Minimum wage/Livable Wage

The average rent in New York is over $3,000 per month. The average rent in Charlotte is about $1,000 per month. If we use a rule of thumb number of 30% being what the typical person should spend on housing - in New York that translates to a $10,000 per month or $120,000 per year. In Charlotte that translates to $3,333 per month or $40,000 per year.

$120,000/52 weeks/40 hours per week is $57.69/hour. $40,000/52/40 is $19.23/hour. If we do the same for Mississippi where the average rent is about $750/month we end up with a need of $14.42/per hour.

How is the Federal government going to come up with a meaningful minimum or livable wage? I argue that the Federal Government can not do it. I further believe that any minimum/livable wage legislation that comes from the Federal government will be meaningless in terms of having an impact on the living standards of the working poor. I believe there is a different agenda in play that is not about a livable wage or living conditions.

 

I think it is eminently doable, but the Federal Government will be unlikely to do it, because it involves innovation and creative thinking, which have historically been the Federal Government's consistent weaknesses. And it involves both boosting social welfare programs, and streamlining them (not as in the usual code for cutting or gutting them, but in the actual meaning of getting them to work more efficiently), and getting the various Federal programs to work together, rather than competing with one another as to who can develop the most impenetrable and confusing bureaucracy to ensure that no one can manage involvement with more than one program at once without making a part-time job of having to harass the government.

Minimum wage should be tied to cost of living. Not by a national average of cost of living, but by actual cost of living tabulated by region, updated on an annual basis. So Federal minimum wage might end up being X% of annual cost of living in the defined region, across the board, but the actual figure might vary between NYC, the Bay Area, Los Angeles, to Chicago, Dallas/Fort Worth, Miami, to Charlotte, Albuquerque, Kansas City, to rural areas, etc.

The inevitable shortfall in some expensive areas between the minimum wage and living wages should be made up in several forms: first, a housing allowance program similar to SNAP, but for housing instead of food, where the government would arrange to offset the portion of rent a poor household could not afford by a combination of payment to the landlord and provision of tax credits to the landlord. Second, expansion of SNAP programs to ensure all impoverished households can afford to eat properly. Third, making the first 33% of the living wage (not the minimum wage) in every region tax-free, while correspondingly raising taxes on all income over 333% of the living wage in every region, with the top 0.5% earners paying income tax between 75-85%; and at the same time closing loopholes in corporate tax codes and increasing corporate tax collection efforts, while increasing rigor of corporate environmental regulations and enforcement of EPA fines.

I also advocate making all undergraduate programs at public universities free, capping the cost of graduate programs at public universities at 50% of the living wage in the lowest-income average small city in the US, and providing interest-free loans to all graduate students (public or private).

In addition to the tax restructuring I mentioned earlier, I also advocate nationally legalizing and regulating minor vice crimes like prostitution, gambling, and most "soft" illegal drugs (as well as decriminalizing most "harder" illegal drugs), which will not only save billions of dollars in useless attempts at enforcement, but will generate many more billions of dollars in tax revenues, permit and licensing fees, and increased commerce resulting from job creation. And I advocate stripping most Federal subsidies to major multinational conglomerates, together with reduction of defense spending by around 20-25% of current budgeting, while redirecting those funds to social welfare, healthcare, education, and so forth. Between these new revenues and redirected budgeted monies, there should be enough to cover the increase in minium wages and expansion of related social programs.

 

The federal government should set a statutory minimum wage so that no full time worker in any state be paid at a rate that would put a family in poverty. It is setting a lowest floor (for the poorest states ) and states can (and many have) establish a higher minimum wage that would be more directly associated with cost of living or consumer price index in that state. More than 20 states currently have higher minimum wage than the federal level; 19 states have the same as the federal, and only four states have a lower minimum wage.

The current federal minimum wage of $7.25 /hour is lower in real dollars than the 1960s and, if one is supporting a family, would be below the poverty level and doesnt buy much whether you live in Mississippi or New York.

As to the different agenda in play, there has been a federal minimum wage since 1938 and raised regularly by presidents and Congresses of both parties…but now, suddenly, there is a different agenda?

 

I believe much can be accomplished with the earned income tax credit for the working poor. Nothing needs to be coordinated and it is pretty close to giving people in need cash. With cash they can make their own decisions based on their own needs. In addition we will not be targeting specific industries with waht could be cost increases that can put them out of business and cost jobs.

Should it be the responsibility of state and local government?

I know a man who immigrated to the US from Venezuela (legally) and he benefited from a free University education in his native country - at the time anyone meeting a minimum standard could go at no tuition cost, in addition they had a private system for those willing and able to pay. I think we should adopt a similar situation here. As in many areas our higher education system is a hybrid, neither pure government or pure free market. In many cases getting a university education is like a lottery for the middle class and poor. Even with aid many can not afford it even when they otherwise would qualify. Our system should be focused on merit without regard to ability to pay - at least in the public colleges and universities.

We also need a better system for training people in the trades, i.e. plumbing, carpentry, electrician, etc.
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Poverty is an arbitrary threshold set by government. How does it work if government sets and arbitrary standard for poverty and then an arbitrary standard for wages? An objective poverty measure in New York is very different than one in Charlotte.

In setting a floor we end up with a minimum wage in some circumstances that is completely meaningless. For example if an area has a market wage of $15/hour setting a national minimum at $10 has no value - the market wage is what matters.

Setting a minimum wage higher than market wages will have a consequence(s). Is the net good or bad? For some on an individual level it is good, for others it won't be good. Can the nation have an honest discussion of the consequence(s), or is this just an issue for demagoguery? For example there is already restaurant technology that will allow food orders using a touch pad device, combined with debit/credit card payment there would be significant less need for cashiers at fast food service restaurants. If we raise the minimum wage 40% or more, as in some proposals, how long would it be before this technology is fully implemented so employers in this industry can lower costs? My guess would be 12 months, eliminating 1/2 the cashier jobs in the industry.

Since 1938 we have had occasions when a minimum wage increase was meaningful and times when it was not. I believe that in the past 25 years the working poor has gotten absolutely no benefit from minimum wage increases, I believe those proposing increases are aware of this - so for me I question what the real agenda is? Tell me the truth. Again, why not increase the earned income tax credit and help the working poor directly without putting many of the jobs filled by the working poor at risk?

 

There is no evidence that higher state minimum wages have had adverse consequences. There is no evidence that in the past 25 years that the working poor have gotten absolutely no benefit from minimum wage increases in those states.

The example of food orders and touch pad devices assumes that there have been no similar productivity improvements as a result of technology advances in the past 75 years since the federal minimum wage was established. Hardly the case.

I'm not opposed to also raising the earned income tax credit, although it would be far more costly to the federal treasury ($10-15 billion over 10 years) than a higher federal minimum wage. Obama proposed such an increase last year; the Ryan budget reduced the tax credit.

Your plan wont sell to the Tea Party. They not only want to cut the EITC, but all income security programs (SNAP, housing assistance, etc.) without any regard to the impact on the working poor and the economy as a whole.
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Somewhat related...a new study on poverty and the social safety net:

 

There is so much wrong with this.

First of all, housing costs vary wildly around the country, far more than other costs do. It stands to reason that the proportion of income paid for rent will vary too. Bottom line, the minimum wage should vary a lot less from one region to another than housing costs do.

Second, you're quoting average rents. A minwage worker is not in the market for an average apartment.
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Experience has shown that the demand for minwage labor is highly inelastic. Changes to the "price" lead to much less than proportionate changes in demand. Minimum wage workers as a group benefit, at the expense of everyone else, which is exactly the goal.

Technology is steadily eliminating jobs, and has been since the dawn of history. We don't dig ditches or graves with human muscle any more. Meanwhile, educational advancement is steadily reducing the proportion of the population that would work those kinds of jobs.

In other words, it's all good.

But your example is wrong, because (1) wages paid to minimum wage workers are not as big a factor in running a fast food restaurant as you seem to think, so an increase in wages won't necessarily drive rapid change, and (2) cashier jobs are only a small part of minimum wage jobs generally.

 

I think the problem is that it costs too much to live in NYC and other places. The people who own property and companies and can charge whatever prices the public will bear are the problem. The prices will just increase more as they think they still need to earn 50x the minimum wage.

But, I'm not sure increasing the minimum wage is a good idea. I especially think that there needs to be a start-up exemption (if they aren't making a profit) for 1-2 years. And the inflation problem is real. Every retired person over 65 should be against this as the money they saved will be worth less unless they are still invested in the stock market, then they might have some protection.

The big problem I have is that fast food companies and some big box stores are making lots of profits, yet not paying their employees enough. Then they have to get food stamps and medicaid from the state/Feds. Basically subsidizing the big companies profits while the workers barely get by. It is what the ACA was supposed to fix with the employer mandate, but they need to fix the part-time issue.

I personally would rather see the taxes be increased $1/hour to provide healthcare for all and stabilize retirements. Then work on rents and the type of living structures. Work on eliminating bills and expenses. Change the expectations of what it means to be successful in society. Work on creating a 'free' on-line university and experience trainer to let people study for new jobs. That is how you deal with the working poor and helping them get ahead.

 

I will give some clarification.

If the minimum wage is set above the market wage alternatives will become more cost effective.
If the minimum wage is set equal to or below the market wage there would be no adverse consequences.

When employers are exploiting labor and are paying below market wages, government assistance is going to be a net good. Exploitation in the market is not good for the overall health of the market. There have been times in US history when this condition has existed. Today it does not exist in lawful employer/employee relationships. there are some circumstances where undocumented workers are being exploited, but minimum wage legislation will not address this type of exploitation.

Wage stagnation.
Wealth gap increasing.
Purchasing power erosion.

There is evidence in these categories and more.

Pay for it with tax reform and restructure of other welfare programs. For example, rather than food stamps, give people cash through the credit. We can guarantee every family - a minimum level of income through the credit. name the amount - $10,000/$15,000/$20,000 and be done with the waste in the welfare programs as they exist. Let the market determine market wages. And let those who make above the threshold keep the money outside of a normal tax rate rather than through the elimination of the tax credit. With creative thought we can come up with a better system.

I do not have a defeatist attitude. I believe I could sell it. If you assume failure, you would never try - is that really your outlook?

The key to selling an idea to the Tea Party or any group is to understand their actual concerns.
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This is what many liberals/progressives/whatever don't understand about people who support smaller government, we are not anarchists, in most cases we support less federal government in favor of local control. The federal government has legitimate roles, but setting arbitrary wages is not one of them when there is no fraud, coercion, deception, etc.
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The formula has many variables to address "poverty". One variable is the wage. Another would be affordable housing. In some communities affordable housing would have an impact on poverty when the impact of adjusting wages might be zero. If the average rent is $3,000+ no employer is going to pay a low skilled worker enough money to pay for that.

Or...I worked fast food in high-school and college - part-time during the school year and full-time in the summer months. I was able to save and pay for college making near the minimum wage during those years - a state university. Today in many instance a person could not do that. Tuition costs have risen at a much faster pace than the minimum wage or general wages. Why? States can set the tuition at these schools - they could just as easily index tuition increases to wages as doing it the other way.

If we look at the price increases at employers who tend to pay the minimum wage, their prices tend not to go up as fast - when they improve profitability it is due to them doing things in a more cost effective manner. Innovation. Why is there no innovation in things like housing, education, utilities. All we get are price increases.

 

Are you really suggesting that recent minimum wage increases were major contributing factors to wage stagnation and the wealth gap increase, rather than the policies like supply side economics? Seriously?

One recent study shows that raising the minimum wage does not cause job loss. The decade following the minimum wage increase in 1996-97 was one of the strongest periods of job growth in decades. Analysis of states with minimum wages higher than the federal floor between 1998 and 2003 show that job growth in those states was actually stronger overall and kept more people out of poverty.

Other recent studies, in Nov 2010 and April 2011, found that minimum wage increased did not cost jobs and contributed to economic stability of the working poor, even during the recession and high unemployment.

So, without providing any details, you basically want to put an end to Reagan federalism, where states have a significant role in most social welfare and income support programs and turn it all back to federal tax policy.

My outlook is one of political reality not fantasy that the Tea Party could be convinced to spend significantly more federal tax dollars on social services for the working poor.

 

I believe it is a question of focus. There are not many things I want or need from government - even local government. I want fire, police, and my garbage collected (and similar things), I don't need government telling me I can't buy incandescent light bulbs. I want government to do a few things, consistent with the Constitution, well rather than trying to micromanage too many aspects of my personal life.

Health insurance should be available across state lines, in my opinion. It works for life insurance.

What is wrong with the market determining wage rates?

What would you pay per hour for someone to wash your dishes? What is it worth?
What would you pay per hour for someone to wash your car? What is it worth?
What process to you go through to determine what is fair?
When do you decide to pay someone to do it or do it your self, or seek an alternative?
Why would you pay more than the job is worth, if not forced?
Would you pay a person less than what you think is fair?

Theses question are not directed to you specifically, but generally I don't understand how those who support government setting a minimum wage view these kinds of questions.
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Follow the flow of the discussion. I am suggesting, given minimum wages and minimum wage increases over the past 25 years that the working poor has gotten no net benefit. Assuming the minimum wage is to address some of these issues, they problems have gotten worse not better. It suggests the policy is infective. If it is ineffective shouldn't we want to know why? I do. Shouldn't we want to do something different, something that works? I do.
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I would eliminate the minimum wage and more strongly enforce fair employment law and regulation. For example if as an employer I can restrict your ability to work for a different employer I can exploit your labor. This at one extreme to employees not being aware of market wages for the work they do. I would make sure in law the playing field is balanced.

People with jobs skills that command a high value will get paid more. Those who enter with no skills or have low skills won't get paid much at all. If our education system is failing, fix that system. If an individual does not want to improve their skills, nothing else will matter. This is the US where people are free to accomplish whatever they want within their ability. Far too many wait to be taken care of.

Minimum wage at 40 hours is $300/week. What if I built a client base and cut 20 lawns per week at $20 = $400. But in many areas i would be breaking all kinds of laws and to get into compliance it would cost $$$$$, so I work for Acme Lawn care at $7.50/hour and effectively there are expenses out of my pocket so even before taxes my gross is measurably less than $7.50/hour. Perhaps we could fix problems like this - and perhaps I grow the business and make more money in time - taking control of my life, not waiting for the promise of a minimum wage increase. Or, Acme lawn care realizing I could start my own business decides to pay me more.
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Wages have changed. Low skill worker wages have not. Work in less demand has not. An assembly line welder, replaced by robotic welding is never going to see the return of his job, but he can learn to program, repair, etc. the robotic equipment - or learn something entirely new that pays well.

 

I have cited several independent university studies that found that raising the minimum wage did not adversely impact employment and, along with other social programs, contributed to the economy and to reducing poverty.

Another university study just released found that raising the current minimum wage from $7.25 an hour to $10.10 an hour would reduce the poverty rate among workers between the ages of 18 and 64 by as much as 1.7 percentage points or over 4 million people would see positive benefits.
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There are also the more intangible benefits, much like providing paid health care/medical leave and other benefits, of less turnover, higher productivity and moral and simple dignity for workers to be paid a living wage.

 

There are plenty of workers that are not 'employed' by a company that would get hurt (or would have to increase prices if possible) to keep up with the inflation though.

I'm not saying the studies are bad, and I haven't looked at them, but I would be interested in knowing how much extra pay these workers saved or how much of an improvement in lifestyle they saw compared to any negative impact to the whole economy. And it seems like if major deflation ever did happen, where the value of the dollar increased somehow, the small businesses wouldn't be able to make enough money to pay for their employees. There is also a psychological aspect to the value of products, and people complain if they go up in price or will do without if it becomes too expensive. Just travel outside of the US and see how much things cost and what your reaction as a consumer is.

I still think there needs to be more personal financial education and advice on how people are able to get out of poverty, even when they make $7.25/hr first. Homes and cities need to help by building smaller sustainable homes and such.

 

But, what happens if you raise the minimum wage too fast and the middle class incomes don't keep up or fall? While I am making 25% more since I started at my current job in 2004, I got a 2% raise in 2012 and a 0% increase in 2013 (even though my 450 shares of company stock luckily went up to compensate).

I'm not an economist, but I would like them to study and create a video about what has happened in the past, and model what will happen in the future if the minimum wage is increased. There should be plenty of data out there from different parts of the country, different years, and such. I want to see how much would change in these workers lives if wages increase or stay the same.

I think that we should be looking at why it costs so much to have a 'livable' wage in the first place. That is something that should be done too. And add in the psychology of prices as a consumer, and how certain people (cheap people like me) won't spend $7 for a Subway sandwich, $10 for a movie ticket, or $25,000 for a new car. I think people get set in their ways about what products should cost, and those prices shouldn't change unless you are getting a better product. I am used to tech prices and those always collapse after a few months (or people want free stuff), the rest of the economy has supply, demand, inflation, and some competition, but they all need to have businesses make enough money to pay employees and give them some benefits. And the more you need to pay people at the start of a business, the more risk it is.

 

The problem with a predictive video is that economics is a fractured quasi-science whose big names are ideologues. So no matter what the video says, half of its audience will reject it on ideological grounds.

I think an increased minimum wage makes sense from a 'basic human decency' standpoint. And that people who start businesses deserve more credit than they get from the people argue on their behalf.