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Minimum wage of $7.25 an hour is a starvation wage

By Steve Hough | American Herald Tribune | April 19, 2016

Whether one supports or opposes raising the minimum wage, there are any number of studies with which to reinforce either position. There is an old adage which states that while figures will not lie, liars will figure. Consequently, the issue continues to provide ample fodder for those operating in our hyper-partisan political arena.

While Republicans have created an echo chamber with the soundbite that raising the minimum wage inevitably results in job losses, most studies representing that point of view are tailored to fit a particular industry or class of workers.

The federal minimum wage was last increased on July 24, 2009, when it rose from $6.55 to $7.25per hour. It was approved by Congress in 2007 and was raised incrementally over a period of three years. Before 2007, the minimum wage had been stuck at $5.15per hour for ten years. Given the intransigence of Republicans in Congress, the Democrats have recently adopted a strategy of framing the minimum wage in terms of a “living wage”. No one in their right mind would consider $7.25 per hour a living wage, but there still exists valid arguments on multiple fronts against raising the minimum.

Teen employment and voluntary part-time employment as a convenience for the employee provide instances where a living wage may not be paramount in one’s decision to seek employment. However, shouldn’t a low-skilled employee, necessary for a business’ operations, deserve a wage sufficient to provide a minimum standard of living? My libertarian friends would argue that the government has no proper role in determining such things but, given our network of subsidies for the working poor, doesn’t the current minimum wage in fact equate to a taxpayer-funded subsidy to some in the business sector?

There are few certainties in life, but one is that raising the minimum wage would affect individual businesses differently and they could/would respond differently. Soundbites will never adequately explain the ramifications of such a decision.

To complicate matters, states and localities have adopted minimum wage laws exceeding the federal mandate. Most recently, cities such as Seattle and states such as New York and California have passed laws to raise the minimum wage to $15 per hour over time. While I certainly support such efforts, these changes can put these early adopters at a competitive disadvantage.

In an era where the domestic supply of labor has outstripped demand, due to businesses shipping jobs overseas and importing lower-wage foreign workers, an artificial imbalance has occurred. The result of these developments has created downward pressure on wages and states and communities with lower minimum wage laws will continue to cannibalize those with higher wage mandates. While I believe other actions must be taken to reverse the trend of offshoring jobs and importing foreign labor, an increase in the federal minimum wage would provide much needed consistency nationwide.

If and when the federal minimum wage is raised, not only should it be raised to an agreed upon rate adjusted for inflation, it should also be raised in the future as a function of inflation instead of Congressional whim. The practice would achieve a dual benefit for both employees and employers. Employees working for minimum wage could rely on increases to offset inflation and employers would have more certainty when preparing future budgets and profit projections.

April 20, 2016 - Posted by | Economics, Phony Scarcity | ,

2 Comments »

  1. $7.25/hour wages are a disgrace. No wonder “tipping’ is compulsory in the USA.

    Like

    Comment by Brian Harry, Australia | April 20, 2016 | Reply

  2. I just left one of those MW jobs which I haven’t worked for in over 20 years. I was treated like a slave in every aspect. I quit!

    Like

    Comment by Whitewraithe | April 21, 2016 | Reply


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