Hooray for the kind-hearted Democrats, who have stated that their first legislative priority upon taking control of the congress will be to increase the minimum wage!
What a wonderful group of people, who really care about those stuck on the low end of the wage scale. They are about to force the evil corporations to pay their entry-level workers more. Who could possibly oppose such a fair and understanding law, especially since the evil GOP has blocked any attempt at raising it from the currently outrageous rate of $5.15 for how many years now?
I was just wondering:
Exactly who is being forced to work for $5.15 an hour right now? I'm very curious, because in my community it's well known that you can't hire anybody to do anything for less than around $6.50 starting rate. Well, maybe you can hire an illegal for less, but that's another topic.
What is the new minimum wage rate going to be? I've heard varying numbers, ranging from $6.15 to $7.50. I think I even heard somebody advocating $8.50. Certainly we don't want our entry-level workers having to endure hardships at these piddling amounts. Why not make it $20?
I did take Economics in graduate school, so even though it wasn't my best subject, I think I did pick up just enough to understand what happens when the government raises the minimum wage. Here's what we will see unfold over the next two years, as this fantastic new law goes into effect nationwide:
Employers will cut back on hiring of students and other temporary and seasonal workers. Employers will balk at paying the extra hourly rates because those workers are now getting too expensive. They will turn to temporary agencies for more experienced workers or do without for those jobs they were providing as part of their community service outreach.
Employees will get restless. After all, when the minimum wage goes up, everyone at the next wage tier will find themselves at or near minimum. That's not fair - why should an entry-level new hire earn almost as much as the employee with one or two years experience? Those employees will demand, and get, commensurate raises.
The domino effect kicks into place. Every wage worker demands a raise commensurate with the raises taking place below their level because of the new minimum rate mandated by law. The increased labor costs in turn put pressure on employers to outsource more work, cut back on their workforce, and/or raise prices. Those companies who can't keep up with the wage inflation will close.
So what happens when the federal minimum wage is increased? Best-case, a slight temporary increase in unemployment rates, a temporary inflationary period, and everyone makes a little more per hour, but their cost of living increases at the same time. So there's no real improvement in the quality of life for anyone at either end of the wage scale, but there will be lots of new people in the unemployment line.
Worse case, if the minimum wage is increased quickly and dramatically, a recession follows. Outsourcing to India and China explodes, companies hire even more illegal workers as long as they can get away with it, layoffs and plant closings happen everywhere, and small businesses close up shop. Everything costs more, so even workers who kept their jobs will feel the pinch of higher prices. Because with a dramatic wage inflation, the labor market will become saturated with laid off workers, which lets employers fill scarce available jobs at lower pay rates than before. In the end, everyone is worse off, at least until the new baseline is set.
I'm sorry, I must be wrecking the celebration. Go back to your party.
See you in the real world when the party's over.
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