Minimum wage/Livable Wage

Here a thought exercise for you folks:

Assume the market has established relative values for various jobs ranging from low entry level to CEO pay - what impact does an introduction of a minimum wage or an increase in a minimum wage have if there is no maximum wage? What impact does a does an introduction of a minimum wage or an increase in a minimum wage have if there is no mandatory adjustments in relative values?

To get started envision three categories - low (impacted by minimum wage), middle, high. Low is the baseline of 1, middle is 5, high is 15.

 

No, not until after someone gives an answer and explanation of the answer.

 

The last increase in the federal minimum wage, the Fair Minimum Wage Act of 2007 signed into law by Bush was not all the complicated. It passed with overwhelming bi-partisan support (94-3 in the Senate, 3315-116 in the House) demonstrating the bi-partisanship that existed just 7 years ago and that has been abandoned by the right in favor of intransigence and extremism.

The other point you are missing is that an increase in the federal minimum wage, unlike other tax relief or social programs, does not cost taxpayers a penny and, in fact, helps lift people out of poverty and potentially reduce the cost of other public assistance programs.

 

This assumes there is no market response to a minimum wage increase. It defies belief to think that an employer dependent on minimum wage labor could handle, for example a $7.25/hr wage increasing to $10/hr, for example, a 38% increase (Actually more, factoring in taxes, insurance and other costs related to an hourly payroll rate ), and not respond.

And how would said employer respond?

Public assistance costs have a base and on top of that fluctuations correlate to the strength of the economy not minimum wage changes. Hence given the "Great Recession" we have record levels of public assistance expenditures, with economic improvement those expenditures go down on a relative basis. Overlay public assistance costs with economic growth and minimum wage changes on a graph and get a visual of how they interact. You can do it yourself in an Excel Spreadsheet. Excel, a remarkable tool. I have hope that one day people will actually think these things through.

Unemployed people getting jobs and unskilled workers obtaining marketable job skills get people out of poverty.

 

The minimum wage would be raised incrementally over three years:

(1) except as otherwise provided in this section, not less than—​

(A)$8.20 an hour, beginning on the first day of the third month that begins after the date of enactment of the Fair Minimum Wage Act of 2013 Act;​

(B)$9.15 an hour, beginning 1 year after that first day;​

(C)$10.10 an hour, beginning 2 years after that first day; and​

(D) beginning on the date that is 3 years after that first day, and annually thereafter,​

The same way they responded in the past to similar incremental increases.....without any adverse impact, based on a preponderance of studies and data.

Unless you have data to suggest otherwise. Oh wait, you dont provide data., just (ideological) beliefs and selected anecdotes.

 

What about the obvious data regarding income disparity? Did you look at the chart Baraka recently posted? I do not know what data you are looking for.

I have provided data. Look through this thread.
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One problem with you folks and data is that there is no interest in trying to understand the data. Perhaps it is time to move out of the shallow end of the pool.

I am not going to give a citation, it is commonly accepted - we know:

Literacy is more valued in the workplace (I often use the word market) than illiteracy.
Some HS is valued in the market more than no HS.
HS diploma is more valued than some HS.
Some college is more valued than HS diploma.
College diploma is more valued than some college.

In general this is true, there are exceptions. We can drill down further into other variables the same way - for example communication skills - writing, speaking, bi-lingual, persuasion, etc.

Using math, we can take specific moments in time and measure the relative market values of the above. Overtime those relative values may change, we can put them on a graph.

We can identify the skills most important for each category from the bottom 20% to the top 5% - different skills sets are required and expected in each category. Then we can focus on the trends of market values on those skills and skill sets.

Ultimately we can understand exactly why the market is respond the way that it is responding - and then we can craft real solutions to real problems.

An artificial, arbitrary minimum will not address what is illustrated in Baraka's chart! A superficial focus on the chart and on reams of data without understanding what the data is saying, how the market responds is a fools game. An absolute refusal to think these things through suggests we will never solve problems of income inequality and poverty.

DC thinks if the poverty line is $11,490 for a single person, a full-time rate well below the minimum wage, increasing the minimum wage will raise people out of poverty, as if $11,491/$12,490 or some other trivial number will do it - assuming no other structural economic changes are made to increase actual disposable income. He needs more data. Right. Look at the obvious first!

 

I challenged the notion of the government's measure of poverty. It is not reflective of my interactions with real people - Why? I say there is a flaw. I state over and over how housing costs consume up to 50% or more of a working poor person's income - there is the problem and the basis to understand the solution - including the flaw in measuring poverty. Why is that? The poverty thresholds established about 50 years ago had a basis very different than current experience. 50 years ago it may have been common for a working poor family to spend about 30% of income on food. Today that is not true. Periodic adjustments to the poverty threshold is inadequate, the knee jerk reaction to connect poverty thresholds (and many other things) to CPI is wrong. I challenged you folks to understand that CPI often is not an accurate measure of inflation for the working poor - what is the response? You need more data - my point is that the data is already overwhelming thought. For example if I present something like what is cited below - what do you do with it?

Relative or Absolute -- The Behavior of Poverty Lines Over Time

I know, we need to discuss if there are really true free markets???? Regardless if a market is truly free or not, there are market behaviors - forces - responses! Gee! What is your point? I am not discussing how free markets are - and in my view markets having behaviors, forces, responses is by definition true. Is this what we need to prove? What? Yes, it is me - my frustration.

 

I'm not arguing that the minimum wage shouldn't be increased. Especially when the minimum ($7.25) is paid by companies whose workers are collecting government aid, all while the company and shareholders are making profits.

But, there needs to be a good plan crafted between people who are on the ground and help the poor, ways to protect people from scams and health bankruptcies (Consumer protection agency and ACA), close the part-time loopholes, but also focus on why people seem to be destined to be poor. And what it means to be poor today. Crime and security are a big problem among groups of poor people, fixing education and crime are two of the big factors on improving poor areas. And maybe the educational skills need to be addressed. Would money management be a better class than trig? Would home repairs be more interesting than English lit?

 

Yes. Income erosion is not in dispute regardless of the measure. I have acknowledged the "rich are getting richer" every time the issues comes up - I actually believe there is a thread with that in the title. However, I think it a mistake to focus on income either in nominal terms or in real terms based on general inflation or CPI for the working poor. I have never said I am against the working poor earning more money, there is nuance in understanding my point of view in this regard. If policy results in the poor earning more money and it is negated by other factors the policy is ineffective. In order to address wealth disparity, poverty and living standards we need policy that will have a real positive impact on those issues.

I know some reading my posts want to simply say Ace is against poor people earning more money - that is not a correct representation of my point of view. If we want to put my views in simple terms - I want the working poor to be in a position to generate real wealth. Income is often an independent of wealth creation. we know this is true, because we know how wealth is created and it can happen given all ranges of income.

I don't care what the minimum wage is - pick any number you want. I have tried to explain why the minimum wage is ineffective in a number of ways - the latest being how the market has relative values for labor skills in the workforce. These relative values are not constant, they do change over time (partly explaining increasing wage gaps) - one thing we know, for example, is that illiteracy in the workforce will continually have diminished value relative to other factors - so if an illiterate person 25 years ago could get a middle income factory job - today the likelihood of that is nil.

People get out of poverty all the time. It starts with learning or gaining skills that have value in the market. A person in poverty who learns to write at a competitive level in your industry can get out of poverty under the right circumstances with the right opportunity. I agree that in some cases government has a role in making sure people get an equal opportunity. In a case like this, the minimum wage would have no importance.
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Collecting government aid - Homeowner can deduct interest on their taxes, basically creating a subsidy for homeowners - drives up prices, causes people to build bigger homes due to the benefit, etc. Renters do not get this benefit. If on average the homeowner interest deduction has a value of about $6,000 to the homeowner and a working poor person gets perhaps $3,000 in food assistance - we complain about the food assistance. In my view, we should have a simple flat tax system with no special interest deductions - ideally based on consumption, so that those who 'live large' pay accordingly. Current policy works against the working poor in many ways.

 

I happened to notice this entirely relevant post from Upworthy recently:


In other words, going by the Federal minimum wage, there are literally no places in the United States where a minimum wage worker can work a forty-hour work week and be able to pay rent on a decent apartment. In California or New York, one would have to work every day, over 18 hours a day. In Hawaii, there are literally not enough hours in a week for someone working nonstop, without break, without sleep, to earn their rent. Even in a more moderate state, such as the one in which I live, a person would have to work almost twelve hours a day, every day of the week, to earn their rent. Only in Puerto Rico could a person work six days a week and make their rent-- though they would have to work 9 1/2 hours a day, and even then, they would have made their rent, and had nothing left over for any other expenses.

Even supposing that the majority of workers do not remain on minimum wage, but get promoted to somewhat higher wages within a year or two, how is this in any way a sustainable baseline model?

I really fail to see how this system in any way, shape, or form produces anything that might be called a fair or just society.

 

Right, but that's exactly the problem. You can't have your cake and eat it: either there is minimalized government, which includes contraction of controls like minimum wages, in which case there is rampant poverty and a hideously oppressed underclass ever more dependent upon social welfare programs (which will be entirely insufficient to the task if run by "small government"); or there are effective controls like minimum wages, tax burdens shifted from the poor to the very wealthy, universal health care, governmentally insured benefits (like government assistance for impoverished people to pay for child care, mandatory paid maternity and paternity leave, paid leave days and vacation time), free quality education through higher education levels, and so on, ensuring a strong middle class and extremely diminished poverty, but all of which require "bigger" government in order to exist and function.

At no time can there be both "small" government and a just society with fairness and opportunity for all. Such a vision requires that all people always be proactively compassionate and extremely giving and generous to friend and stranger alike, consistently choosing to empower and protect others at the expense of their own greed and ambition: which would be great if human nature worked that way, except that it doesn't. It never has, and it is unlikely to begin doing so any time soon. The "libertarian" vision is simply unrealistic, unless one is willing to explicitly prefer small government and personal freedom from regulation or social control over any real justice or fairness in society, and the creation of a permanent underclass serving the enrichment and luxury of a microscopic minority of uber-wealthy plutocrats.