Unintended consequenses of a $15.00 minimum wage.

ECONOMIC REALITY SAYS, LABOR IS JUST ANOTHER COMMODITY

Why not a $25.00 minimum wage?

 

  

New York and California have recently enacted a $15.00 minimum wage. It will be phased in over several years.  The reason, they claim, is to insure a living wage. I doubt that $15.00 is a living wage in California and New York, it may in some areas of the country, but not there. So, if they really want to provide a living wage, they should do a study and calculate a number. They say they are giving workers a pay raise, but they are actually forcing someone else to give a pay raise, without considering if it is economically possible.  Of course we all know this is no more than political grandstanding. This interfering in the price of labor's worth will not end in the desired results. Understand, that I acknowledge that bottom end wages are too low, but the question is how are they raised in a sustainable way.

 

First off, welfare pays more than $15.00 hour in 13 states, Pennsylvania is 19th on the list and  pays $28,830, and this is tax free. That comes out to $13.95 for a 40 hr week. Allowing for taxes likely $17.00 an hour. The Cato Institute released a study in 2014 showing welfare benefits pay more than a minimum wage job in 33 states. It is not unusual for workers to take off and refuse overtime, as it will restrict or threaten their benefits. The average middle income is now $50,000 down from $54,000 at the beginning of the recession.  Welfare benefits range from a high of $60,590 in Hawaii to $21,910 in South Carolina  which is 34th on the list. Many employers are now finding it hard to find competent workers. While the low wages are part of the problem, it is not the whole picture, as many companies have room for rapid advancement, but there are few employees who are willing to do what is required to advance. Many believe that just being there is enough to be paid. 

 

The question is who decides what the minimum wage should be? Are all workers valued the same? Are some worth more than others?  I do know that one large retailer in particular has made an effort to hire some challenged workers, will they still be able to do that ? Will these worker then forever loose the pride of working? Will they now just be destined to welfare forever? The affordable care act has already limited full time employment, will this add to this problem? How many small business's will now have to cut workers, keeping only the very best or cut back to just the employer him or herself?

 

The fast food industry is already looking at machines that will produce 300 hamburgers and hour and ordering will be done by a touch screen or voice recognition technology. It will be improvise or be uncompetitive.  I would be willing to bet the number of the employed will decline, not increase.

 

The only way to raise incomes in a sustainable way is to increase economic activity in business's that produces wealth, sorry but this is manufacturing.  All government workers, all retailers, all service industries are jobs on the expense side of the national balance sheet.  Borrowing money to rebuild infrastructure will not work, it will provide jobs temporarily, but is not the answer to long term prosperity. Long term prosperity can only come about by producing wealth and when wealth producing activity produces a competition for labor then real wages will grow. This is real economic reality. 

Originally published 4/16/2016.  Just as relevant today