What would you do if you had to carve out a living on a minimum wage job?
Most people never consider the question.
Every time the issue of raising the minimum wage comes up, politicians and business people argue the idea down.
"Jobs will be lost."
"Business won't be able to pay and people will be laid off."
"Raising the minimum wage simply drives up costs of consumable goods and services, a fact that eventually makes life harder for minimum wage workers."
We need to look deeper.
First, the facts: the current minimum wage is $5.15 per hour.
A person earning minimum wage on a full-time, 40-hour-a-week job earns gross wages of $10,700 annually.
This amount is $5,000 below the federal poverty line for a family of three. It is over $8,000 below the line for a family of four.
Second, the erosion of the real value of the minimum wage (and all other wages for that matter!) over the past several decades has been dramatic. The purchasing power of the minimum wage adjusted for inflation is over $3.50 below what it was in 1968. To attain the purchasing power of 1968 dollars the minimum wage would need to rise to $8.70 per hour.
The hourly wage required to rent a two-bedroom apartment at fair market value here in Dallas, Texas is between $16 and $17 an hour.
If we raise the minimum wage to $7.25 an hour, as The Fair Minimum Wage Act of 2005 suggests be done over a two-year period, the results would be most helpful to low-income families.
The annual difference would amount to $4,368.
Over 15 million laborers in the United States would be positively affected by this change.
What would the gain mean in terms of real life impact?
Try this list:
Over a year of child care (if you can find a really good deal).
Tuition for a community college degree.
A year-and-a-half of heat and electricity.
Over a year of grocery purchases.
Eight months rent in a low-income neighborhood.
Propaganda to the contrary, evidence from past increases in the minimum wage reveals that such action does not have a negative impact on employment or inflation.
And, even with this sort of raise, our lowest wage workers will still face enormous challenges that must be worked through. A comprehensive package of other social and economic benefits need to be restored and enhanced for working people at the bottom, including health care, supplemental food and nutrition resources, housing subsidies, child care assistance, transportation and skills upgrading.
People who work hard in America should be able to make a life for themselves and their families.
Everyone understands the value of work.
What is needed now is action to properly value work in terms that matter. . .at the bank and in the pockets of the poor.
Sunday, June 16, 2013
8 hours ago
18 comments:
Propaganda to the contrary, evidence from past increases in the minimum wage reveals that such action does not have a negative impact on employment or inflation.
Which evidence is that?
(Yes, it's me, asking for sources again ... particularly if they're available on the Web)
Larry, where it the "Fair Minimum Wage Act of 2005" being considered? In other other words, whom could we urge to support this act -- Senate? House? Both?
Matthew, thanks for keeping us honest! Just do a Google on minimum wage and you can find all kinds of data. Jeremy, the bill was introduced in the U. S. Senate by Senator Ted Kennedy. I am not sure of its status. You can find out on line or by contacting Mr. Kennedy's office in Washington.
I'm embarrassed to admit that I wasn't even aware of what the current minimum wage is, and I am shocked that it's only $5.15! That is basically the same as it was when I was working minimum wage jobs during my college years about 10 years ago! I had just assumed that it had continued to rise throughout the years as everything always does. I can't believe it has been at such a standstill. Thank you for keeping these issues in the front of people's minds. It's important, and needs our attention.
Don't forget that because the way the law is set up, FICA and Social Security increase that $5.15 by 7.5% right off the top to employ someone. That makes it $5.54 an hour. Increasing the minimum wage to $7.25 an hour is really an increase to $7.80. This doesn't count any overhead costs at all, just wage, FICA, and SS.
Let's look at a place like a generic fast-food restaurant that hires lots of people at minimum wage. They have, say, an average of 5 people behind the counter making minimum wage. I never worked fast food, so this is just a guess. The restaurant is open from 6:30 am till 1 am, with an hour each way for opening and closing. That's 20.5 hours a day. ($7.80/hr/employee-$5.54/hr/employee) * 5 employees * 20.5 hr/day = $2.26/hr/employee * 102.5 employee*hr/day = $231.65/day in increased wages. Assuming about $1.00 per transaction isn't going towards the food itself and the energy used to cook it (along with the former cost of labor), the restaurant would now have to sell an additional 232 meals in order to return to its former level of profitability. Where will these 232 customers come from? Where will the money they use come from?
Quoting Larry Elder: A recent "Investors Business Daily" article explained how minimum-wage hikes kill jobs, "It's clear to everyone but the most die-hard socialists how this happens. Employers who can afford to pay four workers $5.00 an hour can't afford them all at $6.00 an hour. Somebody has to go. So, three are marginally helped -- a fourth is simply without a job. And the fifth, sixth and seventh don't get hired in the first place."
Allow me to include by reference an article from the Employment Policies Institute. A great deal of minimum wage earners are teenagers and others looking for entry level, low skill jobs. Pay special attention to this quote: "The authors cite several studies which show that increasing the minimum wage not only decreases employment but that these employment losses are concentrated on the least-skilled employees in the economy. For example, a 10 percent increase in the minimum wage causes four times more employment loss for employees without a high school diploma and African-American young adults than it does for more educated and non-black employees."
I can't in good conscience support a policy that decreases employment, increases stress, and makes it harder for those most in need of a job to find one.
Okay, ibreakcellphones, how do you propose that these hardworking minimum wager earners make a living at $5.15 an hour? That is the other very real end of your dilemma. Help me with an answer that is both realistic and fair.
We are woefully out of balance in this nation. We have no trouble whatsoever setting a limit on the bottom in terms of earning capacity, but we never, ever question how much might be too much to make at the top.
We have a couple of choices it seems to me. Either we raise taxes to build a support system for those at the bottom who cannot live on minimum wage (even at the new suggested level--do the math) or raise the wages and the training to a level that makes sense and rewards hard work.
This is a real interesting balance. Yes, people at the first rung of the pay scale need more to survive. Yet, the government has put businesses in a bind by not keeping up with smaller, annual raises.
By not having these annual raises, a minimum wage jump to $6 is a 17% increase. Many businesses are not prepared for a 17% jump in labor costs.
I'm not familiar with any of this legislation, but it would make sense to have the minimum wage increased on an annual basis by using the consumer price index or some other factor that is widely used in the economic world.
This way, business can better be prepared and can forecast these smaller and more frequent increases and both sides win (in my opinion).
Larry, thanks for bringing daily all of these things to my attention. I am a truly blessed individual with a truly blessed family who has a soft spot in my heart for those individuals/families who have not been afforded the same open doors and opportunities that I have had.
May God continue to bless your work at CDM.
In my perfect world, the tax burden would be greatly reduced. On average, the tax burden is about 29.1% of one's income. Even Pharoah in the best of times only taxed 20% (see Genesis 41:34). The problem as I see it is that it's hearts and minds that need to be changed, but the state isn't in that business. What I would like to see is, again, for the church to step up and feed the hungry, clothe the naked, slake the thirsty, and house the homeless. Those who have the ability should do so, but right now, I am working to feed and house my own family. What right do we have to force someone to do what is right?
ibreakcellphones--It is not a matter of forcing individuals to do what is right--though that is the basis of all law and has been forever. It is a matter of crafting a just society. The marginal tax rate in Israel was at least 30% by the time you take into account all of the requirements.
Even if the church somehow developed the will and the mission heart to tackle these issues, it simply does not have the capacity to manage the scale.
Brett and Jenny--great idea about graduated minimum wage pay hike. Somehow our hearts must be linked to sound, fair public policy.
Larry,
Thanks so much for writing this today. I have several friends who are struggling while making minimum wage and trying to live in New York City. It is almost an impossible task. And you are right that it is our society's responsibility to make sure that large corporations are not exploiting the most helpless. The church has no real power to prevent this kind of exploitation and besides, even atheists deserve to eat!
-Matt
Matt, always good to here from you! Any new productions underway? I appreciate your comments and the fact that you are reading. Hope to see you soon.
Excellent blog... wish i had something to contribute... unfortunately all I can say is that I have enjoyed the banter today.
Larry, thanks for introducing the topic...
Comment Writers, thanks for speaking in from different angles :)
Look at a brief comment from Capitalism Magazine (on the net at http://capmag.com/article.asp?ID=3675):
Ladies and gentlemen, it is understandable to want to help out poor families, and toward that end it has been suggested that Congress increase the minimum wage, from the current $5.15 an hour to $6.65 an hour.
Well, I have good news and bad news for you. The bad news is that increasing the minimum wage will do little to improve conditions for the working poor. This is because relatively few of the recipients of such an increase are living in poverty. The good news is that the working poor do not necessarily need government help. Research shows that the "dead-end job" is largely a myth.
This is not to say that the working poor do not have a hard road ahead of them, but for those who persevere it is a road that leads out of poverty. We should not block off that path by making low-wage jobs more scarce, which is a likely result of an increase in the minimum wage.
Our analysis of 2003 U.S. Census data shows that, of 7.8 million American workers receiving an hourly wage of less than $6.65 an hour—the immediate beneficiaries of a change in the minimum wage—only 15 percent are currently living in poverty. Nearly three-quarters of these workers, 72 percent to be precise, have a family income that is at least 50 percent higher than the poverty line, and over half belong to families earning double the poverty level.
What is interesting here is that the author thinks that families that make 200% of the federal poverty level are doing fine and don't really need anothe $1.50 per hour. That's $38,700 for a family of four. Someone can, no doubt, get by on that amount, but you're going to need to count every penny. An addition $3,500 per year would be an enormous help.
Remember, the people we are talking about are working people.
As to whether raising the minimum wage results in fewer jobs, feel free to look here: http://www.swlearning.com/economics/policy_debates/increase_minimum.html
The answer is that nobody really knows, as usual the facts depend on what you want to believe. It is clear, however, that it hasn't been empirically proven that raising the minimum wage does cause job loss.
I'm just a minister who knows VERY little about economics, but it seems like the above post implies that we could actually end joblessness by lowering wage. Make minimum wage, say $3.15 an hour, then businesses could employ more people, and just like that, unemployment could be eliminated. Our tax load would shrink because we'd no longer need welfare...oh, wait...
A good way I've found to judge ethical decisions in my own life is to give higher priority to the option which leaves the least room for selfishness. That doesn't mean I intentionally cause myself pain, but it forces me to examine my motives. In that light, middle- and upper-class individuals making an argument for not raising the minimum wage, while wrapping that argument in a cloak of compassion for those who would "out of work", sounds decidedly fishy to me.
Why don't we ask the minimum wage-earners what option they'd choose? But they're poor, so they obviously don't know what's best for themselves...better leave those kinds of decisions to the rich...
Excuse me..."the article quoted in the above post makes it sound like we could end joblessness by lowering minimum wage."
I'll try to read the whole comment next time...
Neal, thanks for your insights. Your standard for making decisions sounds like a very good one.
I'd recommend that everyone take the Poverty Tour to see what life is like on the fringe . . .
http://www.nccbuscc.org/cchd/povertyusa/tour2.htm
It requires a full day's minimum wage just to fill a gas tank for a week...Ay Carumba!
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