Thursday, November 17, 2011

Minimum Wage Doubts

There was recent article on the site discussing the results of a poll where 67% of Americans supported raising the minimum wage to $10 per hour. In this instance, and in the vernacular of occupy movements, I am the 33%.

I don’t think raising the minimum wage works, and I further believe that even those in political power that push it know this. Its not really intended to help those on the lower end of the wage scale, those making the actual minimum wage. I believe its true purpose is to entice people to vote for candidates who pledge to raise the minimum wage.

If raising the minimum wage to $10 really helped, wouldn’t $15 or $20 help even more. In fact, I think you could make a case that $20 is the better minimum wage.  According to, the median household
income in my home state of South Carolina is $39,316. This works out to about $19/hour, so even raising the minimum wage to $10 would only bring someone up to about half of the median income of my state, and my state ranks in the bottom of median income for the country.

So wouldn’t a  $20 minimum wage make more sense. I mean if raising the minimum wage is a real way to help people, why stop at $10? Why not bring them right up to the median income and raise it to $20. If it worked, why not raise it to $50?

Why do we keep coming back to raising the minimum wage as a legitimate solution? According to the Department of Labor,, since January 1st, 1977, the minimum wage has been raised 12 times, with the last increase going into effect on July 24th, 2009.  But apparently, we need to raise it again, even though the last raise was just 2 years ago?

When Congress raises the minimum wage, the workers making the minimum make more money, but that money has to come from somewhere, and I’m pretty sure Congress doesn’t send it to every business employing minimum wage workers. It is up to the individual businesses to figure out where that money will come from.

One option would be to cut salaries of workers making more than the minimum wage, which is likely to anger those employees. Another option is to raise prices, which is likely to anger customers. Business probably do a little of both, but what people outside the company see are the raised prices.

What kinds of businesses are most likely to hire minimum wage workers? My guess would be gas stations, grocery stores, and fast food restaurants.The increased cash flow the minimum wage worker received doesn’t go as far as the old minimum wage because the cost of basic necessities like food and gas increases. It then becomes an arm race with the minimum wage and the cost of living continue to go up. This benefits the politician because as more people make the minimum wage, more can be enticed to vote for them based upon a promise to raise the minimum wage. In addition, certain union contracts are written to increase wages of those making far more than minimum wage should the minimum wage increase.

The increased cost don’t just affect minimum wage workers. The costs go up for everyone regardless of what your income level was, and as budgets get tighter, people will may change their spending habits. Maybe they eat at fast food instead of a sit down restuarant, or they shop at Wal-Mart instead of the mall. Those businesses are now impacted as well.

I realized that especially at a time of high unemployment, companies would and probably do underpay their workers if they could get away with it, but I don’t see minimum wage as the answer. Companies have creative, driven individuals who will find ways to keep the company making as much money as it can. The only thing minimum wage increases are the costs of basic goods and the chances for election for the politicians pushing them. But I don’t know what the answer is. Businesses will quickly show us how little they care, and how ready they are to abuse their employees without some sort of governor in place.

What do you think? Does the minimum wage really work? I like to think of myself as an open minded guy, and I know I don’t have all the answers.

Teach me something.

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