014 at 4:51 am

The first question to ask is what is the motivation for the government to want to raise the minimum wage? IMO, this is purely a political move to cause those who are making minimum wage to vote for a specific political party and not vote for the other. When I started working in 1963, and I have been gainfully employed since, I was making the minimum wage of $1 an hour. Stop thinking about what your parents and grandparents have told you about “the good old days” because my point is that I was paid for the job I was employed to do. I started working at the corner grocery store stocking shelves, bagging groceries, and sweeping and mopping floors. I realized in these younger years the value of money and the differences between the wants and the needs in my life. When I served in the military for 12 years (not being gainfully employed as thought by some), my wife and I were receiving LESS than minimum wage for the monthly salary and again, we learned the differences between wants and needs. I am now well paid for the job I am performing and my income is into the six figures while working 51 years. (PTL) It was a result of the desire to improve myself and to live better than my parents and grandparents. My education was from the military that I carried into the civilian world and I did not receive my college degree until I was 61 years old.

When people realize the difference between the WANTS and needs then there will be less dependence on the government. When the Pope came to the US and tells us about the depressed people who are out of work, he should look at the newspapers and see the number of businesses postings job openings and ask “Why are there so many people out of work and so many job openings?”

People do not want the low paying jobs because their income will not meet their WANTS so they have to have the government handouts. I’m not surprised to hear people say that they will overcome their poverty levels if they are paid more money and we will see that that will not happen because eventually there will be the WANTS that can be filled over the needs. The minimum wage was enacted in 1938 for a reason so that people were paid for the jobs they performed and that employers could not take advantage of workers. As mentioned, businesses have a certain profit percentage that they will maintain and when expenses go up, as in the case of health care and possibly hourly wage, the “fastest” method to reduce expenses is reduce the number of employed. Perhaps the 21 states, that have a higher than the Federal limit for minimum wage, will see an increase in their population as people look for better wages. Leave the running of business up to the businesses and have a government that removes obstacles to allow businesses to hire people and reduce our number of unemployed which will allow the nation to experience economic growth. How many of the people who are receiving minimum wage have the phones that have high monthly costs, have the latest trendy clothes, and WANT more to gratify themselves?

Employers may not be screaming at the long time employees as Emily experienced with Pop, but they are taking advantage of them by not giving or delaying COL raises, taking away benefits, down or rightsizing, and reducing hours to reduce costs.

Reduce the wants and the take home pay will go further than currently without having to raise the minimum wage to $10.10; however, raise the minimum wage to closer to $8.75 and wait to see the effects on business then go to the higher hourly wage.

Reply

David Ning May 13, 2014 at 9:12 am

Way to go on getting a college degree at 61 RustyGee! If everyone had your drive I don’t think minimum wages will ever be a topic of discussion.

It always amazes me that Starbucks, with its $5 coffees, are packed in poorer neighborhoods because that habit must be a huge percentage of people’s incomes there.

But then when I think of the good side of all this, the phenomenon partly illustrates why this is a great country to be living in!

Reply

UH2L May 14, 2014 at 9:55 am

I agree that we collectively want too much which is why I feel many middle class and higher families think they need two incomes. But try living off minimum wage just for your needs. You should see the episode of 30 Days by Morgan Spurlock where he and his wife try to live 30 days while they both have minimum wage jobs in a low-cost city, Columbus, Ohio. They don’t have any kids and they could still barely get by. Watching this show will put things in perspective.

The minimum wage has to be raised to at least adjust for cost of living. If we want to encourage people to work and not rely on the government for assistance then we should incentivize them to work. I know small businesses are a different story but corporations have high profits and piles of cash reserves. I find it hypocritical when a corporate CEO makes millions of dollars of bonus instead of paying out an equivalent amount to the workers to improve their standard of living just a bit. Plus it would increase employee loyalty to the company and allow them to attract better workers at the lower end of the payscale.

Reply

ChrisCD May 14, 2014 at 10:15 am

UH2l – I find it hypocritical too, but I don’t want the Gov’t dictating what people should be paid. It would be much better for people to talk with their $. Don’t use those products. Use someone else’s. But sadly, despite the fact they they are paid millions their product is usually less. People don’t seem to want to pay more to support a business that pays a good wage.

So the Gov’t gets involved and everything becomes more expensive for everyone. In a year or two, the higher minimum wage won’t be helping as much and they want it raised again, and the vicious cycle continues.

I don’t believe minimum wage is meant to provide a basic lifestyle. And I get tired of hearing how hard it is for this or that. I use to work two jobs, 70 – 100 hours a week. And really that was to live a basic life. But along the way I taught myself new skills, made myself more valuable and got better and better jobs.

People need to learn to help themselves and quite expecting the Gov’t to do it for them.

Reply

Jason May 13, 2014 at 5:20 am

I’m all for the free market, a healthy capitalist economy, and generally less regulation, however the minimum wage is one of those regulations that seems to be a necessary evil. Without it, business managers/owners would take advantage of workers who have no options. The fact that few businesses voluntarily pay more (than the standard ten cents) over the minimum for fast-food/grocery bagger type jobs shows us they would pay less if they could.

However, there is another dynamic at play: when minimum wage increases, many businesses are forced to do more with fewer workers. It’s not good in the short-term for the supply for jobs, but longer term it does allow for greater productivity as technology that wasn’t economically viable at a lower minimum wage starts to make sense when the labor savings are greater. The profit motive still works, but it needs boundaries to work for the good of society more often than not.

Reply

David Ning May 13, 2014 at 9:19 am

Sometimes I wonder how much businesses would actually pay for minimum waged jobs. Having a set number actually acts as an anchor in some ways, which can allows businesses to keep the wages low.

When there are no more guidelines, it’s not impossible that businesses will actually pay such a low wage if no one is willing to do the job.

Reply

Paul May 15, 2014 at 12:22 pm

The government’s forecast that a minimum wage hike would raise a certain number of people above the poverty line is flawed. They are assuming that the poverty line will stay fixed over time. Raising the minimum wage will very likely be accompanied by a rise in the cost of living.

Don’t believe me? Look at past minimum wage hikes and the cost of living both plotted on a chart. That’s one reason why we have more people in poverty as a percentage of our population. If the minimum wage law worked as its proponents claimed, then we would see fewer people in poverty.

Reply

Jason May 15, 2014 at 1:16 pm

That chart would only show you that inflation exists. The currently debated minimum wage increase is simply to keep pace with inflation since the last increase. In real monetary terms, minimum wage has decreased (and you don’t see many employers voluntarily keeping entry level wages in line with inflation).

What we need to do this time around is have minimum wage tied to COLA, like we do with Social Security. Keeping in mind neither of these are meant to be living wages, but they shouldn’t be allowed to lose value against inflation.

Reply

ChrisCD May 15, 2014 at 1:21 pm

What you should do is start your own company and be a model to the rest of the world. Pay everyone the same. Something like $25 to $30/hr. You would be a hero. And then at the end of the year all profits (except some % for future expenses) is then split up evenly amongst everyone. I wonder how long you would last. :O)

Reply

David Ning May 15, 2014 at 4:08 pm

I predict that if minimum wage is tied to COLA, then eventually there will be PhDs lining up for a cashiers job. After all, minimum wage jobs are staying constant in real terms, while salary positions are slowly lagging in the US. If this trend continues, then there’s no reason for anyone to take the high pressure long hours jobs because I can get the same salary at Micky Ds! With benefits!

Reply

Jason May 15, 2014 at 4:30 pm

Here’s a chart showing minimum wage 1938-2012 both unadjusted and in constant 2012 dollars. Granted, it is still roughly in line with the past few decades, but instead of carrying on with an inevitable debate about raising the minimum wage as inflation creeps along, why not adjust automatically to keep the wage somewhere around $7.50? That’s called a Cost of Living Adjustment, which isn’t the same as a living wage. It’s only keeping the relative value consistent.

Reply

Jason May 15, 2014 at 4:31 pm
Kate May 22, 2014 at 2:29 pm

Raising the minimum wage will speed up the growing trend toward automating all kinds of donkey work that depends mainly on brawn, and the inevitable automation of all fast food restaurants. Remember the Automat? If you didn’t live in New York in the old days, maybe you don’t. But that was a cafeteria where you put money in a slot and took out prepared food or filled a cup with coffee, tea, etc. without the need for waiters, waitresses or cashiers. If this could be done in 1910, this could be done today. And do you really think that people who start at minimum wage because they just plain don’t have the skills to do anything else will be better off when their jobs are done by robots? Who do you think is going to be paying them subsistence handouts to live on when their jobs have disappeared? If you have one of those $600 binkies with the Apps, just consider how many things you can do with an App today that used to take a human being to do them. Now multiply that by a factor of 5 and reconsider that minimum wage rise.

Reply

Jason May 23, 2014 at 4:31 am

That’s how it looks like things would unfold. A similar argument was used by Southern plantation owners to justify slavery, because many of them sincerely believed their industry wouldn’t be profitable without slave labor. You have a point that many minimum wage workers cannot jump into more advanced positions, but neither can their jobs be completely replaced. If McDonald’s paid $10 or $12/hour, they would find ways to automate a few tasks, but they will always need a few workers to do whatever basic work needs to be done. People will always yearn for some form of human interaction. The error is allowing economics to trump our humanity at both extremes, whether it’s justifying a shrinking minimum wage (due to inflation) or tens of millions in salaries for CEOs and coaches who have no more intrinsic value as a person than the burger flipper.

The genius of capitalism is that it uses our natural selfish tendencies to earn more and pay less for the good of society. But it works best when we have a balance of power (i.e. democracy, shareholders, good unions) who keep things in check for the common good.

Reply

David S. June 19, 2014 at 10:59 am

I am just perplexed as to why everyone is focusing so much on the issue of the people not having enough money, and not the other side of the coin where the cost of living and prices are too darn high! Why is the answer the same as it was back in the medieval times The peasants are restless sire, we must throw gold at them in the streets and they will like us again!” Seriously, especially when we are demanding this from our government to “fix” our wages rather than establish functioning collective bargaining, or demanding free higher education so we don’t have these “lifers” working at places that are accepted as student jobs. Higher base wage means more base level taxes, higher prices for everyone, higher business costs, and the value of living remains the same or gets worse. I do not see anyones lives actually improving from this as the cost of living will only follow the trend…I agree the cost of living is not balanced with wages right now, but focusing on wages as the problem, and not the cost of living, is a recipe for disaster. We are just handing out fish here, rather than teaching the people HOW to fish.

Reply

Leave a Comment