Raising the Minimum Wage…

This article pisses me off (free registration required).

It’s an article about the raise in the federal minimum wage from $5.15 an hour to $7.25 an hour (over a two year period). Minimum wage hasn’t been raised since 1997, when it went from $4.25 to $5.15. A person right now making the minimum wage makes $10,712 a yearbefore taxes^[1]. Luckily for the working poor in Ohio (in a sense) our state minimum wage just increased to $6.85 an hour. At any rate, with welfare reform and a host of other reasons, the number of working poor is climbing at an alarming rate. But this article makes that seem, well, trite compared to what small businesses will face.

David Finkel reports on one man who current makes $7.25 an hour through his day working as a cashier at a “everything’s a dollar” store. We learn that Robert just received his raise and celebrated by buying a “new” car^[2]. It’s all heartwarming and even kind of real for the first couple of paragraphs and then we learn why a minimum wage increase would hurt everyone, especially the working poor.

And meanwhile, Jack Bower wondered whose hours he will cut if he has to give his employees a raise.
…So if wages go up, he said, hours will have to come down, and the question will become: Whose?

Will it be Neil Simpson, 66, who works six hours a day as a stockman, and then five more hours somewhere else cleaning floors, and takes care of a wife who is blind and arthritic?

Will it be Susan Irons, 57, who was infected with hepatitis C from a blood transfusion, is on a waiting list for a liver transplant and needs more hours rather than fewer?

Will it be Christina Lux, who is 22 years old and 13 weeks pregnant?

Yes, whose hours? Because we all remember in 1997 how businesses were absolutely devastated when the minimum wage was increased and that all small business people were left out in the cold. We all know that shopping ceased because prices were increased and that unemployment soared to the highest levels since the Great Depression. You remember that don’t you? Yeah, well neither do I.

As a matter of fact, unemployment was lower in 1997 than in 1993.

unemployment rate for U.S. doctoral scientists and engineers (S&Es) in 1997 was estimated at 1.2 percent, a significant decrease from the 1993 rate of 1.6 percent. During the same time period, the overall U.S. unemployment rate also dropped, from 7.1 percent in 1993 to 5 percent in 1997.

What? You mean that was before the minimum wage increase. You’re right. Let’s try some different stats then, shall we? How about the fact that unemployment in 1998 was lower than it had been in almost 30 years?

Continued economic growth led to a significant reduction in poverty in 1998, as the poverty rate declined to 12.7 percent. The reduction in poverty appears to have been driven largely by a drop in unemployment to the lowest level in 30 years as well as a significant rise in the wages of low-paid workers, itself apparently a product of the low levels of unemployment (tight labor markets tend to push up wages) and an increase in the minimum wage.

So, let’s see. Poverty declined, in part because of the wage increase, giving people more money to spend, therefore raising prices on goods, putting money in the pocket of business owners, and this somehow hurts the economy? Not according to this article:

U.S. real GDP grew at almost a 4 percent annual rate from 1995 to 1998, while the inflation rate averaged about 1.5 percent. Buoyed by strong output growth, the civilian unemployment rate fell to a nearly 30-year low of 4.4 percent during the fourth quarter of 1998. During this same three-year period, labor productivity growth accelerated markedly. This performance not only compares favorably to that in 1960-73 when the United States–and indeed much of the developed world–enjoyed strong productivity growth, but stands apart from the 1973-95 period, when relatively weak productivity growth prevailed.

But let’s not veer off track here. Let’s see another example (or a more detailed example) of why someone would want to stay poorer. Back to the WaPo article.

At the register, meanwhile, Shannon Wilk, 33, who makes $6.25 an hour, said that of course she would like to earn more money. It would help her. It would help her 18-month-old daughter. “It would be good,” she said, “but also, for me, I live in income-based housing, and if I get a raise, my rent would go up, and I would lose my assistance.” Even the tiniest raise would affect her, she said, and with nowhere to go, the last thing she can afford is a raise to $7.25.

Oh, wow! I’m curious as to why the low income housing guidelines wouldn’t change like they’ve done every flippin’ time there’s been a wage increase (or an election year or just because). Are you telling me that when they raised the minimum from $3.30 (we’re going back some years here) to $4.25 the federal income guidelines for aid didn’t adjust? Well, shoot, if that’s the case then they didn’t adjust further when the minimum was raised in 1997 and everyone is kicked the fuck off of assistance because the guidelines are still based on $3.30 an hour. Give me a break.

There’s still more doom-and-gloom, don’t you worry. Because we can’t have an article of this nature without attacking the new Speaker of the House, can we?

Bill Murphy, who said that if he had the chance to talk to new House Speaker Nancy Pelosi, he would ask one question. “Where does she think the money will come from? And that is the question,” he said. “My wages are going to go up 10 percent.”

Well, Bill, hop on over here and I’ll give you a clue (first one’s free). People will have more money and they have to spend it somewhere and they will likely spend it at your store (among others) and you will raise prices and you will make more money. Phew! Sorry, Bill, that was a little long winded. Get your head out of that hole in the sand, dear fella, it’ll be ok. You’re more likely to lose money from lack of cigarette sales (should your state follow mine and ban public smoking) than anything else. And your employees will spend their hard earned wage in your store buying milk on the way home, or tampons, or charcoal. Don’t let them frighten you, Bill, please. The fear can be replace by hope. Allow that feeling to wash over you. Your world will not end.

These scaredy cats think that they will have to fire people (they can’t make money without a job) and then raise prices and people won’t come…Are they thinking? Are they reading? Are they learning anything at all about how the economy works? If they’re not doing that are they at least remembering that they survived, and maybe prospered, the last increase?

No. They’re reading WaPo with all it’s “The World Is Coming To An End!” crap and watching Bill O’Reilly spout of how society is going to tank now because people will make just a little bit more money. Woe is me! Woe is me! They’ll wring their hands and worry and cry until this happens and they realize that it’s not such a horrible thing. You know, kind of like that 2000 end-of-the-world scare. Remember being told to stockpile, that it was all going to come to an end? Yeah, it’s like that. But we’ve been through this all before and things have turned out for the better. And WaPo sure as hell doesn’t want anyone remembering that.

_{[1] Assuming they work 40 hours per week, which most minimum wage workers don’t do.
[2] Paying $313.12 a month until the year 2012.}

Popularity: 3% [?]

Related Posts