Minimum

Waiting for someone to finish something so I can proceed. In the meantime I've got a break, spent here.

There was some ranting going on today about the minimum wage. Something about it's a moral duty for employers to pay a living wage to their employees. And congress keeps voting themselves fat raises and lifetime benefits better than just about anybody else on the planet can get.

I can't say I disagree with the sentiments. Sure, an ethical employer should pay their employees enough to be able to provide for their families. I'm also disgusted at the self-serving congress who give themselves whatever they desire, even though for the most part very few of them deserve half.

But the topic is minimum wage, and it's an old rhetorical trick to try making some political point by trying to link some unrelated problem. So let's decouple the whole argument and just look solely at minimum wage.

It's 5.15 an hour, and has been for (without looking it up) maybe close to a decade. No doubt it would be nearly impossible to support even yourself at that hourly rate, although the illegal immigrants are finding ways by sharing housing and transportation expenses.

How many people work full-time jobs that pay $5.15 an hour? I know of nobody, although some say that lots of illegals are working for that rate. Now I do see tipped employees getting less per hour on their base rate, but tips put them well over the minimum and they must be guaranteed the minimum wage if the tips don't cover.

The factories and retailers in this area offer starting rates well over the minimum, so nobody in the larger companies is getting that rate. Around here, it seems to me that the effective minimum wage is somewhere around $6.50, which is the starting advertised rate for pretty much every part-time entry-level job.

The real question that needs to be asked is, what should the minimum wage be? Lots of states have their own minimums, with California and Massachusetts the highest at $8. I don't believe this issue is even any business of the Federal government, and constitutionally is something that should be left to the states. But then again, the Feds have gotten away with sticking their noses in so much of states' business that there isn't much point to that argument.

A single person could live decently, if frugally, at around $8-$10 per hour, from my general knowledge of housing, food, and transportation costs. To support a family of four, I suppose it would take at least $15, maybe up to $20. So should minimum wage be set at $8 or $20?

Suppose minimum wage was set at the California rate of $8. What would happen to the workforce in general? Well, those making less than $8 will be happy with the raise, assuming they don't lose their jobs. And some number of them will lose their jobs, because employers will be forced to lay off people to cut costs.

Those already making $8 or more are going to be unhappy at first. Because they will be angered at having worked for some period of time, maybe years, to work up to their current pay rate and newer employees have just been granted a raise that brings them up to a level matching the longer-time employee. So they will demand a correspondingly higher wage, and are much more likely to seek that raise elsewhere if their current employer doesn't act quickly.

All that is inflationary. As workers across the country suddenly get higher wages across the salary scale, they will compete for better housing and buy more stuff. Prices go up both to cover the new higher wage costs and higher demand for all products and services.

This leads to a spiral, where the cost of living rapidly escalates and employees demand wage adjustments to keep up, so costs go up and prices go up and it continues until the country hits the inevitable recession. We end up with high unemployment, a stagnant economy, etc.

Again, I'm not necessarily against a minimum wage. There are too many employers who will pay their workers as little as they can get away with, and would only pay the minimum wage if forced to do so. Students are most commonly abused by minimum wage, as seasonal businesses and fast food and, ironically, government, hire them part-time or in the summer with no benefits, minimum wage, and often even get exemptions from paying time and a half for overtime.

Politically, there's plenty of criticism for both parties. Democrats demagaogue the issue in an attempt to make the Republicans look bad, while their actual policies would do little or nothing to actually improve the lives of unskilled workers. Republicans know that minimum wage is only paid to illegals, and are pandering to the corporate interests that want to continue employing them.

It seems to me that there would be little or no impact on the economy to raise the minimum wage immediately to $6.50. If it were phased in over several years, I think you could even end up as high as $7 or $7.50 without significant economic problems. What the two parties should do is negotiate: For example, Democrats would permit a repeal of the inheritance tax (aka "Death Tax") in return for a minimum wage increase like I described.

But the parties aren't interested in making deals or compromising on much of anything these days. So from that standpoint, the entire argument is moot anyway.