At Work

Great expectations for $15.00 minimum wage

The Federal Reserve in­flu­ences in­fla­tion by low­er­ing interest rates to spur demand or rais­ing them to curb it. The idea is that if demand for goods and service can be stimulated, prices will rise and inflation will be increased.

If that is the basis for our entire economy, shouldn’t it be true that raising the minimum wage will have a similar effect, especially on the goods and service most important to low income individuals? In fact, proponents of a $15.00 minimum wage say that doing so stimulates buying and thus helps the overall economy.

Rising tide

Okay, I buy that, but does it follow that the minimum wage worker is better off in the long run?

Raising the National minimum from $7.25 to $15.00 does not only impact workers earning between those amounts, but likely all workers up the line perhaps those now earning up to $20.00 per hour; it’s called pay compression.

If your job is worth $15 and hour when the minimum is $7.25, why isn’t it worth $30 when the minimum is $15?

This means more stimulation, and higher prices. Perhaps that’s good for the economy in general, but where does it leave the worker still in a minimum wage job?

At $15.00 a family of five with one full-time minimum wage worker would no longer meet the threshold of poverty; $30,440. With two workers at MW, the household income exceeds the current median for all US households.

Do we set new poverty levels? Do we redefine eligibility for all income related safety net programs? Could MW workers actually lose more than they gain? This happened to some folks when pay increase caused them to lose their ACA premium subsidies.

Here’s the thing, we need to consider all the implications of the MW rhetoric to be sure we are actually achieving the intended goals.

5 replies »

  1. The current Speaker of the House said this past week that raising the minimum wage would stimulate the economy. The Congressional Budget Office (CBO) recently said the opposite, that an increase in consumer spending by some will be offset by the substantial rise in the number of unemployed.

    A $15.00 an hour wage looks good at first glance. But the least skilled workers will suffer the most because their labor will not produce goods and services sufficient to pay them.
    Walter Williams, professor of economics at George Mason University, has devoted much of his career studying this issue. Conclusion: Artificial minimum wages are job killers.

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  2. Lots of predictions about what will happen, but certainly we are already paying for healthcare that is not very preventative, for an obesity epidemic largely because high calorie, low nutrition foods are cheaper, and many other things. Instead of negative predictions, how do we move the needle to break our current vicious cycle?

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  3. Besides all the obvious points, if we do not seal the borders the only thing that will happen is job loss. What robots can’t do, illegals will do for less than $15 / hr. The value and productivity for one hour of unskilled labor has not changed, only the cost. For value to raise, there must be a labor shortage in unskilled labor and then wages will follow. Government interference is only going to make this worse.

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  4. If minimum wage is raised the cost of goods and services will follow…end result is zero economic gain. Just another failed ideology to buy votes.

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