First, let me explain something. All money and derivative credit isfirst produced by government fiat. It is then spent and extended ina manner to support economic activity that both implements governmentpolicy and expands the economy. It then taxed back mostly as itpasses through the hands of the people over and over again.
Understanding that it should be obvious that it is sound policy toensure a living wage tied directly to a legitimate measure ofinflation and to ensure one hundred percent labor force participationat that wage or better. This naturally stimulates the maximum taxrecovery preferably through a universal VAT system that also clipsinterest and incomes. Thus every spin of a dollar bill loses a fewpoints.
There will still be plenty of folks outside such a system, at leastfor a time. However, if you followed me this far, it should be clearthat a minimum wage set point needs to be to the level of a livingwage.
In the real world, real jobs are going for $12.00 per hour becauseemployers need to keep employees. Less that a living wage meanscertain turn over. Thus setting the minimum wage below this easilyestablished benchmark simply promotes abusive counter productivelabor practices.
I should also mention that the minimum wage needs to be applied toall farm workers however you think traditional slavery is good forus. Our own experience with that was that prices immediatelyadjusted. The worker took his piece, the farmer took his piece andthat was that. It goes without saying that in farming, piece workrules will apply as long as a good worker can make minimum wage. Italso allows a less productive member of a family to make money.
In fact a lot of tasks need to be adjusted in this manner. No oneshould care too much if some days you take five hours to deliver fourhours production as long as it can be seen to be fair. Mostimportant, though, it allows the worker to manage his work flow andcompensate for body exhaustion and other issues.
How High Could theMinimum Wage Go?
Friday, 15 February2013 09:36 By Jeannette Wicks-Lim
http://truth-out.org/news/item/14574-how-high-could-the-minimum-wage-go
A 70 percent boost -to $12.30/hour - would help millions of workers, without killingjobs.
The minimum wage needsa jolt—not just the usual fine-tuning—if it’s ever going toserve as a living wage. Annual full-time earnings at today’s $7.25federal minimum wage are about $15,000 per year. This doesn’t comeanywhere near providing a decent living standard by any reasonabledefinition, for any household, least of all households with children.But among the seventeen states that either have active campaigns toraise their minimum wage or have raised them already this year, nonehave suggested raising the wage floor by more than 20%.
How high can theminimum wage go? As it turns out, a lot higher. Economists typicallyexamine whether current minimum-wage laws hike pay rates up too highand cause employers to shed workers from their payrolls in response.But the current stockpile of economic research on minimum wagessuggests that past increases have not caused any notable job losses.In other words, minimum wages in the United States have yet to be settoo high. In fact, if we use past experience as a guide,businesses should be able to adjust to a jump in the minimum wage asgreat as 70%. That would push the federal minimum wage up to$12.30. In states with average living costs, full-timeearnings at $12.30 per hour can cover the basic needs of the typicallow-income working household (assuming both adults in two-adulthouseholds are employed).
Why is such a largeincrease possible? It’s because minimum-wage hikes—particularlythose in the 20-to-30% range adopted in the United States—imposevery modest cost increases on businesses. This is true even for thelow-wage, labor-intensive restaurant industry. And because these costincreases are so modest, affected businesses have a variety ofoptions for adjusting to their higher labor costs that are lessdrastic than laying off workers.
Take, for example, the31% rise in Arizona’s state minimum wage in 2006, from $5.15 to$6.75. My colleague Robert Pollin and I have estimated that theaverage restaurant in Arizona could expect to see its costs risebetween 1% and 2% of their sales revenue. What kind of adjustmentwould this restaurant need to make? A price hike of 1% or 2% wouldcompletely cover this cost increase. This would amount to raising theprice of a $10.00 meal to $10.20.
To figure out what isthe largest increase businesses can adjust to without laying offworkers, we can take stock of what we know about how businesses haveadjusted in the past and then figure out how much businesses canadjust along those lines.
Let’s stick with theexample of restaurants, since these businesses tend to experience thelargest rise in costs. And let’s start with a big increase in theminimum wage: 50%. If we add together all the raises mandated by suchan increase in the minimum wage (assuming the same number of workersand hours worked), the raises employers would need to give workersearning wages above the minimum wage to maintain a stable wagehierarchy, and their higher payroll taxes, the total cost increase ofa 50% minimum-wage hike would be 3.2% of restaurant sales.
The cost increase thatthese restaurants need to absorb, however,will actually be evensmaller than 3.2% of their sales revenue.That’s because whenworkers’ wages rise, workers stay at their jobs for longer periodsof time, saving businesses the money they would otherwise have spenton recruiting and training new workers. These savings range between10% and 25% of the costs from raising the minimum wage. If the higherwage motivates workers to work harder, businesses would experienceeven more cost savings.
So what would happenif restaurants raised their prices to cover their minimum wage costincreases? One answer is that people may react to the higher pricesby eating out less often and restaurant owners would lose business.With a large enough falloff in business, restaurants would have tocut back on their workforce. But it’s unlikely that a priceincrease as small as 3% would stop people from eating out. Thinkabout it: if a family is already willing to pay $40.00 to eat dinnerout, it hardly seems likely that a price increase as small as $1.20would to cause them to forgo all the benefits of eating out likegetting together with family or friends and saving time in mealpreparation, clean up, and grocery shopping.
Still, let’s assumethat a 3% price hike actually does influence people to eat out less.The key questions now are how much less and can restaurant ownersmake up their lost business activity? Economists have found thatrestaurant patrons do not react strongly to changes in menu prices(economists call this an “inelastic” demand). Estimates fromindustry research suggest that a price increase of 3% may reduceconsumer demand by about 2%.
However, if thesesmall price increases take place within a growing economy—even aslow-growing economy—restaurant owners will probably see basicallyno change in their sales. This is because as the economy expands andpeoples’ incomes rise, people eat out more. In an economy growingat a rate of 3% annually, which is slower than average for the U.S.economy, consumer demand for restaurant meals will typically rise byabout 2.4%. This would boost sales more than enough to make up forany loss that restaurants may experience from a 3% price increase. Inother words, consumers would still eat out more often even after a50% minimum-wage hike.
After taking accountof the ways that restaurants can adjust to the higher labor costsfrom a minimum wage hike, it turns out that the biggest minimum wageincrease that restaurants can absorb while maintaining at least thesame level of business activity is 70%. In 2004, Santa Fe, NewMexico, came close to this. Its citywide living-wage ordinance raisedthe wage floor by 65%—from $5.15 to $8.50. A city-commissionedreport after it was put into effect found that “overall employmentlevels have been unaffected by the living wage ordinance.”
However, even if thefederal minimum rate were 70% higher, or $12.30, it would still fallshort for two major groups of workers. First, one-worker familiesraising young children need generous income supports in addition tominimum wage earnings to help cover the high cost of raisingchildren. Second, minimum-wage workers who live in expensive areas,such as New York City and Washington, D.C., require affordablehousing programs.
A 70% minimum-wagehike is the biggest one-time increase that U.S. businesses can absorbwithout cutting jobs, but it’s not the end of the story. In thefuture, the minimum wage can inch further upward. For example, itcould rise in step with the expanding productive capacity of the U.S.economy, as it did in the 1950s and 1960s. A $12.30 minimum wagetoday rising each year with worker productivity would reach $17.00 injust over ten years (in 2011 dollars). This wage would be high enoughso that a single parent with one child could support a minimallydecent living standard. We would finally begin transforming theminimum wage into a living wage for all workers.
Policy discussionsaround the minimum wage need to move past the debate of whether ornot it causes job loss. The evidence is clear: minimum wages, in therange of what’s been adopted in the past, do not produce anysignificant job losses. Now it is time to focus on how we can useminimum wages to maximally support low-wage workers. Can we raise theminimum wage rate to a level we can call a living wage? By myreckoning, we can.
Sources: JeannetteWicks-Lim and Jeffrey Thompson, “Combining the Minimum Wage andEarned Income Tax Credit Policies to Guarantee a Decent LivingStandard to All U.S. Workers” (Political Economy ResearchInstitute, October 2010).
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