Thursday, November 21, 2013
Political Mayhem Thursday: A $15 minimum wage?
Robert Shiller, a Nobel laureate in economics, has called income disparity in the United States "the most important problem that we are facing." There can be no doubt that income disparity has grown in my lifetime: from 1979-2007, the top 1% of households saw their income increase by 275%, while the bottom one-fifth saw only an 18% increase. That's a remarkable difference.
Should it matter that the middle class is shrinking? Smarter people than me think it does, and even my economics-challenged brain tells me that this is something contrary to the way we Americans see ourselves-- as a hard-working, middle-class country. In reality, though, we are moving towards a society with a large underclass and a smaller upper class, with fewer people in between.
If you accept that this is a problem (and not everyone does), then the question is what to do about it.
There are several possible approaches, but the two that are most discussed are a more progressive tax structure and a higher minimum wage. The latter has been in the news lately, as activists have coalesced around a specific target: the $15 per hour minimum wage.
The current federal minimum wage is $7.25, which has been true since 2009. A full time worker making $7.25 an hour will earn about $15,080 a year. As President Obama noted, a family with two kids making minimum wage is living far below the poverty line.
Some economists argue that raising the minimum wage would be ineffective or counter-productive at reducing poverty, in part because many poor people don't work and because many minimum-wage earners don't live in poverty. Common sense tells us, too, that the economic disruption caused by a swift hike in the minimum wage is a bad idea during a fragile economic recovery. Moreover, price hikes caused by such a change would disproportionately affect the poor-- because they more often than others shop at low-wage employers like Wal-Mart and eat at low-wage employers like McDonalds.
As a long-term strategy, though, I have sympathy to the idea. It makes sense to me that hard work should be rewarded with something more than poverty, if it is that low-wage work which sustains you. Our society too often imposes policies that disfavors work. For example, profits from investments are taxed at a much lower rate than most wages.
If I am working for $7.25 an hour, a two-dollar raise is a big deal. It matters. It has been a long time since I made $15,000 a year (and things were cheaper then), but I remember acutely how careful I had to be, and how little I could afford.
I know that if the minimum wage is improved significantly the price for some things would go up, but I am willing to pay that difference. I suspect that I'm not alone...
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Mark; If the subject is income disparity and the solution is the government setting limits on wages, I think a reasonable maximum wage would bring good results.
I'm pretty sure that's not politically feasible… and would have some serious unintended consequences given the mobility of international businesses and their leaders.
What do you think of the minimum wage idea?
What do you think of the minimum wage idea?
Mark; There was a time when more of the 1% of the 1% lived in the community where the work was done. Good point. Unfortunately the problem of inequity is usually framed by how much value hard work is worth rather than how fair is the system.
A decent wage that provides a minimum quality of life should not have to be negotiated but should be expected.
As that is currently not the case, the minimum wage should be set at a level that currently provides security for the worker. Politically this will be just as hard as a limit on the top wages.
Your great grandfather wrote on this subject. He was a staunch republican who believed deeply in free enterprise, but desired a cap on profits in good times to level out our economy. The depression provoked his writings.
A decent wage that provides a minimum quality of life should not have to be negotiated but should be expected.
As that is currently not the case, the minimum wage should be set at a level that currently provides security for the worker. Politically this will be just as hard as a limit on the top wages.
Your great grandfather wrote on this subject. He was a staunch republican who believed deeply in free enterprise, but desired a cap on profits in good times to level out our economy. The depression provoked his writings.
Some how my comment regarding minimum wage ended up in the wrong place originally. Here it is again.
I am in favor of higher wages. However employees will need to add enough value so that employers can afford to pay minimum wage of $15 per hour. There are a number of things that I would encourage employees to do:
1) Choose a profession/job that you love. It may take some time to figure this out; and intereest may change over time.
2)Treat your job as if you are running your own business. It is not enough to show up and just do what you are asked to do. Look for ways to do additional things within the scope of your employment that make a difference for your employer.
These are things that we should be encouraging our children and the young people in our lives to do.
I am in favor of higher wages. However employees will need to add enough value so that employers can afford to pay minimum wage of $15 per hour. There are a number of things that I would encourage employees to do:
1) Choose a profession/job that you love. It may take some time to figure this out; and intereest may change over time.
2)Treat your job as if you are running your own business. It is not enough to show up and just do what you are asked to do. Look for ways to do additional things within the scope of your employment that make a difference for your employer.
These are things that we should be encouraging our children and the young people in our lives to do.
# posted by 
: 1:31 PM
: 1:31 PM
An alternative that has been suggested is that you start with the whole corporate compensation package expense. Deduct the portion of the expense that goes to the top 10% of the payees. Compute 20% of the earnings of the 90%. Limit total compensation of the top 10% to that computed amount.
Second alternative. Limit the top total compensation in the organization to some factor times the average compensation of the bottom 20%. Say 10, 20, or 50 times as much. (In many orgs today, the ratio is over 100 times.)
Second alternative. Limit the top total compensation in the organization to some factor times the average compensation of the bottom 20%. Say 10, 20, or 50 times as much. (In many orgs today, the ratio is over 100 times.)
# posted by : 3:16 PM
: 3:16 PM
Raising the minimum wage so that a family of 4 can have a living begs the real question - why on earth do we encourage these low skill, low wage people to have children they obviously can't afford?
A much more rational policy would be to provide free birth control, reproductive health care, free abortion, and education subsidies for those who don't have children until they can pay for them!
Our current policies making these things either prohibitively expensive or unavailable only trap working poor in a cycle they can't easily escape, and raise the taxes to pay for the children they can't afford. This makes it impossible for the responsible young people who are productive and pay these taxes to have their own children.
It is so illogical to provide subsidies to the working poor to enable them to have more children that they cannot support or educate, thus perpetrating a permanent underclass.
I know this is not politically correct - logic is not very popular these days.
Lee
A much more rational policy would be to provide free birth control, reproductive health care, free abortion, and education subsidies for those who don't have children until they can pay for them!
Our current policies making these things either prohibitively expensive or unavailable only trap working poor in a cycle they can't easily escape, and raise the taxes to pay for the children they can't afford. This makes it impossible for the responsible young people who are productive and pay these taxes to have their own children.
It is so illogical to provide subsidies to the working poor to enable them to have more children that they cannot support or educate, thus perpetrating a permanent underclass.
I know this is not politically correct - logic is not very popular these days.
Lee
# posted by : 4:29 PM
: 4:29 PM
I agree that hard work should be rewarded with something other than poverty. The problem is that wages are set at a level that creates economic value for wage payer. Workers don’t have to accept that compensation if they think they can find something better. The problem is that they can’t and the jobs they can perform do not provide enough economic value to support a higher wage.
Any employer worth their salt can recognize someone who contributes value to their business and will compensate that employee with more money or more benefits just to keep them around. They would be silly not to. That’s how business works. And, that’s how America works too. Smart people figure out how to create value and are rewarded for it. The extent to which a progressive tax system does not dissuade them from this, that is a good thing.
The way people work is different than the way economic systems work. People without some incentive to do more will not do more. The Soviet Union communist experiment proved that. In our capitalistic experiment, the number of people in poverty is getting larger not smaller. Our government incents people not to work by providing benefits to the equivalent of $17 an hour. There are lots of reasons why not everyone takes advantage of this, but those who can figure out how to claim the benefits and don’t feel degraded by it do.
A minimum wage is a good idea. Unions that keep employers in check is a good idea. An inflated minimum wage that forces the value of the job up and beyond the value of its contribution is not a good idea. Wages without value creates no incentive to work, only to “get” (there is no “Earn” in this equation.) Employers need for their employees to create value, or businesses fail and the jobs fail with them.
The true poverty in this country is the inequity of education. Education is the lens through which opportunity can be seen. As a society, we need to clear the paths to educating our young. We need to break the cycle of poverty by providing incentives to educate the young poverty bound and separate them from their heritage of impoverishment.
Of course, educating the young poor is a long term solution to a problem that requires expedient political solutions, and education (which doesn’t happen without time and hard work) does not meet the prerequisite of “Expedient” or “Political,” or “Election Cycle.” I don’t think that W.E.B. Dubois would be surprised.
Any employer worth their salt can recognize someone who contributes value to their business and will compensate that employee with more money or more benefits just to keep them around. They would be silly not to. That’s how business works. And, that’s how America works too. Smart people figure out how to create value and are rewarded for it. The extent to which a progressive tax system does not dissuade them from this, that is a good thing.
The way people work is different than the way economic systems work. People without some incentive to do more will not do more. The Soviet Union communist experiment proved that. In our capitalistic experiment, the number of people in poverty is getting larger not smaller. Our government incents people not to work by providing benefits to the equivalent of $17 an hour. There are lots of reasons why not everyone takes advantage of this, but those who can figure out how to claim the benefits and don’t feel degraded by it do.
A minimum wage is a good idea. Unions that keep employers in check is a good idea. An inflated minimum wage that forces the value of the job up and beyond the value of its contribution is not a good idea. Wages without value creates no incentive to work, only to “get” (there is no “Earn” in this equation.) Employers need for their employees to create value, or businesses fail and the jobs fail with them.
The true poverty in this country is the inequity of education. Education is the lens through which opportunity can be seen. As a society, we need to clear the paths to educating our young. We need to break the cycle of poverty by providing incentives to educate the young poverty bound and separate them from their heritage of impoverishment.
Of course, educating the young poor is a long term solution to a problem that requires expedient political solutions, and education (which doesn’t happen without time and hard work) does not meet the prerequisite of “Expedient” or “Political,” or “Election Cycle.” I don’t think that W.E.B. Dubois would be surprised.
# posted by : 5:11 PM
: 5:11 PM
Anon 5:11 Thank you for your insight. We should all think about the difference between having a job and creating value (work). I believe that we have too many jobs and too little work. I am not sure that work is rewarded a lot more more than filling a position.
The experience of being rewarded for meaningful work is a rare experience for our youth today. Early work programs have always proved very successful. The more teenage jobs that are available increases the chances of workers being available with good work habits along with incentives and purpose to study. Unfortunately we have given up most of the work programs for the youth.
The experience of being rewarded for meaningful work is a rare experience for our youth today. Early work programs have always proved very successful. The more teenage jobs that are available increases the chances of workers being available with good work habits along with incentives and purpose to study. Unfortunately we have given up most of the work programs for the youth.
The entitlement issues we hear so much about in context of the poor are just as present in the wealthy, only supported by a lot more power. The disproportionate rise in incomes and corresponding political rhetoric defending "job creators" and the "right" to keep what you make are just the flip side of the same entitlement coin. Unfortunately I'm not sure a political solution will be possible until the consequences of the status quo become bad enough to tip the scales. I cringe to imagine how awful things will have to get before then.
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