All this talk about the minimum wage. I heard the stupid quote of the week yesterday. Anyone working eight hours a day should not have to live in poverty. Brilliant! Certainly a sentiment with which we can all agree. But pure stupidity. The hard truth is that the folks who depend on minimum wages for the full support of their lifestyle will always live in poverty. The minimum wage can be $100/hour and minimum wage workers will still be poverty stricken. There are two ways to look at this. The first, and easiest to grasp, is that the increase in the wage will cause some inflation. In addition, every worker up the pay scale will expect a raise causing even more inflation. If you raise the minimum wage from, say $9.00/hr to the current nut-case proposed $15.00/hr., what are the folks currently earning $12.00 going to demand? Probably at least $16.00. The folks earning $15.00 are going to want at least $19.00. Those cost will result in higher prices. The result, $15.00/hr is the new $9.00/hr and the minimum wage worker will not have any improvement in his/her lifestyle. What cost $100 before the hike will cost $167 after. Maybe even more because the increase in wages will result in an increase in other business costs as well. Case in point, when I got my first job the minimum wage was $1.75. The current minimum wage workers are not 5 times better off than those in 1963. The only difference is the 2014 worker waiting for the bus will have a cell phone against their ear instead of a transistor radio. Another way to look at it is that the value of the work does not change. All that has been done by increasing the minimum wage is decrease the value of the dollars with which it is paid. Try to bear in mind that the dollar is just a medium of exchange. It has no intrinsic value. It just makes trade easier. Instead of a car costing four cows, one mule and 12 hours of digging ditches, it cost $20,000. Or maybe it cost $8,000. But the value is still four cows, one mule and 12 hours of manual labor. The difference between the 8 and 20 is caused by variations in the value represented by each dollar. The dollar in the $8,000 example simply represents more value than the dollar in the $20,000 case. It doesnt matter what the dollar figure is, if you dont have value equivalent to four cows, one mule and 12 hours of manual labor, you cant buy the car. The only way for minimum wage workers to overcome poverty is to increase the value of the work they do. That means improving knowledge, expertise and skill levels. There is no other way.
Posted on: Wed, 26 Mar 2014 18:07:45 +0000
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