au1929 wrote:Economic Scene: A Weekly Column
from the September 15, 2003 edition
New efforts surface to raise minimum wage
By David R. Francis
Democratic Sen. Ted Kennedy hopes to put his Republican colleagues in the Senate in an awkward spot. Any day now he intends to attach a raise in the national minimum wage to a must-pass appropriations bill.
If it reaches the floor, senators will have to register their vote on a measure popular with a large majority of Americans - but opposed by groups representing restaurants, hotels, retail stores, health services, and other major employers of low-wage workers.
The question, as put by proponents, is: Are conservatives really compassionate or just saying they are?
The minimum wage has been frozen at $5.15 an hour since 1997. The Massachusetts senator's amendment would raise the hourly rate 75 cents six months after passage, and another 75 cents a year after that.
It may be affixed to an appropriations bill that contains a hike in pay for members of Congress. "That seems to be a likely candidate," says Jim Manley, press secretary to Mr. Kennedy.
Since 1997, Congress has raised its own pay five times for a total $21,000 increase. That's nearly twice what a minimum-wage employee makes working 40 hours a week, 52 weeks a year. The minimum wage, in real terms, is worth 24.5 percent less than 24 years ago. And it's $4,300 below the official poverty line for a family of three.
"No one who works for a living should have to live in poverty," Kennedy says in a press release.
Chances for passage of a minimum-wage hike are considered slimmer in the House than the Senate. The Republican House leadership is opposed, says Mr. Manley. And it has more disciplinary might than the Senate leadership. But with an election next year, pressures for passage may build.
In the past, Republicans held a minimum-wage boost hostage to a tax cut or some other measure they sought.
But, as Manley notes, the Republicans "have shot their wad" as far as tax cuts go. President Bush says he will not seek further tax reductions.
With a minimum-wage hike blocked in Congress for the past several years, proponents have turned with considerable success to obtaining "living wage" requirements in states and municipalities. Since the
last federal increase in 1997, the number of states setting a higher minimum wage rose from six (plus the District of Columbia) to 12.
In addition, 110 local governments have living-wage provisions, most for their own workers plus employees of firms with contracts with the cities, towns, and counties. Some require employees to be paid about $10 an hour. Sixty university and colleges have also instituted living wages for workers.
The drive to get living-wage laws or ordinances will continue "no matter what the federal government does," says Jen Kern, director of the living wage resource center of ACORN (Association of Community Organizations for Reform Now), the leading campaigner for living wages across the country.
Economists always note that nothing is free in economics. If wages are raised by law, the extra costs must be covered somehow. It could be that prices of goods and services rise, or that profits diminish, or that fewer minimum-wage workers are hired. Possibly, some cost could be covered by lower turnover of low-wage workers and by greater productivity.
The Employment Policies Institute (EPI) in Washington, sponsored by industries heavily using low-wage workers, has in the past argued that minimum-wage hikes destroy jobs.
But economists have had a difficult time detecting detrimental effects from moderate boosts in the minimum wage.
A study of all 50 states and D.C. over a period of 19 years could find "no statistically significant relationship between the value of the minimum wage and employment growth in industries reliant on low-wage workers."
The study, by economists at the Center for Urban Economic Development, University of Illinois, Chicago, was aimed at the Illinois General Assembly. This summer, the legislative body passed a law creating a state minimum wage of $5.50 next June and $6.50 a year later.
"There was intense opposition to the legislation by the hotel and restaurant industries," says Ron Baiman, one author of the economic-impact study.
But low-wage workers, packed into a committee room and chanting, "We can't survive on five-one-five," won the vote.
The EPI now maintains that if the minimum wage is raised, it attracts more skilled, better-educated workers to take over those now better-paying jobs.
"Low-skilled workers are pushed out of the market," says Craig Garthwait, EPI's director of research. Since single mothers and others moving out of welfare often take minimum-wage jobs, they may face fewer job openings. "All the success we have seen in welfare reform could disappear," Mr. Garthwait adds.
Kern counters that she sees no evidence of major job shifting.
It saddens me to learn that a person who works 60 hr weeks at a minimum wage job would only earn around $16,000 an year.
It saddens me everytime I consider that the average salary for an american working a full time job is only $18,500 (the median is much much lower).
Democrats argue that we should increase the minimum wage while Republicans argue that this would cripple businesses and actually decrease the number of jobs we have.
I know that we all want both, to increase living standards while also increase the number of jobs we have.
Which side do you agree with more? And why?
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I know it's probably implausible to fund something like this but i'm just brainstorming here...
Please discuss the merits of this idea rather than the plausibility of getting it passed
What if we try a multitiered compromise...
A.) We increase the minimum wage to $10 but the government immediately reimburses businesses for half of this increase.
B.) We increase taxes on the rich but also increase the tax incentives that businesses get for each employee they hire.
C.) We fund this plan by slowly scaling back welfare so that it only covers those who are genuinely disabled while instituting funding for programs such as free daycare for welfare mothers so that they have no excuse not to go get a job.
I believe that this would significantly boost the economy for the following reasons...
*Even minimum wage workers can now make over $30,000 an year if they work 60 hrs a week (instead of the $16,000 they make right now). A family where both parents work can make $60,000 an year just working minimum wage jobs. Thus they can afford college for their kids and would also have a lot more spending money.
*It suddenly becomes cheaper for businesses to hire more people and expand than not to thanks to the tax incentives and the slighly lower minimum wage.
*The current average income for a person with a full time job in the US in the US is a meager 18,500, a person working 60 hrs a week at a minimum wage job only makes 16,000! All these people don't have money to spend on goods and services. If they all start making around 30,000, spending would skyrocket for everything from houses to cars to fast food. Businesses would make a lot more money and would be forced to expand and hire more people to meet demand. Unemployment would thus decline as a result as well. And the increased employment, decrease in welfare and increased profits also means that the goverment would collect more in taxes and have to less to spend money on and would thus be able to pay for much of this.
Are there any statisticians here that could figure out what the exact amount government revenue would have to go up and government spending would have to go down to pay for this? Keep in mind, we spend trillions of dollars on space exploration alone, consider what our defense budget is, tens of trillions.
Edit:
It sounds like a lot of the people who're replying didn't even bother to read my actual post.
Based on how many of your criticisms have nothing to do with anything I actually said, it sounds as though they simply read the topic title and assumed what I was advocating, increase the minimum wage without doing anything to compensate businesses for it.
If you actually read my opening post, you have no basis for arguing that the rich or businesses would be hurt by this proposal or that jobs would decrease as a result.
I specifically outlined counterbalances that prevent this from happening.
Even if you misinterpreted what I am saying, many of the arguments are still faulty....
Here are some points that Wilso brought up...
Quote:Every time we have a wage case here to increase the minimum wage, employers cry poor. "It will cost job" is the old line they trot out every time. NOT ONCE has the unemployment level risen after a wage rise.
BTW, the minimum wage in Australia is roughly double that of the US. I don't believe our cost of living is even close to being double of the US.
I want to highlight the key part..
NOT ONCE has the unemployment level risen after a (minimum) wage increase
It's also naive to assume that as demand goes up, so would prices. In the modern economy, more demand implies more production, more competition and more jobs.
Keep in mind, I'm not talking about limited goods like gold and silver. I'm talking about products, which we can make as many as neccesary to meet demand simply by expanding and hiring more people.
I'm curious Foxfyre,
have you seen the stats on how much people actually donate to charity. How about the stats on how much donations increased following Bush's tax cuts.
Libertarians and republicans love to argue that charities could ever come close to govt. aid because americans are so benevolent. They love to argue that cutting taxes will increase charitable contributions.
Why do they insist on ignoring the information out there on this that completely flies in the face of these unfounded claims?
People make almost as much on welfare as they would working 60 hrs a week at a minimum wage job. Either way they barely have enough to live. But in one way, they get insurance and don't have to do any work. The other way, they have to work hard and still would be sunk if they had healthcare needs.
It's easy to see why so many people choose to remain on welfare rather than go out and work. They have little to gain and almost everything to lose.
They would be doing a lot better and leading a better life if they go into crime. And that's why people opt to do so inspite of the risks involved.
If with hard work, people could actually live a half way decent life, maybe more would opt to do so.
That's why
we need to increase the wage without hurting businesses. And my proposal outlines how.
Also like Roger points out, minimum wage jobs typically go for work such as flipping burgers at McDonalds or cleaning rooms at Motel 6. They can't outsource this work to do it any cheaper even if minimum wage was to go up.
Trickle down economics doesn't work.
Companies don't hire people just because they have extra money lying around. They hire people because they need to hire them to do work. And extra money they have will go into their own pockets and increasing how much money they get to keep only fattens their pockets. It doesn't increase jobs.
Demand is what increases jobs. When poor people make more and can afford to buy more, this increases demand for products.
Thus companies need to open more factories and hire more workers to meet demand and cash in on it. And that's exactly what they do.
Trickle up economics does work, trickle down economics doesn't.
Trickle up economics IS market forces. As lower income individuals get a higher living standard, spending increases and so does business profit.
Unlike the trickle down economics that Reagan and Bush have blown trillions of our revenue on, trickle up economics has been proven to work in developing Asian countries that now have both a much larger middle class and a greater revenue.
There has never been controversy over the assertion that increased demand leads to increased growth, economic output, and revenue. And there is even more evidence that increasing standard of living for the lower class increases demand.
This is the very basis for market growth.
I challenge anyone to prove this basic economic and logical prinicple wrong.
Ask any economist, what happens when minimum wage workers who can't make ends meet start getting a living wage. They will tell you that that demand for several goods and services will go up.
Now ask them what happens when demand goes up. They will tell you that jobs go up, wages go up, profits go up, and competition and corporate expansion goes up.
kickycan wrote:American equality? That's rich
BY LENORE SKENAZY
New York Daily News
(KRT) - America is the land of opportunity. Granted. But the opportunity for what?
Well, if you're rich, there's a whole lot of opportunity to stay rich. And if you're poor, you have plenty of opportunity to pass that hard life on to your kids. That's because, among the top 11 developed countries - France, Germany, Japan, etc. - America now ranks as the most unequal, in terms of wealth. In jolly old class-stratified England, for example, the top 1 percent of Brits own 18 percent of the wealth. In America that top percent owns a whopping 33 percent.
Even worse than this income disparity is that the American dream is dying: Our country is now second to last (thank goodness for Canada) in terms of its poor people ever escaping from poverty.
http://www.fortwayne.com/mld/newssentinel/news/editorial/8693386.htm
My question is this. Is there any way to stop this trend?
Due to a more global economy, companies are having to compete much more. While they try cost-cutting measures such as longer work weeks, cheaper benefits, less pay, and less vacation time for their workers, the CEO's salaries just keep rising.
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