July 14, 2006

What Does A Living Wage Look Like?


The Democratic Party and the left (not always the same thing) have been agitating for a substantial raise, to a "living wage" the federal minimum wage law. Currently, and for many years, the federal minimum wage has been $5.15 an hour and the generic left (in which this time I'm including the Democrats) would like to see that raised. I've seen suggestions ranging from $6.00 an hour up to $12.00 an hour. When anyone suggests that price increases passed on by businesses and or job loss from small firms may result, the outcry typically is that Republicans and Conservatives (again, not necessarily the same thing) hate the poor and don't want the rich to have to pay anything out of their pockets. And, depending on the blog you go to, the language to describe generic conservatives (this time I'm including Republicans) is a whole lot worse.

Well, the fact of the matter is that there will be a tradeoff. Companies, large and small will either have to raise prices and/or lay folk off in order to keep profit margins within the realm of feasibility. What's that you say? No they won't? How silly, of course they will. No politician is going to pass a law limiting profit (unless it's big oil and a windfall profits tax - and you see how well the last one worked) because they know that the funds for re-election come essentially from the pockets of investors and owners of small and large businesses. So, ask for the moon, you have as much a chance of getting that.

But, I digress, back to the issue of the minimum wage. Many states and localities have already passed minimum wages for residents in their respective political subdivisisons, so why aren't the generic leftists prodding them for increases and the rest of the country to catch up? Simple really, again politics. To effectively "buy" votes for the Democratic Party, there needs to be a national stage for Democratic politicians to run from.

It just won't do to have a bunch of Democrats touting a higher minimum wage as a local issue (although they are doing so for state wide initiatives). Ahhhh, but "The Democratic Party forced the administration to raise the minimum wage can be a national cry and be much more effective. But, that is still not the whole answer.

The rest of the answer lies in the amount of the raise. If $9.00 an hour is "OK" but not where it should be, why stop at $9.00, or $10.00 or even $15.00? Let us go all the way to $30.00 an hour for all entry level jobs, regardless of skills, education, or experience. Those don't matter anyway, because a minimum wage is just that... the minimum that you can pay someone for work received. But, you know, I've never had a generic lefty say "OK, you bet, let's do it." They all say something along the lines of "Don't be ridiculous." But, I'm not being ridiculous! If that, or some other figure exceeding a figure of say $18.00 an hour is what it takes to reach the "livable wage" criteria, why heck, lets do it.

If we did however, while the Democrats could claim victory for that election's pandering, it wouldn't hold up over the long term. No, not even close, in fact the resulting economic displacement and chaos would be horrendous. You see, the Democratic party really doesn't give a damn my dear, about the "little guy" they only want policies that insure his vote. Look at all the "grand coalition" of special interest groups called the Democratic Party and where they are today. The Democrats ruled congress and the senate from 1954 through 1994, with a single exception of the U.S. Senate on the coattails of Ronald Reagan's landslide, and that only lasted a couple of years. Are those groups substantially any better off now than they were then? Blacks? The Poor? The Hungry? The Homeless? Labor? Or, as it seems to me the Dems are running on the same issues that they have always run on? Except of course when a Democrat is in the White House. Whole different ballgame then friends.

So, why not raise the minimum wage all the way at one time? Because they want to use that issue again, and again, and again. $7.00 an hour now, in a couple of years, another $0.75 then another a dozen years after that. Each time decrying the lack of a livable wage. Yeppers dearly beloved readers, a platform they can run on forever, and never be held accountable for. No wonder the horses haven't been to the smithy since '33, same old tired platform, same old tired policy.

Thoughtful comments from generic lefties requested. No vitriol please or I'll take your comment down.

More on the Minimum Wage and other egregious fibs from my good friend Donald Luskin on my blogroll, who writes "The Conspiracy To Keep You Poor And Stupid." By the Bye, if Luskin isn't on your favorites list, he ought to be.

Posted by GM Roper at July 14, 2006 07:08 AM | TrackBack

Some firms will have to lay off workers or raise prices. Some will merely have to dip into prices. But this is macro policy and we can't get too absorbed in what happens to each individual business. Studies show that with modest increases in minimum wage, the job market doesn't suffer. And, since there hasn't been a minimum wage increase in several years even though interest steadily increases, the poorest people in our society are essentially getting a wage reduction every year. The economy is big and complicated and any market manipulation may have some negative effects, but liberals believe that those effects are modest and worth dealing with. That's why serious liberals are proposing a modest increase, because if the increase were larger the attendant effects on the economy would be too severe.

And you're correct that there is a political dimension (hey, that's politics), but it's no more cynical than proposing tax cuts around election time.

I think you guys are taking a pretty cynical approach on this because it is popular. It's an issue where the public already sides pretty convincingly with liberals. So instead of making a case against a realistic minimum wage increase, you're just condemning liberals. Fancy footwork, but it's not fooling anyone. Let's see a real case against a modest minimum wage increase, if anyone's got one.

Posted by Mavis Beacon at July 14, 2006 03:06 PM

Mavis, I can always count on you for reasonable responses and friendly debate. Thanks. OK, lets take a look at what you said. You have not refuted my major point that this is politics, in fact, you have reinforced it. Too, while it is absolutely correct, as you note, the disruption will be minimal, but it will be a disruption and it will not substantially affect the family wage earner at the bottom of the ladder (the $5.15 an hour earner) and the purpose of raising a minimum wage for that individual is to help get him out of poverty. OK, lets go all the way... $20.00 an hour. So, the disruption will be significant, but it will only last for a few years then everything will revert to the status quo and we have to start over.

Rather, why don't we just admit that the $5.15 an hour figure is a starting point only and if there really is a family man/woman supporting a family on that, pay them the same wage and put them in an education program that will lift them out of poverty.

I think, based only on my own observations, that education is the key to poverty, but as long as schools are what they are and turn out the under-educated as they do, nothing is going to change. Yep, I'm cynical. It comes from being more liberal once and having any conservative ideas I espoused hammered by the more enlightened of my brethern.

By the way Mavis, welcome back, it's good to see you again.

Posted by GM at July 14, 2006 03:21 PM

GM: Are those groups substantially any better off now than they were then? Blacks? The Poor? The Hungry? The Homeless? Labor?

If the Democrats actually solved any problems, then they wouldn't have those causes to use in future elections. The Republicans are trusted more on national defense, and that is why people voted for them during the cold war to deal with Russia. (They trust them more on terrorism, too.) Unlike the Democrats with their issues, the Republicans actually solved the cold war problem and lost that voter concern, as a result-but, it was the right thing. I believe that had a lot to do with Clinton coming in, because people no longer saw a Russian threat and Clinton could use the "peace dividend" (a fancy phrase for gutting the military) to buy votes with new programs for their voters holding out their hands.

I do blame the Democrats for forcing moms to go to work. Years ago, the father was the sole breadwinner and the mother would stay home to nurture the kids. Because of inflation caused by huge Democratic budget deficits and trying to fund guns and butter during Vietnam, more people struggled with making ends meet. In addition, the tax code had the brackets fixed (by the Democrats), so inflation threw people into higher tax brackets with no real increase in spending power--thus, the difference had to be made up by the moms. This led to the womens' "rights" movement, that said that women should be paid the same thing as the traditional breadwiner (even though there were real differences in education, productivity, and commitment.) So, now, the breadwinner was finding more competition in the marketplace for his job and was forced to take less or work more hours for the same thing. Another liberal policy defeats the family and hurts the chilllllldrennnnnnn.

On the minimum wage, if it worked we wouldn't have to change it all the time. The market place will always have a leveling affect, and any short-term gains will be wiped out. It doesn't matter to the Democrats that some people will lose their jobs or some small businesses may die as a result.

If someone wants a "living wage," it is available. You just have to earn it. A minimum wage is a "starting wage"--not a living wage for someone supporting three kids. If someone relies on a minimum wage to support a family, then the problem is not with the wage base but with them.

Posted by Woody at July 14, 2006 04:13 PM

I think everyone is ignoring a simple, if perhaps unsavory truth. There will always be a need for someone on the bottom of the totem pole. If everyone gets educated and works at think tanks, who will deliver pizzas and straighten aisles at Wal-Mart?

Posted by bishopdic at July 14, 2006 05:15 PM

Joe, good point. Thanks. You are of course right, if everyone made a minimum of 18 bucks an hour, soon they would still be poor, but unless the Democrats relented, they would be in a higher income tax bracket. My first job with the State of Texas paid the awesome rate of $350.00 per month paid once a month (so more taxes were held in witholding) and that worked out to about 1.99 an hour working as a therapist at San Antonio State Hospital. I'm making a lot more than that now, but I've also added a Bachelors and Masters degree since then. I'm just as broke, but broke in a better part of town. ;-)

I once took a class at the university on work counseling, most of the class were hard core liberals including our beloved (and he really is a nice guy) professor who was a strong proponent of liberation theology.. but I digress. They went on and on and on about the "poor" but not one of them could name the lady who cleaned our classroom (it was Maria as I recall) knew anything about her (her husband was killed in Vietnam and she raised 3 kids by herself, one was then a senior in the same university) or even seemingly enen saw her in the hallway, spoke to her, nodded at her or smiled at her. One of the invisible poor but far richer than any of those yahoo's.

Posted by GM at July 14, 2006 07:47 PM

How did Clinton handle the welfare and minimum wage problem?

When Clinton went into office he promised tax cuts for the middle class. He renegged on that promise and only after a resounding "Booo" he set about to making it right in his own twisted way. This is how he did it:

He extended and expanded the earned income tax credits to make actually 'working' attractive. But that wasn't enough. So then he raised the minimum wage. Then he had to go on the road to convince businesses to hire unskilled workers at the new minimum wage. When that wasn't enough, he made it easier to get food stamps, medicaid and housing assistance. So they were never really "off welfare" because the new minimum wage was in fact NOT enough.

When all this together eventually inflated many wages, in some cases to up to $30K a year, he started calling it his "tax cut for the middle class".

And THAT, my friend, is how the Democrats do things. They don't "fix" stuff, they just shift it around and slap a new label on it and everyone goes, "Ooooh!"

Posted by Oyster at July 14, 2006 08:55 PM

Funny how complex a seemingly simple issue like minimum wage can be. Essentially, I agree that minimum wage will always be poverty level. Although there may be a short lag time when it is first raised.

Recently Tennessee defeated an effort to have a state minimum wage. Oddly, one of the supporters showed, to me at least, the circular process that makes it self defeating. He wrote a op ed piece for the local newspaper supporting and had a lively discussion in his blog. The discussion focused on the increase in prices that the raise would cause. For some reason the exampe being used was frozen yogurt. The telling comment the blogger made, quoting his wife, was "Who can't afford to pay another nickel for frozen yogurt?" Well, the people making minimum wage, whatever it may be, would be the most likely to not be able to afford the extra nickel, dime, quarter, etc. The circle never ends.

Maybe minimum wage shouldn't be a living wage. Then more people might be motivated to learn more skills, be better educated and work harder.

BTW - GM, my first job with the state of Tennessee paid exactly what your first job with Texas paid. In college I had several work-study and university jobs that paid well below minimum wage as universities don't have to pay part-time student employess minimum wage. It helped me pay my way through college though and I was happy to have the jobs.

Posted by DADvocate at July 14, 2006 09:01 PM

The first jobs I had: haying, picking berries and beans, had no minimum wage.
But if I had to start over, and I was unskilled, I would prefer to have a job at $5.15 per hour than no job at all because some rich politician wanted to "help" me get a "living" wage.
Incidently, I don't see thousands of working class people making a dying wage, keeling over left and right due to malnutrition.
All a "living" wage really means is owning a bigger TV, better stereo, dvd player, microwave, etc., i.e. luxury items for the most part.
Even unskilled workers who work hard, get raises as they become more experienced.
My wife and I have a young friend who started out working as a janitor, 10 years ago, and today he owns his own janitorial business, and with no education past high school.
He drives a Lexus when he isn't driving one of the cleaning trucks.
A kid starting out at McDonalds can rise up through the ranks also.
It's hard work, but it can be done, even without college, if one is honest, reliable, willing to work long hours, and has a good attitude.
College can help, sometimes greatly, but it isn't absolutely necessary to get out of poverty.

Posted by Ben USN (Ret) at July 15, 2006 04:46 AM

I love this issue. ALL STUDIES HAVE SHOWN AN INCREASE IN UNEMPLOYMENT WHEN MINIMUM WAGES ARE INCREASED. Even Clinton's study in the 90's showed an increase in unemployment. This unemployment increase is ONLY short-term due to a growing economy. So when those that originally lost their job, secure another job, it is at an artificially increased value, which artificially increases the prices of goods and services which decrease the buying power of the consumer, which increases the need to make more money...do you see the problem yet?

One may ask why unions are for raising minumum wage? It would seem if wages are increased by the government there would be no need for unions. However, major unions have contractual language that state when the federal minimum wage is increased, union wages will automatically increase at the same rate.

Let the free market set the wages and prices.

Posted by cracker at July 15, 2006 07:24 AM

MA just voted to increase MW to 8.50/hr--
thats more than most kids make up here in NH at their afterschool jobs. I remember when MW was 2.90/hr-- sheesh.

Posted by Raven at July 15, 2006 09:37 AM

Raven - My first "real" job was as a lifeguard for the University of Tennessee. It paid $1.25 per hour, minimum wage was $1.65.

Posted by DADvocate at July 15, 2006 10:41 AM

I agree with you, GM; I've always made it a point to know all of the people who move within my sphere, be they cleaning ladies, repair men, janitors, food service workers, receptionists and so on. It astonishes me how often these people are taken for granted, often as you say, by the very people who claim to be so concerned about them

One of my first jobs was working in a flower shop for $1.75/hr, starting when I was in middle school. I learned the basics of flower arranging, then moved on to shopkeeping, then to ordering, and finally to bookkeeping (luckily my wage went up as I learned more!). It was always a surprise for customers to come in and see a highschool sophomore running a flower shop by herself, especially when a bride and her mother came in to plan the floral arrangements for her wedding.

Another job I had paid a dollar an hour (more of a volunteer job really, with a token wage) for teaching ESL to new immigrants to our town (legal ones, btw). It was funded in part by their wages, which were minimal, seeing that they had just immigrated. Most of them had found work at any of the many sympathetic Mom & Pop joints in town (an upper middle class college town in Oregon), many of whom also ended up unofficially sponsoring or helping out the people or families of the people working for them. But then all these people from California started moving up (the property and income tax there are minor compared to California's), and with them their GeneraBusinesses. Now, they've driven out just about every Mom & Pop shop in town, and the price of everything has shot sky high. It's almost impossible for teens or low-skilled workers to find employment in town now, so so much for the thought of encouraging responsibility through industry and money-management. In spite of the town's professed "committment to diversity", they've created a situation where even legal immigrants have been driven farther afield to find work (maybe that's what they intended all along?). Raising the minimum wage so greatly wouldn't benefit the workers as much as it would Big Business, who could afford to absorb the initial losses until their profit margin made up the cost of outlay. Not to mention that many of their employees tend to be skilled labour who can command a higher wage anyway. Small Business on the other hand, would suffer greatly under the economic pressure imposed by raising the minimum wage. Firstly, it would be difficult for them to come up with the initial capital to begin paying their few employees the increase, then they would have to rely on being able to make up this outlay as quickly as possible or be forced to lay off employees, or go under entirely.
I'm still trying to see how this would make our economy better...

Posted by Katje at July 16, 2006 02:31 PM

Since Cracker has read ALL MINIMUM WAGE STUDIES, he'll be able to explain why this one, courtesy of the British Secretary of State for Trade and Industry, disagrees with his foolish blanket statements: http://www.lowpay.gov.uk/lowpay/report/pdf/2006_Min_Wage.pdf

Those who asssert that inflation is a long term problem for the poor (and everybody else) are correct. The solution California is considering is to hitch minimum wage increases to the Consumer Price Index. The other solution, just let everybody keep earning $1.50 an hour until the market will no longer bear it, seems pretty unfeeling to me.

GM, I like to drop by every now and again, just to make sure you're behaving yourself :)

Posted by Mavis Beacon at July 17, 2006 10:58 AM

If I want to understand minimum wage logic here, why should I consider a report prepared by a British government socialist? Mavis, that report has 174 pages. Before I invest that kind of time, the report would have to offer promises of something that I haven't seen. Can you reduce it to 200 words or less?

Minimum wage adjustments should be something reiewed and voted on by current politicians rather than defaulting to a CPI adjustment decided upon by previous legislators. Times change and so do philosophies, so nothing like that should be fixed.

But, it's so nice that minimum wages could be indexed to inflation while the wages of no one else are.

Posted by Woody at July 17, 2006 02:17 PM

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