The Craze to Raise the Minimum Wage

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“Just a living wage sir…”

 

Income inequality is the present purported plight of the working class.  It will be, and remain at the forefront of political debate while candidates run for office in 2014.  This oft-touted issue will continue percolating as the Presidential election cycle begins to ramp up.  Robust rhetoric will be espoused by polemic politicians.  As occurs with many complex issues, the eyes of the electorate will transform into a glossy haze of confusion and disconnection as each side explains about the malevolent motives of the other.  

Income inequality, as a grave social injustice, and the ostensible cure raising the minimum wage, are issues that deserve close attention.  Understanding the reality of an economic situation guides an informed voter to the polls.  Less than savory politicians will use the circumstances surrounding the minimum wage debate as a wedge issue, attempting to sow doubt, divide the population and, through fear and ignorance, secure enough votes to win an election.  They will attempt to exploit low information voters, telling tales of underpaid workers and evil corporations.  In turn, sympathetically misguided voters will be ruled by the blind compassion that augments economic illiteracy.  Only by understanding this issue can voters dissect the intentionally misleading arguments made by politicians who promise to “DO SOMETHING” when elected, even if the “something” is to make a tough economic situation even worse.

Simply put: Do those working for the minimum wage “deserve” to be paid a higher wage?

Instinctively, the answer is a resounding “YES!!”.  The very term minimum wage just sounds insufficient, regardless of the actual dollar amount.  When most Americans hear that someone is paid the minimum anything, the bells of prosperity and the desire for a better life chime and echo in their hearts.  It is at this point that the gates of compassion swing shut and proclaim CASE CLOSED.

However, as informed citizens, we know that there remain a few questions to be answered before our inquisitive political brains will rest easy.  So, let’s start at the start:

How many folks make the minimum wage?

According to the Bureau of Labor Statistics, not very many.  “[In 2012] 1.566 million hourly workers earned the federal minimum of $7.25 an hour; nearly two million more earned less than that because they fell under one of several exemptions (tipped employees, full-time students, certain disabled workers and others), for a total of 3.55 million hourly workers at or below the federal minimum.  That group represents 4.7% of the nation’s 75.3 million hourly-paid workers and 2.8% of all workers.”  

All the rage to raise the minimum wage would see pay increase for less than 3% of all workers.

Who makes the minimum wage?

–  The majority of people making the minimum wage are not supporting families on this limited income.  50.6% of them are ages 16 to 24; 24% are teenagers.  64% are part time workers.  The average income for a family of a minimum wage worker is above $50,000/yr.  

Who else benefits from a higher minimum wage?

–  In short, unions.  Some labor agreements, such as those concerning the United Food and Commercial Workers International Union, contain stipulations that wages be indexed to the minimum wage.  When the minimum wage is increased there will either be a percentage or flat rate increase for workers under such agreements.  

For example: if a union worker makes $30/hr and the minimum wage is increased by 20%, that worker will also see a raise of 20% to $36/hr.  Not a life of sheer luxury but certainly well above the minimum wage.  

These agreements explain why many of the protesters in favor of the wage hike are not in fact workers of the retail or fast food locations that they are protesting.  They are planted by organized union efforts.  More info can be found here.  

How does a business pay hourly employees?

– Any business must recover all of its costs, which include payroll for employees.  Therefore, a business cannot afford to pay any employee more than the value that that employee brings to the business.  The compulsive pay rate that is any minimum wage prevents workers from accepting jobs at any rate of pay, potentially eliminating jobs in the process.  A government mandated minimum wage creates an arbitrary, artificial pay scale not based upon value but upon fairness…but to whom?

The reality is that economics does not deal in what is fair, only in what is.  When businesses are forced to raise wages, prices will increase for everyone (due to the necessary recovery of all costs by a business), including for the minimum wage workers.  This “solution” only serves to kick the proverbial can down the road until another pay increase is demanded, also in the name of fairness.  But again for whom?  Not consumers, not business and not to a robust economy that creates wealth and jobs for a society.

Ignoble protests are occurring outside of McDonald’s and Burger King restaurants in major cities.   People self-righteously engage in “peaceful civil disobedience” in order to obtain a higher minimum wage.  The terms “fairness” and “living wage” are used to justify the necessity of a pay increase.  These are seductive, malicious terms used to persuade the naive into the cause of social justice while economic ruin lies in wait.  

Everyone would like to be paid more and everyone’s mother knows that her children are worth ten times more than what they are paid.  However, in order for a business to stay in business, it can only pay according to the skills brought and the value added by an employee.  That is business.  And that is fair.

* SOURCE: More information can be found here

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