Is a minimum wage necessary?

Thomas should be along any minute now.

I'm undecided about minimum wage. On the one hand, I'm pretty sure that a minimum wage doesn't do much for the folks making it in the long run, as the cost of goods and services which they use will likely go up with it. On the other hand, our country's history shows us several examples of workers being taken advantage of by employers who won't pay them enough to live, and who have the benefit of a labor surplus to ensure that they don't have to. It seems like maybe you either need unions for collective bargaining or a minimum wage. Hmmm, I wonder if the introduction of the minimum wage contributed to the decline of the unions. I'm off to look that up.

I agree that in the short-term it helps those individuals (both unions and min wage), however, in our current economy (although some specific locations may be different), that there is no monopoly (at least for businesses that typically pay lower wages) so how can a business take advantage of an employee? If BK is so greedy that they won't pay what the economy dictates, then go to McD's.

If the equilibrium wage is so low (greater supply than demand) those workers not really needing the extra money like students, people working extra jobs, etc. will simply not work.

If the economy cannot support a higher wage, and one is forced upon them, prices will have to rise in order to make business even feasible.

I could see in a situation where there is only a business in a community or something like the US Post Office where there is only one, but where the market is saturated with similar businesses, min wage and unions really don't make much sense.

I don't know what the economy looks like in Mass, and most of what you say I agree with, but geography plays a big part in this. For example, a one company town (there are many) where the one company closes up and moves out leaves a lot of people with similar skillsets rooted in a particular area. The cost of moving is often prohibitive for people of lower incomes so they are pretty much at the mercy of their employer. A business in this town could pretty much name its price for these workers.

But I make that argument without much conviction because, as I said, I'm undecided. I don't know enough about economics to foresee what the consequences are of leaving it as is or removing it altogether. I am curious, though. Thomas? Where are you?

Santa Fe New Mexico has a city wide minimum wage of $9.50 hr. I don't know of any studies done so far about the positive or negative results.

if you are working for a living, yes

Considering some employers will only pay the absolute bare minimum to workers, les if they were allowed, I think minimum wage is important.

It doesn't pay enough as it is...can you imagine what some employers would do to workers if they didn't have to pay them a certain wage?

At a certain point you become a slave. You make just enough to survive to work for the boss. You exist merely to produce for the boss. Only when the worker takes action in numbers is it any different.

The best slave is a slave that doesn't know he/she is a slave. You get paid but only to give the money right back so you can work more thus working "pay check to pay check".

I don't know if anyone here still respects Ralph Nader, but this recent piece of his sums up my feelings about the minimum wage pretty well...

Hope y'all can take the time to read it. It ain't really that long...


A Congress with Marie Antoinette Values
The Politics of the Minimum Wage
By RALPH NADER

Whatever led to the metastasis of corporate demons inside the brain of the Democratic Party over the last thirty years, it has paid off the business establishment. The cost of freezing the minimum wage has deprived millions of working Americans of trillions of dollars for their necessities of life.

A few Democrats, most prominently Senator Edward M. Kennedy, have championed keeping the minimum wage up with inflation for years. But the Republicans and the somnolent Democratic Party have combined to defeat Kennedy's bills over and over again.

Last year the federal minimum wage at $5.15 per hour was $3.50 below in purchasing power of what it was in 1968. Today's minimum wage has the lowest purchasing power since 1949 when economic productivity per worker was a fraction of what it is today, when the super-rich corporate bosses had not become hyper-rich averaging over $8000 an hour.

Add no health insurance for the working poor and there are added pressures on livelihoods for parents and children.

The last increase to $5.15 per hour was in 1997. Except for one year of restraint, members of Congress have zipped their annual pay grab through the House and Senate every year. Just the increases in that period amount to about three times the annual minimum wage income for millions of American laborers. No wonder poverty has been on the increase.

The abdication of the Congressional Democrats, even when they were the majority and Clinton was President, on the living wage matter has cost them as well. More than any other single issue, save possibly health insurance for all, their reluctance to boldly and visibly champion the living wage has cost them the Presidential and Congressional elections.

People want politicians to STAND FOR THE PEOPLE, not grovel beneath the corporations.

Mindful of the political appeal of the living wage issue in our country since the onset of the industrial age, I sent an open letter in May 2004 to the Democratic leadership-Rep. Nancy Pelosi and Senator Tom Daschle, urging them to pledge that members of their Party would resist all future raises for the lawmakers until the federal minimum wage was restored to its 1968 purchasing power. Hardly revolutionary.

But for Pelosi and Daschle and their leadership circle, that was too much alienation of the Wal-Marts, the McDonalds, other fast food and retail chains and their allies. They never responded to my letter and, along with John Kerry, plunged headlong to defeat in November. Meanwhile, though opposed by Governor Jeb Bush and the fast food chains with big television gadgets, a Florida referendum raising the minimum wage by a dollar won with a 72% majority in November.

Twenty-one states lately have raised their minimum wage above the federal minimum. None have reached the 1968 purchasing power level yet.
The Democrats finally sense the minimum wage issue to be a bright line position with the retrograde Republicans whose ideological heads are in the sands. But look how long the Democrats took to wake up their earlier political history.

At last, led by Senator Kennedy, they are attaching amendments to legislation and two weeks ago got 52 Senators to back raising the wage to $7.25 in three stages. At that level, minimum wage workers would earn an additional $4,370 a year to support their families.

However, the Republican filibuster opposition can only be overcome by getting 60 votes, so Kennedy has a ways to go. But the issue is getting hotter, though far from being visible to most Americans, including poor families.

The best thing going for the Democrats' November prospects is bonehead John Boehner, Republican majority leader of the House who has dug in his heels. His spokesman, Kevin Madden, said Congressman Boehner "remains convinced that a minimum wage hike will destroy jobs." Rep. Ray Lahood (R-IL) is trying to convince his leader, John Boehner, that raising the minimum wage "is a no-brainer. It's just something that we should do."

The loss of jobs argument is the Republican fig leaf hiding added bundles of campaign dollars that ooze intro the Party's pores when the minimum wage remains frozen in time. As one wag put it, by that reasoning, the Republicans should push down the minimum wage to add more jobs.

Princeton economists blew that "job loss" claim out of the water after the 1997 increase. In the four years after the last minimum wage increase, 11 million new jobs were added including 600,000 restaurants jobs.

More to the point is the public philosophy that working full-time should provide enough income for your family's necessities. There is also the matter of simple fairness. Wal-Mart's CEO made $12,000 an hour, plus perks, in a recent year, while hundreds of thousands of his workers were making between $6 and $9 per hour, with very few if any benefits.

Rest assured, neither the Democratic nor the Republican leadership will stop their annual pay raise. The House already has passed their pay grab.

Shame is a rare commodity when it comes to the moral authority to govern.

Why do we let them get away with such Marie Antoinette values?

Re: Is a minimum wage necessary?

This particular argument for the minimum wage doesn't make sense. When the state raises the minimum wage, every extra dollar a minimum wage worker gets is an extra dollar his employer pays. Consequently, every dollar the worker "recycles" into the Massachusetts economy is a dollar the employer withdraws from it because he pays it to the worker. So for the rest of the Massachusetts economy, the raise in the minimum wage is a wash.

You may still consider it a net gain, depending on whose side you're on. But as you say, the pay raise will discourage employers from hiring low-skilled workers. So even from the workers' point of view, the effect of the minimum wage is to put very poor workers out of work so that somewhat less poor workers can get a raise. To a first approximation, the bad effect (getting workers laid off) scales quadratically with the minimum wage raise, while the good effect (pay raise) scales linearly. So if you care only about workers and not about employers, you can justify a minimum wage that is slightly above the market wage, but not too much. The $8.00 in Massachusetts could still be within the range of what a responsible liberal would consider a net gain. It's difficult to say without knowing more about the Massachusetts economy.

On the other hand, if you're not a liberal, if you say "a dollar is a dollar no matter who earns it", the minimum wage is always a net loss for society because it discourages hiring.

Here is a 1998 book review by Paul Krugman in which he discusses the empirical evidence some more. Krugman is a card carrying liberal, yet he is skeptical about it.

http://www.pkarchive.org/cranks/LivingWage.html

I suppose that one effect of a minimum wage (along with other assorted mechanisms) would be the concept of "relative deprivation".

I don't understand what you mean by "relative deprivation", and why it would be a consequence of raising the minimum wage. Could you please explain?

relative (vs) absolute deprivation is comparing non quantified qualites. "My parents were so poor during the depression they seldom had enough food to eat" vs "My cousin is so poor she doesn't have cable t.v." I am thinking that "minimum wage" could be seen in the same light.

But, Bella, if the employee has the option to go some where else why wouldn't they? If an employer paid $5, but the one down the street paid $5.50, where would you go? And believe me many places pay far above the minimum wage rate to get good employees even for so-called lower waged jobs - non-skilled jobs (i.e. no previous experience needed).

One is not forced to work any where one doesn't want to - so if one company doesn't pay enough - good employees will go elsewhere. Any company is going to pay the bare minimum to get workers, however, if they don't pay market price, they will not be able to hire anyone. Similar to selling an item. Businesses would like to charge you as much as possible, but you aren't going to pay $300 for a quart of milk. The price will be as high as the market (basic supply and demand) will allow.

In a monopoly things are different - like freeduck was trying to explain - in certain environments you don't have a choice where to work - only one option so they can pretty much set the price, however, in most cases - this is not true - look at any average city/town - how many fast food places do they have - how many WalMarts, etc. If you don't like the pay at one - go to the other.

I do have a background in economics (masters degree), however, money and banking is my area, not labor economics so min wage, unions and the labor market is not my specialty - it just doesn't make common sense (in the majority of the situations). It seems to only make the problem worse.

If you support the minimum then explain to me how increases in prices help the purchasing power of these individuals? I will also assume that many businesses out of necessity will hire illegal aliens in order to stay in business. Increasing costs to a small business owner will make such illegal actions worth the added risks.

As far as Nader considering increasing the wage rate to increasing the number of jobs - I doubt that necessarily caused the increase in jobs. Just because two things happen about the same time does not mean one causes the other. There could be a boost in the economy in general. There are so many factors affecting the economy that not one item will necessarily affect the other.

Thomas to be honest, I don't think the rise in minimum wage in general will have an affect on the Mass economy at least in the eastern part of the state. Many places already pay above minimum wage to get good employees (ie.WalMart, most fastfood places, home depot - all advertise hiring that is above the minimum wage). The only downside I see is for the smaller business owners who cannot afford to pay extra - not the bigger companies that easily absorb added costs. These smaller business owners are not the ones making $12,000 an hour as snood mentions.

So in these cases, if you care about the mom and pop type of stores, then raising the minimum wage hurts them the most.

Not everyone is qualified for a high paying job. And why should the guy down the street hire a high school drop out for $5.50 when he can hire someone with a much better education for $5.50?

Some people have to take whatever job they can get, regardless of pay. We aren't all fortunate enough to have jobs we like or even tolerate because they pay decent.

What if you aren't a quote un quote "good employee"? You have a felony? You are homeless? You don't have any particularily special skills? McDonalds pays their employees minimum wage because they have to, not because they want to. If McDonalds paid their employees better because they wanted better employees, we'd all have fantastic fries and great burgers every time. But we all know that's not the case.

Linkat, Help me to understand something. If you and your spouse are full time workers at minimum wage and it's not enough for them to provide necessities, how would increasing the minimum wage not help their situation?

Bella - I am talking about lower paid jobs i.e. no experience required. Home Depot, WalMart, McD, Dunkin Donuts are all advertising to pay for above minimum wage. They need to in order to just hire some one. I am talking about the current market environment in eastern Mass. If you live in a good economy these jobs are plentiful, please read my full comments and you will understand what I am talking about. What you are referring to is a situation similar to a monopoly or oligopoly where a business can set the price. Or even a situation where the supply of workers far exceeds that of the demand - which is not the current situation in the geographic location I am referring to.

A good employee is one that performs at their job well - nothing about background - simply job performance. McD's where I live pay above minimum wage - not because they want to because the market dictates it. Even in the case of being forced to pay an employee a higher wage due to increases in wages, if the business cannot afford this increase, then they will have to increase their prices. How does that help someone? If they earn $100 more a month, but then they have to pay $100 more for their necessities, please explain how that can help some one?

Snood - Basic economics - if a business costs increase, they will need to increase their prices in order to make an equilibrium profit. If prices increase, it costs the consumer more to buy their necessities. So even though they may increase their wage, it costs them more money to buy food. So they are in the same position they were before. If the increase in costs are significant enough, the business will also cut back (decrease their supply). This will result in hiring less (laying people off) and decrease in supply ultimately raises prices. This is easier to show in a simple graph, unfortunately I can't make a graph here. Of course this assume the basic economic principle certis paribus (all else equal - meaning nothing else changes in the economy).

Sorry... I don't live in Mass so I guess I can't intelligently converse about this.... I live in a state where jobs are not as plentiful. Where the unemployment rate is still too high. Many "good workers" are forced to take low paying jobs because that's what employers are paying right now. Without minimum wage, I can guarantee that many of them would be hiring for less because people are desperate for any job. Businesses ARE setting the price because they can. They set the wage they want beacuse SOMEONE will hire in at it.

Linkat:



I understand what you're saying. But all those numbers go out the window when you factor in that everything has been rising proportionately except the minimum wage. It's not an issue of economics and "the market" IMO, but of simple fairness. If the cost of living rises consistently, the federal mimimum wage should as well.