Sunday, July 02, 2006

The Minimum Wage 2 (The Guest Blog)

Mikey's Second Post

Hey, I was looking to post a min-wage comment and it wouldn't let me. Here it is

If we're going to start talking about the minimum wage and the benefits and/or consequences from raising it, we're going to have to get some ground info down.

The Federal Minimum Wage is $5.15 per hour. It was raised from $4.25 per hour to $4.75 per hour in October 1996 and to current level ($5.15 per hour) in September 1997.

44 states have minimum wage laws of their own in addition to the federal law. The six who do not are South Carolina, Alabama, Mississippi, Louisiana, Tennessee, Arizona.

13 States and the District of Columbia have minimum wages higher than the mandated federal rate: California – $6.75 (Indexed rate is $8.50), Washington - $7.63, Oregon - $7.50, Florida – $6.40, Minnesota - $6.15 (large employer) $5.25 (small employer), Wisconsin - $ 5.70, Illinois - $6.50, New York - $6.75 (becomes $7.15 on Jan. 1, 2007), Maine - $6.50, Massachusetts - $6.75, Maryland - $6.15, Delaware - $6.15, Rhode Island - $7.10, District of Columbia - $7.00

The Federal Poverty Level (FPL) for a one person household is $9,800. For a two person household it is $13,200. (These figures are annual gross income).

A person making minimum wage in South Carolina and working 40 hours a week has an annual gross income of $10,712.

Okay, those are the rough facts.

Now, onto what's been said already. Quoth S.A.W.B: "Hiking the minimum wage is absolutely asinine, considering it only affects 250,000 or so workers out of the 150-200 million employed individuals in this country."

I quoted S.A.W.B, but let's not single him out because Pat agreed with his point and both of them are absolutely dead wrong. Jared Bernstein, lead economist for the Economic Policy Institute testified before congress last year that raising the minimum wage to $6.25 would benefit 3.3% of the workforce (4.1 million workers) while raising the minimum wage to seven dollars would benefit 5.98% (7.4 million).

Now, for the old stand-by argument that raising the minimum wage would kill small businesses. Okay, let's see what happened when Florida enacted its own statewide minimum wage increasing the federal mandate to $6.40 per hour in June of last year.

Not only has Florida continued to see shrinking unemployment after the hike, the numbers are actually falling faster. "Between May 2004 and January 2005, Florida's unemployment rate dropped by only 12.8%, well below the 17.9% drop during the same period following the raise. (Florida International University Research Institute on Social and Economic Policy)"

I understand that some people are going to be philosophically opposed to raising the minimum wage, and that's fine. They can argue their philosophy all they want. The arguments are flat out wrong, but what do I care?

If their philosophy says that a person is either unable or unwilling to get a job that pays above the minimum wage, then they're welcome to it. I disagree, but they have their principles and I guess we should respect that.

My point is simple: if a single mother with one child works 40 hours a week at a job that pays minimum wage, in order to be at or above the FPL, minimum wage would have to be at least $6.35 per hour.

In order for her child not to be eligible for Medicaid through SCHIP, she would have to make $9.52 per hour.

In other words, philosophy shouldn't be what keeps that child living in poverty.


Patrick Armstrong said...

I guess you didn't read my response: "There may only be 250-500K workers (I've heard both quoted, but it never goes higher) currently pulling down the minimum wage, I'd wager that there are millions making between $5.75 and $6.50 after years of hard work with the same employer, who have little access to benefits."

I also do not consider the Florida comparison a good one, because their unique geography directly affords for a unique economy.

Patrick Armstrong said...

One other thing, and this is something I'm running into with only Democrats.

Guys, the minimum wage hike failed in the Senate.

Uhh. Isn't there anything we could do right now, as an opposition party, to work on making workers' wages better right now? There's got to be something we can work on right now, between the current dishonest pay situation we have right now and a minimum wage hike we can't get right now.

Mental note: it would be a great idea to have an issues debate before the issue is considered legislatively.

Internet Esquire said...

How would you respond to the position that an expansion of the Earned Income Tax Credit would be a much more effective and equitable way of helping the working poor than raising the minimum wage?

RightOnPeachtree said...

I still say that it would be responsible (and reasonable) to tie minimum wage increases to Congressional pay raises. If Congress votes themselves a 3% raise, then $5.15 would go to about $5.30 as the minimum wage.

At least it would make Congress consider it more empathically (if that's a word).

And the argument that "only" xxx number of workers would be affected would seem to be an argument in favor of raising the minimum wage. If there are "only" xxx number of people making that wage, then there is a limited numbers of jobs at that levels that could be lost.

RightOnPeachtree said...
This comment has been removed by a blog administrator.
RightOnPeachtree said...

Oops. My grammar was bad on the previous post, but you get the gist of mah messij, ah thank.


Laddi said...

I read the Earned Income Tax Credit idea and there are several problems with it. The main one is that eventually it ends up that the EITC stops. So at some point, the employed person will max out (thus having $0 in taxes owed) which means they are keeping all $5.15 per hour of their earnings, but that amount will eventually not afford a sustainable living. At that time, EITCs will have no effect. And I do not agree with or like the government allowing tax credits to exceed taxes owed (meaning the government paying tax refunds above the amount that person paid in taxes during the year). And that's not even touching the issue of "paying more in taxes than you need to throughout the year is a bad idea."

I like the idea by rightonpeachtree.

Personally, I think increasing the minimum wages helps economy as long as it is not increased to a ridiculous amount (re: the law of diminishing returns). More money in the public economy means more sales, higher consumer confidence, and eventually more revenue, which leads to more investments by businesses, which typically ends up as job growth, which means more money in the public economy, leading to more sales,...

But maybe that's just me thinking.

mikey said...

First let me make it very clear that I’m not particularly well versed in the EITC.

That being said, I have a hard time seeing how decreasing the already minimal tax burden on the working poor would help them much at all.

We’re not talking about folks who make a good living but have too high a percentage of their earnings collected by the IRS. We’re talking about folks who simply do not make a good living. So let’s address that problem, and address it directly.

That is not to say that raising the minimum wage is the only solution. (I’ll concede to Pat and Internet Esquire on that point.)

There are at least two other things we could do to alleviate the situation: mandate full-time work and health insurance.

I’ve already talked about mandatory health insurance (at length) so I’ll take it first and be brief. Mandating employer sponsored health insurance kills a whole bunch of birds with one stone. First, it raises the intrinsic value of minimum wage jobs (providing minimum health insurance for the average worker costs the employer somewhere around $2,000-$4,000 a year. That adds up to a $1-$2 per hour raise). Secondly, it cuts Medicaid costs by eliminating the need for Disproportionate Share Payments and shrinks the Medicaid roles by providing health insurance to the working poor. Thirdly it breaks the cycle of rising healthcare costs and makes coverage more affordable to everyone. All in all, great idea.

Now onto solution number two. For most of us, our yearly income is determined by two things: our hourly wage and the number of hours we work. For many of the working poor the problem isn’t the hourly wage. An hourly wage of $10 per hour still lands you beneath the poverty level if you’re only working 20 hours a week.

The next time you see a big announcement in the newspaper about some big business bringing hundreds of jobs into the community, do a little research and find out what percentage of those are full-time jobs.

This didn’t used to be such a big problem because manufacturing jobs tend to be full-time, but as our economy increasingly turns to the retail sector the jobs become part-time. This is especially true in tourism driven southern states.

We can fix this problem simply enough: mandate that, in order to be eligible for industrial tax incentives (fees in-lieu and the like) 90% of the jobs created must be full-time. You’ll get some argument that the majority of businesses create mostly full-time jobs already. But, if that’s the case, then they shouldn’t have a problem with their competitors having to follow the same rules will they?

So, there you are, two solutions that are not only simple and direct, they appeal to our sense of fairness. Plus, they don’t take us too deeply into the federal tax code black hole.

liberalandproud said...

I agree with Mikey across the board.
Yes, the minimum wage should be raised (If at first you don't succeed . . .)
Yes, businesses should be encouraged to hire more full time workers (they'll get better workers).
Yes, employers should be required to provide health insurance (although to what standard I do not know)
Then again, I'm a bleeding-heart. What did you expect?

petallic said...

Fine. Time for some more of my nonsensical analogies. I'm sure PB will be along shortly to tell me why I'm dumb: I see raising the minimum wage in the same way I see grade inflation. The equation seems to be:

It looks bad that so many students are failing, so therefore we'll make it easier to pass.

It looks bad that so many people are below poverty level, so we'll make it easier to be above the poverty level.

At what point does it become a meaningless number? When minimum wage goes up, everyone else's wages have to go up as well over time, relative to minimum wage. After all, construction workers aren't going to work for $10.00/hour if minimum wage is $8.00. So when the other wages go up as well, prices go up in general because people have more money and are spending it. The disparity remains the same. We can't eradicate poverty because it's a social construct dependent upon comparison. If everyone in the country were billionaires, then the millionaires would seem poor by comparison. As long as people are making and not making money, there will be poverty because someone has to be at the bottom of the curve.

Okay, now tell me why I'm wrong, and please be kind; I am far from being an economist.

dadvocate said...

Well said, Petallic, I agree with you. There may be a lag between the time minimum wage is raised and inflation catchs up but it's a never ending circle. The poor are only helped for a short time with a stop gap measure.

While I was in college many of my jobs were below minimum wage because they were work study jobs which were exempt from the minimum wage. However, the jobs enabled me to further my educaton and eventually attain a better income.

For too many, social and governmental supports are seen as entitlements and rob these people of ambition. As Petallic says, poverty is relative. We have the fattest poor people in the world in our country. Unless your Paris Hilton or the like, you have to work to have more than a minimal existence.

mikey said...

“Some see things as they are and ask why; I dream of things that never were and ask why not.” – RFK

Is poverty a fact of life right now? Yes. Does it have to be? NO!

Why does the argument against raising the minimum wage decry it as a stop gap measure while, with the same breath, it says someone has to cook the french fries? (yes I know that two different people said it. but it’s the same argument)

Look I have no problem conceding the fact that raising the minimum wage is, at best, a stop gap measure. But the solution isn’t to stop. The solution is to raise the minimum wage and then go beyond it.

Dadvocate is absolutely right: “While I was in college many of my jobs were below minimum wage because they were work study jobs which were exempt from the minimum wage. However, the jobs enabled me to further my education and eventually attain a better income.”

The problem is that for most of the folks stuck in minimum wage jobs, that’s all there is. Because that’s all our society has prepared them for. Because our schools are more worried about 15 year-old carrying fully-automatic machine-pistols than they are about teaching algebra.

If we want to be able to ignore the minimum wage, then we have to train our kids for real opportunities and, I’m sorry, that takes money…SERIOUS money. I’m not talking about putting a few new computers in some rural schools, I’m talking about doubling our base student funding, mandating industrial participation in public schools (you want a qualified work force, you help train it).

Where is this country’s ambition? We are a nation filled with people who braved oceans to get here or their descendents. Has that sense of adventure, of exploration and achievement been bred out of us so much that we’re willing to just sit back when faced with a problem and say “Oh well, that’s just the way it is.”

Let’s be honest, our society doesn’t reward hard work. If that were the case, the Forbes top 100 richest people in America would all be dry-wallers. Our society doesn’t reward education or college professors and research fellows would all be billionares. If our society rewards anything other than blind luck, it’s daring; the willingness to take a chance, to grab a moment or an idea and run with it ignoring the consequences completely.

I started with a quote from Bobby Kennedy; let me finish with Ronald Reagan, “The future is not for the fainthearted.”

If you think poverty in this country cannot be annihilated, then get off the boat because you’re not American. We are, at our core, a sad, tattered, ragamuffin people. What makes us different, what makes this country great, is that we are also a people who believe that nothing is impossible. It’s an idea that’s gotten us this far, and I’m not willing to abandon it yet.

Laddi said...

Mikey, come on. Not everyone can be rich and not everyone can be poor, but it would be wrong to make sure that everyone is neither rich nor poor. You can't make everyone middle class.

Call me unAmerican (and look stupid in doing so if you wish) but social status has a range from Destitute/poverty all the way up to filthy rich. There will always be obscenely rich folk as much as there will always be folk in destitution. That's life. It isn't pretty, nice, or fair. But it also doesn't mean that we have to act uncivil or unfriendly to those who may have more or less than us. Everyone has the right to be treated kindly, and the same respect is expected.

And it also doesn't mean those INDIVIDUALS in poverty shouldn't strive to move up, but the people they pass will take their place. Not everyone can be a drywaller, not everyone can be the crew manager, and not everyone can be the CEO, and they all won't be paid the same or have access to the same resources, mostly due to financial reasons. That's life. Strive to improve - absolutely. But there will be those who don't and remain in poverty.

petallic said...

Well, phooey. I had a whole post typed up and Blogger ate it. So to sum up:

#1. I agree with laddi and Dadvocate.
#2. A work ethic cannot be cultivated by throwing money at the problem. A work ethic is not a means to an end, but an end in itself. Money is not the goal here. Money does not equal success.
#3. Mikey, making fun of school shootings doesn't exactly score you any points. Yes, teachers are aware and therefore afraid; you would have us be ignorant and oblivious?
#4. Yes, our ambition has been killed by people who think money solves everything and that it falls from the sky like free-floating manna.
#5.Yes, we were once a ragamuffin people, which is what made us great. Doing away with poverty flies in the face of that statement.

Lily said...

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