Minimum Wage
Both houses of Congress have passed slightly differing minimum wage increases, so shortly, the wage will be increased to $7.25 an hour for some people on minimum wage. There are equity reasons for having a minimum wage, eventhough it is a heavy-handed intrusion of big government into our business. This is being hailed as a great accomplisment by some hacks in the Democratic Party, yet there are many reasons why this isn't quite so significant.
First of all, many states have enacted minimums in excess of the federal rate, so they will get little ( if their state wages is between $5.15 and $7.25) or no (if their state has $7.25 or higher wage) increase. The stagnation of the real minimum wage in many labor markets has pushed prevailing wages above $5.15. Even 21 years ago, as a high school kid, I made more than $7.25 an hour as a busboy on most nights.
Secondly, this isn't quite the blow to poverty that some sell it as. As of 2005, there were less than 2 million workers who made minimum wage or less. Workers in some industries can make less for various reason, most are tipped employees who are considered minimum wage earners. Yet when tips are included, most make more than minimum wage. Half of minimum wager earners are young, less than 25 years old, so they are more than likely just starting out their work experience, have summer jobs, or maybe they work for some liberal non-profit group that doesn't even want to pay their employees that much.
When one looks even deeper into the numbers, most of these workers are in the hospitality industry. Out of the 1.9 million workers, slightly over 1 million are classified as workers in the leisure and hospitality industry AND make less than minimum wage. This means most are probably tipped, and make more than minimum wage when tips are included. (and I am not even counting the fact that these people are notorious tax cheats). Also, the increase in the wage is not going to hit workers making sub minimum wage, since they are not getting the full $2.10 increase.
Of course, when you raise the minimum wage, someone has to pay the price. Many employers can afford it, or can simply pass the price of the increased cost of labor onto the rest of us. But it will hit some small businesses in their bottom line. If you are a small pizza shop and have to add $2.10 an hour to your delivery guys paycheck (people who are tipped, so they aren't really making just $5.!5), it might put a dent into your profit. The corporate pizza chains can handle the increase, they can afford to pay more and they can more easily raise prices.
Finally, if politicians want to make these wages more fair, they should provide an automatic COLA increase for minimum wage. Social Security, tax brackets, tax exemptions, and many other items are adjusted for inflation every year, so this could be easily done. In Chris Matthew's book "Hardball", he describes his first job working for a Congressman. He came up with this great idea to help the working poor by doing exactly this. Then his boss, a Democrat, tells Matthews that he isn't the first one to think of this. He was told this won't work because the politicians need to vote on wage increases, or they won't get credit from the voters for it if the wage increases automatically every year. So the perception of caring for the poor is more important than actually helping them.
First of all, many states have enacted minimums in excess of the federal rate, so they will get little ( if their state wages is between $5.15 and $7.25) or no (if their state has $7.25 or higher wage) increase. The stagnation of the real minimum wage in many labor markets has pushed prevailing wages above $5.15. Even 21 years ago, as a high school kid, I made more than $7.25 an hour as a busboy on most nights.
Secondly, this isn't quite the blow to poverty that some sell it as. As of 2005, there were less than 2 million workers who made minimum wage or less. Workers in some industries can make less for various reason, most are tipped employees who are considered minimum wage earners. Yet when tips are included, most make more than minimum wage. Half of minimum wager earners are young, less than 25 years old, so they are more than likely just starting out their work experience, have summer jobs, or maybe they work for some liberal non-profit group that doesn't even want to pay their employees that much.
When one looks even deeper into the numbers, most of these workers are in the hospitality industry. Out of the 1.9 million workers, slightly over 1 million are classified as workers in the leisure and hospitality industry AND make less than minimum wage. This means most are probably tipped, and make more than minimum wage when tips are included. (and I am not even counting the fact that these people are notorious tax cheats). Also, the increase in the wage is not going to hit workers making sub minimum wage, since they are not getting the full $2.10 increase.
Of course, when you raise the minimum wage, someone has to pay the price. Many employers can afford it, or can simply pass the price of the increased cost of labor onto the rest of us. But it will hit some small businesses in their bottom line. If you are a small pizza shop and have to add $2.10 an hour to your delivery guys paycheck (people who are tipped, so they aren't really making just $5.!5), it might put a dent into your profit. The corporate pizza chains can handle the increase, they can afford to pay more and they can more easily raise prices.
Finally, if politicians want to make these wages more fair, they should provide an automatic COLA increase for minimum wage. Social Security, tax brackets, tax exemptions, and many other items are adjusted for inflation every year, so this could be easily done. In Chris Matthew's book "Hardball", he describes his first job working for a Congressman. He came up with this great idea to help the working poor by doing exactly this. Then his boss, a Democrat, tells Matthews that he isn't the first one to think of this. He was told this won't work because the politicians need to vote on wage increases, or they won't get credit from the voters for it if the wage increases automatically every year. So the perception of caring for the poor is more important than actually helping them.
posted by Doug at 11:44 AM
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