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The minimum wage is not a living wage. With the cost of everything being what it is, you can't reasonably be expected to have a McJob and live comfortably, especially if you have a family to feed.
Many people believe that the answer to this problem is to raise the minimum wage. People don't have enough money, so the argument goes, okay, give them more money.
That sounds great on paper. But there is a problem. The value of money is fluid. And rarely, if ever, does that value increase. There was a time when you could actually buy stuff with a dollar. Imagine that. You could buy a whole lunch with a dollar. But no more. Why? Because of inflation. A dollar today is not as valuable, by a long shot, as a dollar in 1940 was.
So why not raise the minimum wage? Like I said, it sounds good. But here's the thing: no matter what you set the minimum wage as, people who earn it will still be making the minimum wage. Whether the minimum wage is 75 cents an hour, like it was in the early fifties, or fifteen dollars an hour, which is the goal for many jurisdictions, it's still the minimum wage. You raise the minimum wage, employers are required to pay more in salaries; those salary increases get passed on to the customer by way of price increases, and with those price increases comes inflation and a corresponding devaluing of currency. And it doesn't stop there. I'm going to use made-up numbers here to make a point. Say the minimum wage is $10 an hour. You start working for a company at minimum wage. In a year, your salary will be raised to $15 an hour. But in a year, the minimum wage goes up to $15 an hour. The net result? You've worked for your employer for a year, but now your salary increase is equivalent to the minimum wage increase, and so both you and the new guy who just started working for the company are making the same thing, minimum wage. So if an employer wants to be fair, she not only needs to increase the salary of her minimum wage employees, but she also needs to increase, proportionally, the salaries scales of her other workers, further adding to the devaluing of the currency.
I see two potential solutions here, neither of which is perfect, but I do think they're both better than chasing windmills by increasing the minimum wage. First, you need to get people off of minimum wage. Instead of just raising the floor, get people off of the floor. One way to do it might be to legislate that the minimum wage can only be paid to an employee for a set amount of time, after that a certain percentage of salary increase above the minimum wage is required. This idea would have to be refined as it is open to some abuse, but it's a start. The other idea, and this one isn't mine, would be to raise the income tax threshold, so that people making minimum wage do not pay income taxes. This would stretch the spending power for the minimum wage earner without devaluing the currency as quickly.
No, I don't think raising minimum wage solves problems. The problems are real and need to be addressed, and the best way to do that, I think, is to reduce the number of people making that minimum wage.
Many people believe that the answer to this problem is to raise the minimum wage. People don't have enough money, so the argument goes, okay, give them more money.
That sounds great on paper. But there is a problem. The value of money is fluid. And rarely, if ever, does that value increase. There was a time when you could actually buy stuff with a dollar. Imagine that. You could buy a whole lunch with a dollar. But no more. Why? Because of inflation. A dollar today is not as valuable, by a long shot, as a dollar in 1940 was.
So why not raise the minimum wage? Like I said, it sounds good. But here's the thing: no matter what you set the minimum wage as, people who earn it will still be making the minimum wage. Whether the minimum wage is 75 cents an hour, like it was in the early fifties, or fifteen dollars an hour, which is the goal for many jurisdictions, it's still the minimum wage. You raise the minimum wage, employers are required to pay more in salaries; those salary increases get passed on to the customer by way of price increases, and with those price increases comes inflation and a corresponding devaluing of currency. And it doesn't stop there. I'm going to use made-up numbers here to make a point. Say the minimum wage is $10 an hour. You start working for a company at minimum wage. In a year, your salary will be raised to $15 an hour. But in a year, the minimum wage goes up to $15 an hour. The net result? You've worked for your employer for a year, but now your salary increase is equivalent to the minimum wage increase, and so both you and the new guy who just started working for the company are making the same thing, minimum wage. So if an employer wants to be fair, she not only needs to increase the salary of her minimum wage employees, but she also needs to increase, proportionally, the salaries scales of her other workers, further adding to the devaluing of the currency.
I see two potential solutions here, neither of which is perfect, but I do think they're both better than chasing windmills by increasing the minimum wage. First, you need to get people off of minimum wage. Instead of just raising the floor, get people off of the floor. One way to do it might be to legislate that the minimum wage can only be paid to an employee for a set amount of time, after that a certain percentage of salary increase above the minimum wage is required. This idea would have to be refined as it is open to some abuse, but it's a start. The other idea, and this one isn't mine, would be to raise the income tax threshold, so that people making minimum wage do not pay income taxes. This would stretch the spending power for the minimum wage earner without devaluing the currency as quickly.
No, I don't think raising minimum wage solves problems. The problems are real and need to be addressed, and the best way to do that, I think, is to reduce the number of people making that minimum wage.
