On the Minimum Wage

I saw an item on my Facebook news feed not too long ago that basically said, “Why should we give the hamburger-flipper $15 per hour when some of our military members are on food stamps?” I’ve been thinking about the minimum-wage issue on and off since then, and would like to share my thoughts.

First, let’s get rid of the false comparison between the minimum wage and military pay. Yes, a sizable number of military members are on food stamps, and for the record, I think that’s shameful. They put their lives on the line to protect us, and I think we should at least give them enough money so they don’t have to scramble for their next meal.

But it’s also important to remember that our military is paid by the Federal Government, which must live with the budget voted on (or not) by Congress. Conversely, the minimum wage is a legal floor under the compensation paid to workers by employers. Additionally, there are multiple allowances (housing, uniform, subsistence, COLA) and supplemental payments (flight pay, hazardous-duty pay, combat pay) available to the military that can increase their overall bimonthly check. You can review the basic pay rates, allowances, and special pays here. These payments make it very difficult to create a valid comparison between military pay and civilian pay, not to mention the fact that the military isn’t an 8-to-5 job, but rather is a 24/7/365 commitment.

Back to the question of the minimum wage, then: What should it be set at? Many people say it’s just fine where it is, while others say it should be raised to $10.10 or higher. This graphic on money.cnn.com shows the actual minimum wage since its inception in 1938, along with its relative buying power in adjusted 2013 dollars. You can see that the minimum wage reached its peak buying power in 1968, when it purchased the equivalent of $10.71 in 2013’s dollars. It has declined since then. My view is that the minimum wage should be raised to at least $10.71, simply to restore lost purchasing power. And even that would still be slightly behind the power curve, since the $10.71 figure represents 2013 dollars, not 2014 or later.

Another argument made against raising the minimum wage is that it’s not intended to be a lifelong pay rate. This line of thinking goes that the existing figure is just fine, because it’s only for entry-level jobs that are typically filled by teenagers, who eventually move on to higher-paying jobs as they get additional experience and education. At a certain point, anyone still in a minimum-wage job becomes a “loser” by default.

If that was *ever* true, it certainly isn’t true today. In her “Curious Capitalist” column in the Oct 6 issue of TIME, Rana Foroohar notes the following: “Some 58% of the jobs created since 2010 have been in low-wage positions, often in food services and retail, with salaries of less than $13.83 per hour.” This isn’t all that much above the 1968 (adjusted) minimum wage of $10.71. Further, she notes, “When the majority of people don’t have more money, they can’t spend more, and companies can’t create more jobs higher up the food chain.” And this: “The job market, as everyone knows, is extremely bifurcated: there are jobs for Ph.D.s and burger flippers but not enough in between.” This is a major problem in our economy today, and it’s exacerbated by the current minimum wage.

But Wait! The critics say. If we raise the minimum wage, people will lose their jobs! Well, yes, that’s true. You can’t move the stick without some people getting the short end of it. But it’s my belief that fewer people will be hurt by a minimum-wage increase than are currently hurt, and would continue to be hurt, by keeping the existing level. And here’s a thought: If all these minimum-wage earners have more money, maybe they’ll spend more! And if they spend more, maybe companies will have to make more widgets for these people to buy! And if the companies make more widgets, maybe they’ll have to hire some of the people who lost their minimum-wage jobs when the minimum went up! I’ll call it the “trickle-up” theory: If money percolates up from the consumers, everyone will benefit.

So my conclusion is this: The minimum wage must be raised, and it should be raised to at least $10.71 per hour. In my opinion, the entire economy would benefit.

2 Comments on “On the Minimum Wage

  1. Well, what I am against is the fact that many people who are not at minimum wage, but will be at minimum wage when it’s raised won’t be paid more, nor will the people who already make $20+/hr. Also, prices increase as wages increase, so you will create the same non-spending and poor people that you had before. I haven’t studied the minimum wage increases in Seattle or um… well, I know that there were a few states/cities that increased their minimum wages quite a bit, so I will say that I may be speaking wrongly. A gradual increase would be better, in my opinion.

    • Although I guess I *did* give that impression, I didn’t necessarily mean that the increase had to happen all at once. I agree with you that a phased increase would likely be less disruptive than a single, sudden jump. I don’t think there’s a 100% correlation between wage increases and price increases, though that may be the case in some industries or product categories. A lot of times, though, companies will increase (non-minimum) wages to retain workers but won’t increase their prices because of competition pressures – they’ll take it out of their profits, instead. And with what I’ve read about current corporate profits, it’s my feeling that they have plenty of room to raise wages without increasing prices. As for those who make [a little] more than the proposed minimum, whatever that ends up being, I don’t think they will be harmed nearly as much as those making the minimum will be helped.

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