It was encouraging to see President Obama propose an increase in the minimum wage in his State of the Union address, even if the $9.00 target did not seem especially ambitious. If the $9.00 minimum wage were in effect this year, the inflation-adjusted value of the minimum wage would still be more than two percent lower than it had been in the late 1960s. And this proposed target would not even be reached until 2015, when inflation is predicted to lower the value by another 6 percent.
While giving a raise worth more than $3,000 a year to the country's lowest paid workers is definitely a good thing, it is hard to get too excited about a situation in which these workers will still be earning less than their counterparts did almost 50 years ago. By targeting wage levels that roughly move in step with inflation we have implemented a policy that workers at the bottom will receive none of the benefits of economic growth through time. In other words, if we hold the purchasing power of the minimum wage fixed through time, as the country as a whole gets richer, minimum wage workers will fall ever further behind.
It is important to realize that this was not always the case. The federal minimum wage was first put in place in 1938. From that year until 1968 when its value peaked, the purchasing power of the minimum wage increased by more than 140 percent. As a result, minimum wage workers saw a sharp increase in their living standards. Over this 30 year period, low wage workers shared in the gains of the economy as a whole as the minimum wage rose in step with productivity growth.
If workers at the bottom had continued to share in the economy's growth in the years since 1968 as they had in the three decades before 1968, we would be looking at a very different economy and society. If the minimum wage had risen in step with productivity growth it would be over $16.50 an hour today.That is higher than the hourly wages earned by 40 percent of men and half of women.
It shouldn't seem strange that the wages of workers at the bottom rise in step with productivity, after all they do for many other workers even when the work has not in any direct way become more complex. For example, when a realtor is selling a $400,000 home rather than a $200,000 home it does not necessarily require any greater effort or skills. In fact, if we were talking about the years of the housing bubble, it may just be the case that the same home had doubled in price. Yet, the commission will be twice as much.
There would be similar stories in many other occupations where the growth of the economy by itself would tend to make wages rise. It is not obviously more difficult or time-consuming to sell 1,000 shares of stock or credit default swaps at prices that are twice as high, yet the commissions going to the brokers are likely to be twice as large.
Doctors, lawyers, and other highly educated professionals have also been positioned to benefit from the growth in the economy. We have left those at the bottom out. This has been by design and nowhere is that more clearly the case than with a minimum wage that has been set at level that has not even kept pace with the cost of living.
As a practical matter we couldn't possibly raise the minimum wage any time soon to $16.50 without serious disruptions to the economy. One result would also be higher prices in the economy. Of course this is also the result of having doctors who average $250,000 a year and Wall Street bankers who can pocket many millions of dollars a year. Their income is a cost to everyone else.
Somehow the issue of higher prices and inflation is an important point when we discuss the wages of people getting $7.25 an hour to wash dishes but it is not supposed to enter into polite conversations when we talk about the most highly paid workers. That is a political choice, not an economic one.
We have structured our economy so that we can get cheap restaurant meals because of low-paid workers. Hotel stays cost less because we ensure a plentiful supply of workers at near the minimum wage. And convenience stores stay open 24 hours because the people working the midnight shift get paid almost nothing.
There is no economic reason why those at the bottom should not share in the gains from economic growth. And there is no economic reason why those at the top should be such disproportionate beneficiaries. We rigged the deck this way more than three decades ago. We can restructure the rules so that money no longer flows upwards. A minimum wage that again follows in step with productivity growth would be a large part of this reversal.
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On the flip side I voluntarily pay over minimum wage because I believe I get better happier employees which drive up my sales.
Please leave me alone. And yes I pay the taxes for the roads my customers use to come buy from me.
Great countries in the world are great for all it's citizens, not just for some.
This does not get to the heart of the matter. The collective WE fell for the allure of the "Service-Based Economy" from the early '80s until now. WE believed that the Financial Services Industry (Wall St., et al) could effectively make us 'money for nothing', and that there were no consequences of leaving much of the Real Economy behind (manufacturing, industry, invention) for one built largely on paper earnings from abstract transactions. In my opinion, low wages and overwhelming income disparity are among the consequences. Other consequences? A so-called Democracy that is a pay-for-play component of the dysfunctional Economy we have wrought.
What authorizes that?
The Preamble's requirement for the United States government "to form a more perfect Union" along with Article 1 section 8, paragraph 3's "To regulate Commerce ... among the several States" since corporations are the producers of commerce among the several states.
Come on "People Citizens" of the USA, sign http://www.change.org/petitions/eliminate-capitalistic-military-regime and let's get it done!!!!
Amendment 16 reads *Congress shall have power to lay and collect taxes on incomes, from whatever source derived* which include investments in foreign banks and others, sales to foreign nations and, since the only constitutionally allowed tax exemption is salaries paid and taxed by the US, any pay they pay to foreigner workers. They owe us 4 years of back taxes since they became citizens in 2009. How much in back taxes will that provide to eliminate the automatic cuts destined for March 1? So why not to save education, {Social Security is untouchable anyway}, medicaid and care, and everything else except military, which is bigger than it need to be.
So, Let's get with it.
Raising the minimum wage may have some short term squeezing of the job market, but the longer term effects are likely to result in increased employment. This is because essentially all of a minimum wage earners income is likely to go to basic daily living exprnses. Getting $ 9/hr. instead of $7.25/hr will still be more likely to be used for basic living expenses than the millions in bonuses CEO's capture for themselves on the backs of workers who are more productive than in the past, but are rewarded with stagnant or declining purchasing power. The CEO's tend to put their largesse into speculative investments, luxury goods, and more vacation homes. This $ tends to have a lower velocity through the economy, resulting in fewer jobs being created than the same amount of money spent for food, clothing, and diversions from the mundane life of the working poor. More $ spent this way will increase demand, resulting in increased production, and the hiring of more workers to meet this demand. This results from the greater velocity of $ used for everyday needs through the economy.
Since 1980 the richest 5% saw their net worth balloon from 9.5 trillion to 38 trillion and growing. The other 95%: worth 13 trillion in 1980, are today worth 13.2 trillion. The bottom 50% are worth merely 1.3 trillion in total.
Several implications that rarely are discussed.
1. the reason both parties court the top 5% for campaign donations? they have the money.
2. the bottom 95% have already been making huge sacrifices.
3. the richest 5% have amassed enough new wealth since 1980 that they could easily pay off the entire federal debt immediately and still have 2.3 times the wealth they held in 1980.
4. If the entire net worth of the other 95% was liquidated, this would not cover the debt.
5. keeping the minimum wage low is essential and keeps wages for all lower too.
Raising the minimum wage is one modest way to transfer value created by workers into their pockets instead of continuing to allow all value to accrue to a few Mitt Romneys at the top. Count on the GOP opposing this; they are committed to maximizing the imbalance even if this hurts the economy.
The Super Rich deserve more dancing ponies for being so totally awesome and SuperMan like.
If we aren't careful, they'll remove themselves and form their own super duper secret society.
I read that somewhere....
We would be so lucky that they would leave, and let us get back to doing right by the most people.
The purpose of hiring more workers would be to satisfy demand. Why else would you employ someone? You don't just hire them because you have more cash.
Remember, better paid workers = more tax revenue, more demand for products requiring employers to hire more people.
Alternatively, you can maintain the status quo.
Here's what we have:
Employers pay the lowest wage they can get away with
Employees then must file for government assistance because their wages don't cover living costs
Employers use a portion of their profits to lobby the government to reduce or eliminate the assistance used by their employees
Unemployed workers are given the choice of taking any job at any wage or die
Employers can lower wages more by using the threat of unemployment (work or die) for their existing employees
Today, the Supreme Court is hearing an argument to lift the cap on individual contributions to political campaigns.
The unwashed masses can barely keep themselves alive, much less consider contributing to a political campaign. Therefore, who is looking to be free of these limitations? Odds are real good they're not donating to candidates that would work to benefit the majority in this country.
The goal is unchallengeable plutocracy.
A rising tide lifts all boats, but right now, we have an upside down umbrella above our heads catching rainwater while we all die of thirst.