Minimum wage and other ideas for basic sufficiency
This chart of U.S. federal minimum wage increases shows the current minimum wage has fallen in relative value even as it has gone up. Source: public domain
To raise or not to raise the minimum wage is quite topical right now. In his State of the Union Address President Obama just called for legislation to increase to the minimum wage paid to federal contractors from $7.25 to $10.10. It remains to be seen if Congress will get on board for that, the Wall Street Journal says the idea is already “stalled”.
In Ontario, Premier Kathleen Wynne’s minority Liberal Government has announced plans to hike the provincial minimum wage from $10.25 per hour to $11/hr, effective June 1st. Assuming that passes – which will require support from one other party, mostly likely the NDP – it will be the first such provincial wage hike since 2010.
Most of us have some first-hand experience with minimum wage, enough to know it’s hard (impossible?) to live securely on so little. This Ottawa Citizen profile of minimum wage earners in Canada’s capital makes the point that those who barely scrape by are always on a precipice – one mishap could spell disaster. And it’s very difficult to move out of that cycle, leaving many trapped in a growing underclass.
The pinch of poor wages is supposed to motivate higher education, more hustle or good old entrepreneurial spirit, to attain a better standard of living. It’s the Protestant work ethic and the American Way. OK, but here’s something I would like to see in the whole conversation: Liberals should admit that moochers and cheaters exist. Motivation and personal responsibility are good qualities. Meanwhile, conservatives need to acknowledge that effort is not the whole story. Sometimes even the hardest workers – who already are frugal – still can’t find jobs, or make ends meet.
Listening to those who say the minimum wage should be $10, $14 or even $20 sounds disconnected from reality. Face it, not every employee is worth that cost to employers. And employers can’t just whistle up extra money to pay arbitrarily-mandated wage scales. Bumping the minimum wage higher and higher doesn’t solve everything either. Not everyone can find or hold a job, and those people need to live too. Businesses that cannot afford higher payroll costs will cut jobs. Or close. Or they’ll have to raise their prices to make up the difference, meaning we’d all pay.
Which is why another idea is making the rounds: what if we quit dithering around with minimum wage, welfare, food stamps and that whole myriad of over-lapping, yet still inadequate, programs? We all might live better, happier lives if society tackled the problem through some government-assured minimum income. And this might be win-win, because reducing the many ways poverty drags people down could lead to more productive lives and greater prosperity for all. (Or so that theory goes.)
It’s not a new concept. No less than Thomas Paine favored some version of what he called a citizen’s dividend which he detailed in an essay “Agrarian Justice” published circa 1797. (It’s hard to remember this many decades later, but I’m pretty sure one of the official debate topics when I was in high school was either a guaranteed minimum income or a negative income tax, which is another way to attempt the same outcome.)
I’ve heard some interesting discussions about this recently. Unfortunately, I’ve forgotten where I heard them (CBC? NPR?) – a hazard of too much radio listening! But here’s more discussion of the concept, from the New York Times, Wikipedia and City Journal.
A raw, sink-or-swim economy isn’t all that pretty. But it doesn’t seem fair (or complete) to expect the business sector to solve income inequity by itself either. If this is a worthy societal goal, does it require a societal solution?
Suppose a guaranteed minimum income could eliminate most of the other safety net programs we already have, would that be worth considering? Or do you prefer a world where natural consequences and personal responsibility rule the day?
Do tell.
Tags: economic inequity, economics, guaranteed minimum income, minimum wage, politics, social policy
Lucy, Per your comment: “But it doesn’t seem fair (or complete) to expect the business sector to solve income inequity by itself either. If this is a worthy societal goal, does it require a societal solution?”
How does one separate business from society? Without society how much business would there be and vice versa? I am not an economist and have great difficulty accepting, as scientifically rational, those who think money is an end all commodity and that in and of itself it can and will produce real commodities, oil, lumber, ., ., resources of the Earth, if the prices of same increase ad nauseam.
Once upon a time businesses without employees were hard pressed to manufacture/acquire products to sell at a profit, not so much with today’s computer controlled robotic assembly operations; however, today as then without customers, provided by society, those products are worth but little. Way back at the beginning of the previous century Henry Ford recognized that building automobiles that no one could afford to purchase was the road to perdition. Bucking the conventional “economic” realities of the time Henry started paying a “living” wage to his employees thereby empowering them to become “new car” buyers and so began the good times. Unfortunately the good times for the masses begat those who coveted money with such passion that a situation uncannily akin to that which exists today, incredibly huge disparity between the haves and the have nots, ravaged the planet Earth. The collapse of the world wide economy resulted in large numbers of paradigm changes in societies to ensure such would never happen again. Subsequent to a few wars, one really large, the good times returned to the Earth and those who covet money with passions returned as well. In as much as the paradigm changes which made life more equitable for the many interfered with the enrichment of the few, the few began working behind the scenes to “realign” the paradigms and we now, once again, live in a society where the few have the bulk of the wealth and the many once again have nearly nothing.
Businesses are the major mechanism by which the control of wealth is transferred from the many to the few we had another taste of the effects of such paradigm realignments in 2007-2008 from which the majority are still reeling; however, this is not true for those whom covet wealth at the top of the economic pyramid. When the wherewithal for the masses to obtain the necessities for existence approaches zero to whom are the businesses going to sell? Sans a living wage/support system the likelihood that what occurred in “29” can happen again approaches certainty, this time possibly with a vengeance since far more of the populace is armed than were in the 1920’s. Nobody will win if such a scenario transpires again.
government-assured minimum income. ? Enough to survive on and there is no more ,No more food stamps , or welfare or any govt. assistance , Sounds good ,but impossible . You’ll still have people who won’t work and take the money to spend on whatever besides what they should ,Food ,Shelter shoes for the kids ,Etc. Etc. .Then what happens to them when they’ve spent their money and still need more ? Kick them to the side and tell them they have to wait till next month . Be about the same as now . Every one should be able to get a livable wage ,but some jobs are just not meant for more than just as stepping stones for expeirience and training . And also what happens to the person that is up above min. wage ,will they get a mandatory raise to keep pace with the min.wage increase ? If they do , how does that make a min. increase work ,Like it or not people will raise their prices to keep up and the wages will be just like working for the old wage if not worse . We need to come up with programs to get people used to working and striveing to better themselves again instead living on the govt dole . Before giveing away anymore money they need to get people out there to earn it ,Public works ,infrastructure , even picking up litter , ,Pay these people enough to survive but not enough to retire on ,Then when they want more they’ll hopefully move on to the private sector and get better pay . Probably asking to much as it seems the govt. doesn’t really want to solve the problem but give the people just enough to survive .. Being old or disabled or otherwise unable to work is a whole different problem too. but the ones that are able to should have the oppertunity too, and to keep raiseing the minumum wage just keeps tying people down
I like Ken’s comment. Seems like every discussion of this mentions those who would take advantage of the government’s generosity and not contribute to society, however it always seems to be the poor who are focused upon. There are plenty in the 1% who are just as much gaming the system. Taking advantage of government programs to enrich themselves without contributing as much as they take. I find no correlation between wealth and intelligence. It seems that if you are above a certain income threshold failure can still be rewarded. If you are below a certain threshold any slip in fortune can ruin you. These days there seems to be fewer people between those thresholds. As Ken says, when the customer has no money he can’t buy your ever more pricey goods.
Well, everyone is raising good points. Between rampant materialism and over-population, I’m inclined to think greed and exceeding reasonable carrying capacity are the real elephants in the room.
But right now we _are_ doing welfare, food stamps, food banks, homeless shelters….it’s a long, long list of social services and everything it takes to administer them, employees, reams of applications and paperwork. (And this doesn’t even get into the very valid observations about socializing risk and privatizing profit)
So, for the bottom rung at least, might guaranteed minimum income function as a “consolidation loan”? Would it be more cost-effective to address poverty directly, in one fell swoop and not leave anyone out? I suppose it could replace social security too.
Yes, that creates a huge, new entitlement burden. And yes, some will still over-spend or mis-manage their funds. But at least one could then take a “well, you deal with it!” stance after having established a fair shot to begin with. (It might foster responsibility and stabilize the greater economy.)
Truthfully, I suspect it’s pie-in-the-sky stuff. Ultimately unaffordable.
But the status quo isn’t that sound either, which makes me wonder if there aren’t better ways to tackle the same goals.
I don’t believe the “rich” are the problem in and of themselves. Nor do I believe the “poor” are the problem in and of themselves.
The problem as I see it for both the poor and the rich is that we have painted ourselves into corners.
We continue to add to the number of humans on the planet and we have figured out ways to keep people alive longer than in the past. We do this while we have figured out ways to increase the production of goods and services without needing more workers to do it.
As things now stand, I don’t see any solution. We might have reached the breaking point where nature might have to solve the problem for us. Maybe it will be a plague worse than the black plague or maybe it will be a nuclear war. I just don’t know. But I do know an increase in the minimum wage or more and more welfare will not solve the problems all of us have inadvertently created.
I think a clear local example of a baseline rate and its impact is found in the Watertown region where housing allowances of the soldiers at Fort Drum are the greatest influence on rental rates as well as house prices. So the cost for one person working at a fast food restaurant to rent an apartment is impacted by what a soldier can pay. Of course with current practices, most people will have to work 2 jobs to get 40 hours of work and part time work does not have to pay minimum wage.
The calculations of disposable income of the military base probably figure in decisions made to locate stores, hotels and restaurants in the area.
An adjustment in the minimum wage will not increase my wages (so I get squeezed when I buy groceries) unless it may have an impact several years later if I get a cost of living adjustment. But what does that do to the people on the bottom but increase the price of whatever goods and services I produce. Of course the “middle class” gets squeezed more.