Six Points Against a Higher Minimum Wage: How Do They Stand Up Almost Five Years Later?

On December 13, 2013 I published a post with the first half of the title above.  It has been read over 2,000 times and has drawn various comments.  Much has changed in the economy and the world since then.  How have these arguments held up?

The first point was that “not every low-paying job is with a large and very profitable company,” and in fact most such positions were and are with small, often struggling local concerns with little in common with the likes of McDonald’s and Walmart, and run real risks of being closed out if the business’s owners were forced to pay more.  Two comments implied that we could tie minimum pay to profitability, which sounds unwieldy but would indeed solve the Burger King-vs.-Joe’s-Bar-and-Grill problem here.  Another stated, correctly, that more money in circulation would help such businesses survive – it would, but in the great majority of cases would not approach being enough.

Second was that the country, then 19 million jobs short, was poorly placed to lose more to higher mandated wages.  Per the AJSN, that number is now 16.6 million, but that is not even a 15% reduction and still shows our surplus of people who would work if given the opportunity.  One commenter mentioned the increased money movement above – again positive, but far insufficient – and suggested that we could help that jobs deficiency with government infrastructure programs.  I heartily agree, as I have in the past – we will need to build, repair, and upgrade numerous bridges, roads, dams, airports, cellular towers, and much more sooner or later, and it may as well be sooner. 

My third point was that higher minimum wages would make employers pay more than they need to, that when they do not get the workers they require, or want to improve their quality and tendency to stay, they can and should raise their offers on their own.  That has been borne out by Walmart and other companies establishing internal minimums higher than the government requirement.  One observer said that the additional competition would be good for customers, which it could be, unless there is plenty as it is.  He also mentioned the problem of “a full time paycheque being less than your rent,” which would only apply to a small share of low-paid workers, as well over half are with parents, sharing living spaces, or have additional household income.

Fourth, I called “the largest inequality” the one between those working and unable to find jobs.  That is less true now than in 2013, but millions of those 16,600,000 would tell you that is how they see it.  No, this is not “fake news” – it isn’t real news or news at all, only my viewpoint – and is necessarily subjective anyway.  In business theory, income is known as a “hygiene factor,” which means that its appeal as it increases does not go up as a straight line but almost levels out.  Sure, $4.5 million or whatever per hour is farther from $15 than $15 is from $0, but a remarkable number of Americans would consider themselves halfway to being rich if they, indeed, earned $30,000 per year – and most people earning $1 million a year would see less change in their lives if their income increased 100-fold than if it went to zero.

Fifth was the limited ability of a higher minimum wage to lift people out of poverty.  That would only work for people experiencing that now who would not once their pay increased, even with no gain in the number of hours they are working.  Vastly more would need additional money or are not poor now, the latter most common among the 45% of minimum-wage workers who are under age 30.  “Increased consumerism” from people being paid more will not solve this problem by itself either. 

Last, our country contains vast variation in costs of living, and getting $7.25 per hour is not the same in Hawaii as in southern Texas.  Over the past five years, many states and cities, most with above-average living costs, have responded by raising the lowest pay themselves, a valid solution not inflicting prohibitively high minimums on others.  I add to that that there are huge individual variations in money wants and needs as well, and it would be an unmitigated loss if those able and willing to work for less than the minimum were legally forced to be unemployed instead. 

I finished with suggestions that, instead of penalizing businesses who need workers, we increase food stamps and unemployment compensation.  Our economy is better, and keeping them the same might be adequate now, but with that 16.6 million there is still no excuse for cutting them. 

One other thing has happened since I first posted here.  Guaranteed income, or universal basic income, has received a lot of attention and a few, usually fatally flawed, trials.  If it comes to pass, and I think it will before 2050, there will be no need for a minimum wage.  That would allow more interesting, fulfilling, and fun work opportunities to pay less, while, fittingly, having little effect on the dirtiest ones.  If everyone were assured of financial survival, I think we as a country could agree, after we had a guaranteed income in place, to abolish minimum wages completely.  Then, and only then, would everyone wanting to work be able to do that.  In the meantime, the ideas above are still valid – we need to let people earn.