A $9 Minimum Wage? No Way!

Site Sponsors

Topics

Subscribe to AFM

Site Sponsors

Some of my Friends are Authors

AFM in the Media

Blog Stats

Search

« 18 Years Ago Yesterday… | Main | Now You Can Hedge the House »

By JLP | May 24, 2006

There’s another article on MSN Money about minimum wage )or “living wage” as the media and politicians love to call it). Here’s how it opens:

Donna Riley never liked taking handouts. The 49-year-old parking lot attendant had for years subsisted on disability payments for her injured back and $6-an-hour part-time work, eventually filing for bankruptcy in 2003 because of her mounting medical debts.

In 2004, when the city of Buffalo, N.Y., passed its last living-wage ordinance, raising city contractors’ minimum pay to $9.03 plus benefits, she saw the opportunity to finally get off disability and work full time.

Now, Riley and her husband, who also works for a city parking company, make $6 more an hour combined — enough to pay all of their bills and buy their first new car.

“Driving out of the car lot at the dealer with a brand new car was a total blow-away,” Riley said. “Now we are working on buying a house.”

So, they get a “raise” and go buy a BRAND NEW car with it? What about getting an education or some sort of training so that they can better themselves? Something tells me that the minimum wage isn’t going to be enough for them. Therein lies the problem with the minimum wage: IT IS NEVER ENOUGH! We can raise it all we want, but people are always going to want more.

Wages should be a factor of supply and demand, not a tool by politicians to get votes. As I have said before: jobs that require little or no skill and can be done by just about anybody do not deserve high wages.

Topics: Miscellaneous |

Comments to “A $9 Minimum Wage? No Way!”

djb Says:
May 24th, 2006 at 2:28 pm

“As I have said before: jobs that require little or no skill and can be done by just about anybody do not deserve high wages.”

How nice. I hope I never work for you.

Living wages increase productivity by reducing turnover and absenteeism. An economic idea called the “efficiency wage” hypothesis holds that firms may benefit from paying above-market wages because their employees will put in more effort, show less absenteeism, and have lower turnover.

Not to mention that we are all human beings living on this planet together and an increase in my well being has a direct correlation to and increase in your well being.

JLP Says:
May 24th, 2006 at 2:42 pm

djb,

You said:

Thanks for the input.

However, if it is a minimum wage, then it is not above-market. An above-market wage implies that is at the discretion of the employer to pay as they see fit, kind of like how Costco pays more than WalMart.

Wages should be based solely on supply and demand.

Tim MMF Says:
May 24th, 2006 at 2:51 pm

Like Robert Kiyosaki says…when you give people with a “poor” mindset more money they just get themselves into more debt. Throwing money at poor people isn’t the solution. There’s has to be some money management lessons to go with it. You’re right on.

Dus10 Says:
May 24th, 2006 at 3:12 pm

djb:

The idea of a “living wage” is very short-sighted. If an employer pays his employees minimum wage, because that is what he can afford based on the costs of production, and you raise the minimum wage, one or both of the following will happen: 1) the employer can retain fewer employees and will require those that are retained to produce more, 2) the cost of the final product to its consumers will increase. If the first happens, then unemployment will rise, and those people will be worse off than they were making less per hour. If the second happens, then you are sparking inflation, and their “real” wages will fall back to what they were before minimum wage was raised. The end result, it is at best neutral, or it is much worse.

Herb Says:
May 24th, 2006 at 3:50 pm

Ok, no Robert Kiyosaki reference… Let’s keep it to real ideas, not scams.

I’m ok with a minimum wage, but I’m not sold on the “efficency theory”. Would paying the McD’s guy $10/hr really make him want to get your order correct? Typically people in low paying jobs are there because they’ve “chosen” to be there. ie. they are not willing to put in the effort to gain skills and increase their worth to an employer. I don’t see how paying them more money is going to change that mindset, it simply reinforces that their “choice” was a good one.

However, we also have the problem that the American middle class seems not to care about the welfare of those below them. Who in their right mind would shop at Walmart for example? Wal mart is a scourge on every community it enters; welfare roles increase and small businesses collapse. While at the same time providing cheaper goods to the middle and upper class which furthers the divide between haves and have-nots. Capatilism is great, but it’s also brutal on the “losers”; the poor/uneducated/unskilled.

Foobarista Says:
May 24th, 2006 at 3:55 pm

If you raise the minimum wage, all you will do is increase unemployment as more jobs go into the black economy to be done by illegal immigrants. Increasing the minimum wage just prices poor Americans out of the job market.

BD Says:
May 24th, 2006 at 4:06 pm

Clearly this increase was enough for them, since they are “totally blown-away” by how much easier it was to get by on $6 an hour more, considering both incomes together. Why do you assume that “IT IS NEVER ENOUGH” for them?

Rich folks tend to assume that people earning minimum wage are leeches, when in fact that are taking the bare minimum that society is offering. That’s what a minimum wage is!

djb Says:
May 24th, 2006 at 4:07 pm

Below is a link to Balitmore’s study of their living wage law. It found that there were no large-scale negative economic and fiscal impacts from living wage legislation

http://www.cepr.net/columns/weisbrot_II/baltimore.html

Vladimir Stojanovski Says:
May 24th, 2006 at 4:11 pm

$9/hour is a reasonable living wage. But $15 is even better. Heck, why not raise it to $20 so the parking attendants can buy that house AND furnish it.

Therein lays the fallacy of the minumum wage argument: it is not only completely subjective and not rooted in economic fact, but also simply bad for business. And what’s bad for business is ultimately bad for employees.

But tell that to populists looking to create victims and votes. That’s right: all of you in the bottom 50% of earners are victims. In fact, you should pay no tax to Uncle Sam–your better off compatriots should pay all the tax. (Oh wait, that’s the way it already is! Never mind!)

Yeah, vote for me, and I’ll take care of you–it’s not your fault, after all. Vlad for President!

Rob Says:
May 24th, 2006 at 4:21 pm

“Not to mention that we are all human beings living on this planet together and an increase in my well being has a direct correlation to and increase in your well being.”

Then by all means send me a big check and increase my well being, and yours will go up too!

Adam Says:
May 24th, 2006 at 6:37 pm

Raising the minimum wage like that is merely a way for them to force their idealist socialistic ‘theories’ upon the market to allow them to garner votes and feel better about themselves. Some people will always be carrier victims no matter how much you pay them. They will always hate people who are better off, and will never do anything to better themselves. Oh well, there’s always robots.

Dus10 Says:
May 25th, 2006 at 7:32 am

djb:

You seem to not notice that your article is discussing raising the minimum wage for government employees and contractors. This would not be an increase in minimum wage for all jobs. Which means that it does not have as large of an effect on the economy. This is a like an employer deciding to pay all of its employees a certain amount more than the minimum wage… it is apples to oranges… and you cannot effectively argue what is good for applies is also good for oranges.

Anonymous Says:
May 25th, 2006 at 4:03 pm

I bought my car used. My income is higher than this couple’s and I’m sure my net worth is too. Part of the reason is that my wife and I own our cars free and clear. We aren’t carrying a pile of debt around with us. We’re actually considering how soon we’ll be able to pay off our mortgage.

Lelia Katherine Thomas Says:
May 25th, 2006 at 9:15 pm

Okay, my gut reaction is to agree with you on this, but ultimately I can’t in some ways.

People will always want more because there’s this thing called life, simply put. In life, you don’t just have yourself usually, but your spouse and your child (likely children–plural). Put all of that together, and you’re right–minimum wage, be it at $5.15 or $9.00, will never be enough.

Moreover, even if this particular couple is childless, you just imagine trying to balance similar lives and getting a new education. And might I mention that they do have to have a functioning (hopefully safe) car to get to and from work or even to and from a university. Used cars–or should I say good used cards–aren’t always available when you need one, especially according to where you live.

Now add children to the whole equation. Young children will require daycare for this to be pulled off successfully. Children under 16 will only be at school until 3pm; any time after that would be extracurricular, in which case there are usually equipment costs. If you’re living on minimum wage, you likely don’t live in a good neighborhood, unless you’re just lucky. You don’t want your kids there without you. What do you do with them, while you’re trying to balance bills, work and an education? Do you think you could do it all? Some families even have one or both parents working multiple jobs.

This doesn’t even begin to account for single mothers.

Yes, people of lower incomes need to be taught proper and better money management, but are you going to pay for it? Because, guess what, either society will be chipping in for more handout programs or it will be chipping in to teach people how to manage their money. And even then we all know that the latter would not necessarily have a high success rate, because good money management comes more of self-motivation. Otherwise, you wouldn’t see upper middle class people filing for backruptcy, right? A person has to be interested in the responsibility to take it, so the success rate of such education would probably only be about 50 percent, if even that.

While I agree with you in terms of politics here, you obviously have not thought about how important menial tasks are! Not all things can be done by machine; there are still many, many factory jobs out there that make your life better, whether you realize it or not.

Without them, you likely wouldn’t get as high quality products as you do (inspection by hand), your restaurant tables might be dirty (waiting tables), your plate at a restaurant might have caked food on it (dishwasher), and the list goes on for miles. Yes, these are tasks everyone can perform but tasks that most are not interested in performing or even acknowledging.

Also, define skill and your idea of supply and demand. There are people who work in mechanical situations that many of today’s males could never survive in (considering how many males don’t even know how to change the oil in their cars nowadays), and yet they may only get paid slightly above minimum wage (usually $8-10). They have skills many don’t, and they’re in demand, but they don’t get paid as much. Is that paying someone according to skill, according to demand? And, of course, mechanical situations are not the only scenarios one can use for such an argument.

All this said, I think it would be good if people could get better jobs and have better pay, and not just because of what some politician may decide to do. However, not everyone gets to go to college (even in this day and age). Put bluntly, not everyone is smart/willing enough in high school to get scholarships, either. From those points, it’s hard to move up in the world.

I hate the handout society that I feel America has largely become, and yet there is no clear, 100 percent effective answer as to how we can remove ourselves from it. I agree that consistently raising the minimum wage isn’t the way to go, but I also don’t think people should be bordering starvation or chance being ruined upon their next case of the flu, simply because their pay is so low.

Answers are usually in a grey area.

Mighty Bargain Hunter » Roundup for week of 22 May 2006 Says:
May 26th, 2006 at 1:45 am

[...] All Financial Matters has a good discussion going about raising the minimum wage. (I tend to agree that it’s not the best idea.) [...]

jtc Says:
May 26th, 2006 at 2:01 am

Ultimately “living” or minimum wages are arbitrary constructs. Once they are moved, the entire system eventually re-baselines to the new value and back to the same position since there are pressures to raise wages at all levels (just not at the same time or same rate). On the other side, people will argue that this lower end adjustment is a necessary response to cost of living increases. Which one drives the other? The real question is how fast your pay increases relative to the rate of cost of living increases. As I see it, adjusting the minimum wage has a ripple effect which causes less predictability and unsettleness in the overall wage marketplace particularly for those in the middle. It’s natural not to like that feeling especially when it’s only a temporary fix and the next one is just a few election cycles away.

Vladimir Stojanovski Says:
May 26th, 2006 at 8:04 pm

Wow, Lelia Katherine Thomas is on fire! We American men aren’t manly enough to change our oil? I thought YOU gals wanted us to be in touch with our faminine side! But I digress …

Let’s shift focus to illegal aliens, since that’s in the news a lot these days. Yep, let’s raise that min. wage to $9. What’s gonna happen is the parking attendants will be fired because the parking company will hire Jose and Pedro (no offense to my Mexican friends here, just illustrating) for $4 or whatever the going rate may be.

Dylan Says:
May 28th, 2006 at 2:15 am

You are right. People will always want more. That’s why there should be a MAXIMUM wage law, stating that an individual can not make more than a certain amount, which would be a multiple of the minimum wage. This would keep all wages balanced in a continuum.

hmmm Says:
May 31st, 2006 at 3:46 pm

I may be a little late to jump into the discussion here, but I have two cents (maybe I’d have more if the minimum wage were higher) to add. It seems that part of the problem with minimum wage being stuck at $5.15 for YEARS is that, even with it stagnant, we’ve still had inflation. Yep, it seems that the effect you folks mentioned, that would be caused by an increase in the minimum wage, has occurred all on its own. In fact, the entire economy, for good or bad, has continued to chug along on its merry way without increasing the wage that most workers earn. So while things get more expensive, those workers are trying to afford a status quo with the same income. It doesn’t work. But some people have been receiving raises; CEOs and upper echelon managers get their pockets lined when profits increase. Granted, shareholders have the right to step in and limit the salaries of these people, however most workers aren’t shareholders. Where’s the trickle down effect that used to occur when companies were smaller and the boss actually knew your name and cared whether or not you could afford to feed your family more than pop-tarts and white bread. The reason that the minimum wage is instituted is because corporate accountability HAS to be regulated; they certainly won’t self-regulate. In this way, I agree with Dylan in that there should be some cap on wages. I mean, athlete salaries are capped; why shouldn’t other wages be? How much money do people actually need for that whole “stimulate the economy with my affluence?”

Comments

Name (required)

Mail (will not be published) (required)

Website

AllFinancialMatters

A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.

Site Sponsors

Recent Posts

Archives

Topics

Subscribe to AFM

Site Sponsors

Some of my Friends are Authors

AFM in the Media

Blogroll (Daily Reads)

Blog Stats

Search

A $9 Minimum Wage? No Way!