At $7.25 per hour a full time worker with no overtime can make $1,247 per month. In theory housing should be no more than 25% of income, so that’s $311.75. If only folks could find a place to live for that. Here in Portland, a tiny studio in a poor neighborhood costs around $500. That leaves $747. Food and household products are another $300, with very thrifty living. That leaves $447. A modest car payment and insurance will cost that, leaving nothing for gas, so for a single person minimum wage does not cut it. For a single mom with kids, it won’t even come close. This highlights the gross inequity of income distribution in this nation.
As the nation grapples with a jobs crisis and unemployment hovers near 9 percent, it is easy for policy makers to forget the plight of those who work but earn very little. There are about 4.4 million workers earning the minimum wage or less, according to government statistics. This amounts to about 6 percent of workers paid by the hour. They need a raise.
Today, a worker laboring 40 hours a week nonstop throughout the year for the federal minimum wage could barely keep a family of two above the federal poverty line. Though it rose to $7.25 an hour in 2009, up $2.10 since 2006, the minimum wage is still lower than it was 30 years ago, after accounting for inflation. It amounts to about $1.50 an hour less, in today’s money, than it did in 1968, when Martin Luther King Jr. and Robert Kennedy were killed, Richard Nixon was elected president and the economy was less than a third of its present size.
The minimum wage has many opponents among big business and Congressional Republicans. In Nevada, the Las Vegas Chamber of Commerce is pushing to repeal the state’s minimum wage, a whopping $8.25 an hour. Representative Darrell Issa, the California Republican, has proposed a bill in the House that would effectively cut the minimum wage in states where it was higher than the federal threshold by allowing employers to count health benefits toward wages.
Opponents argue that raising the minimum wage would inevitably lead to higher unemployment, prompting companies to cut jobs and decamp to cheaper labor markets. It is particularly bad, the argument goes, to raise it in a weak labor market. Yet with unemployment likely to remain painfully high for years to come, this argument amounts to a promise that the working poor will remain poor for a long time.
What’s more, we know now that the argument is grossly overstated. Over the past 15 years, states and cities around the country have rushed ahead of the federal government to impose higher minimum wages. Economists analyzing the impact of the increases on jobs have concluded that moderate increases have no discernible impact on joblessness. Employers did not rush off to cheaper labor markets in the suburbs or across state lines for a simple reason: that costs money too… [emphasis added]
Inserted from <NY Times>
In a that can afford the most luxurious welfare socialism can provide for the rich and for criminal corporations, it is an outrage that so many of those of us stuck with free enterprise work hard for 40 hours a week without earning enough to live, let alone support a family. Is it any wonder that Republicans are standing in the way?
20 Responses to “We Need a Higher Minimum Wage!”
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If anyone wants an oppposing view, see
http://freemarketalternative.blogspot.com/2010/01/why-minimum-wage-laws-are-bad-idea.html
and
“… research shows that in the long run the adverse effects of a higher minimum wage are quite substantial.” (page 84, The Economics of Public Issues, 13e, by Roger LeRoy Miller, Daniel K. Benjamin, and Douglass C. North).
“In a new report, economists David Neumark of the University of California at Irvine and William Wascher of the Federal Reserve Board say a review of more than 90 studies in more than 15 countries since the early 1990s shows nearly two-thirds of the studies find a “consistent” though not always statistically significant negative impact on employment. Fewer than 10 found a consistently positive impact. While there’s “no consensus,” they say, “the weight of empirical evidence” supports the traditional view.” (The Wall Street Journal, p. A4, Nov. 3, 2006)
From Greg Mankiw’s blog:
“Economists Richard Burkhauser (Cornell University) and Joseph Sabia (University of Georgia) report:
a beneficiary from a proposed federal minimum wage hike to $7.25 an hour is far more likely to be in a family earning more than three times the poverty line than in a poor family. In total, only 12.7 percent of the benefits from a federal minimum wage increase to $7.25 an hour would go to poor families. In contrast, 63 percent of benefits would go to families earning more than twice the poverty line and 42 percent would go to families earning more than three times the poverty line.”
Welcome Cyril. 🙂
Is that data up to date? The older it is the more it reflects teens working summer and after school jobs. There are less of them now as the Bushwhacked economy has driven many adults into such positions. I would not object to raising the minimum wage for non-students only. You benefit analysis does not change the need of any Americans working full time to be able to live on what they make.
As far as I can tell, the last study by Burhauser and Sabia is pretty recent, since it is based on the recent changes in the minimum. You can see that the other one is through 2006 but it is very broad based.
In micro economics, there is a case of something called monopsony That means only one firm hiring workers of a certain occupation. In that case, a minimum wage above what the firm is already paying can, if it is not too high, actually increase the number of workers hired (there is a somewhat complex graph that shows this and there is a very clear point where, if the government made the minimum wage too high, the number of workers hired would fall). But monoposonies in the real world are rare
But the problem I see in saying that raising the minimum wage will not reduce the number of workers hired is that the demand curve for labor would have to be just about vertical, no downward slope. If that were true, then we could make the minimum wage $50 an hour and no one would lose their jobs. I think proponents of the minimum wage have to say how they know what it should be set at. How do they know that a given number is where workers hired would fall?
We have to remember that many businesses operate on the margin. If the minimum wage gets too high, some new businesses are never formed in the first place, which is bad for workers and everyone else. Or, workers don’t get laid off, the business will have to cut back on training or capital investment.
When the government imposes a minimum wage, it basically forces the the businesses that hired the workers (and the customers of those businesses) to pay for the government’s anti-poverty program. If I don’t own a business affected by the law or shop at those businesses, as a citizen I don’t have to pay for the anit-poverty program.
So what I am saying is if we really believe the government should fight poverty, it means that it is a burden all citizens should share, not just the owners or customers of the businesses affected. I think it would be better to expand the earned income tax credit or something like that
Cyril, your argument about the demand curve makes perfect step in classical capitalism, but Adam Smith never envisioned corporations, corporate welfare or oligopolies and cartels. He based his theory on unlimited numbers of small suppliers where the supply line is based on the cost of providing the commodity. In Smith’s theory, “profit” only occurred when monopolies or barriers to entry interfered with the free market. Today’s crony corporatism has nothing whatsoever in common with The Wealth of Nations. What remains is that States with a higher minimum wage have economies no worse than red states. In fact, red states require more federal resources than they pay in.
I certainly agree that we should get rid of corporate welfare. But again, there are very few monopsonies in the real world. There may be corporations, but they still compete with each other for labor. Studies show that generally the US is one of the more competitive economies in the world.
If you can prove that these corporations are monopsonies then a case can be made for a government imposed minimum wage.
Oh No! We’re not going there, but nice try. Your attempt to define the terms that justification for minimum wage must be based on proof that corporations are not monopsonies is fallacious because your major premise is invalid. My case is based as previously stated. An economy in which a worker is not worth his keep cannot survive. States with higher minimum wages have healthier economies than those that do not.
I don’t see any premise that is invalid. What studies show that “States with higher minimum wages have healthier economies than those that do not.”
Do those studies prove that it is the minimum wage alone that causes them to be healthier? (talk about falacious reasoning) What does healthy mean?
Besides, I was not addressing justifying the minimum wage. I was addressing the issue of can the minimum wage increase the number of workers hired or at least not reduce the number hired. Many principles of micro books will show that a minimum wage in a competitive market will reduce employment but they can increase employment in a monopsony if they are not too high (there is a special graph which shows this).
I am sorry to say I just don’t get a sense that you are playing fair or trying to understand where I am coming from. Even this editorial by the Times was not completely fair. They only cited research that they liked then they said disregard other opinions. I think what is going on here is what gets libertarians and conservatives a little mad. A person raises reasonable objections to more government intervention into the economy and you get ridiculed.
I even read an article yesterday by the liberal think tank EPI yesterday on the minimum wage and one of the reasons they emphasized was market power by employers. That means monopsony power or something close to it (maybe a just a few firms hiring a certain kind of worker). But I don’t see that much in the US economy and industries like the auto industry that have just a few firms pay way over the minimum wage (and probably still would even if they were not in a union)
What is invalid is the premise that one need prove monopsony to justify a minimum wage, Look at any study about which states pay more into the federal government that they get back in benefits. Disagreement is unfair? OK, I’m unfair by that definition. Look at what Snyder is doing in Michigan. How could there be more government intervention than that? I can’t comment on your last, because I am unfamiliar with the article.
If you were suddenly to learn that raising the minimum wage would put many current minimum wage workers out of work, particularly minorities and those under the age of 25, would you change your opinion? Or do you have no sympathy for those who would lose jobs as a result?
Once upon a time, this nation had a maximum wage. it was the point at which 90% of wages were taxed for the grossly expensive military which protects the wealthy and all of their possessions from the poor, domestically and internationally. It is long past time we got back to it.
Realist, the President that had those rates must have been a pinko socialist. That Eisenhower must have been a Democrat. 😉
Seriously, I agree.
Actually, HR, that is not true. In states, like Oregon, that have increased the minimum wage, there has been no increase in joblessness. Your slur on my sympathy (final warning) is invalid, because if is a minor premise to an invalid major.
Bullshit.
Jimbo, if the best you can do is treat others with disrespect, please do it elsewhere. Your comments will be moderated before release from now on.
Jimbo, I am not sure what you are saying is BS. But how about a helpful comment? A respectul debate is what we need
Cyril, there are some things about which even a conservative and a progressive can agree,
Oh heavens to Betsy we can’t have a raise in the MW! That would be above equilibrium! Translation: businesses won’t pay it. 🙁
Blue, I trust you speak in jest, or are you a different Blue?
TomCat,
JUMBO is the one who is full of BS. We should simply tie the rate of the minimum wage to tat of corporate CEO pay. Every time their pay scale or benefit packages increase, so should the minimum wage, by an equal percentage. That would take care of the widening gap between highest and lowest paid corporate workers and prove to be a heavy disincentive against corporate greed.
Jack, Jimbo is on moderation. If we followed that theory, 100% of us would be millionaires. 😉