Saturday, August 22, 2015

The Minimum Wage: Common Arguments

With Bernie Sanders so popular on my Facebook feed, the $15 dollar/hour minimum wage has been floating around a lot, and there are a lot of arguments that I think need to be addressed.

A good starting point to refute is the Salon article about the myths of the minimum wage

Myth 1: The minimum wage was never meant to be a living wage. 
Liberal/Progressive Take: Everyone working a full time job should be able to support their family.

Okay, so I'm not going to argue intent of the policy. It may well have had the noble intention of having everyone living above the poverty line. Intentions, sadly, don't really matter. What matters is the effect of the policy and the means by which the policy is enacted. 

The problem with the argument about the minimum wage is the definition of 'living wage.' I have lived at $8/hour. It wasn't that bad. Adjusted for inflation, that is about $10/hour in today's dollars. In graduate school, my wage is officially ~$20/hour, but I only get paid for 20 hours/week. This would be full time at ~$10/hour. I have lived fairly well on that. One problem with having a single living wage across the nation is nonsensical. A living wage will be different in LA or NYC than it will be for some podunk town in the middle of nowhere. A national minimum wage would try to impose the living wage of NYC on a smaller town that has a lower cost of living.

Also, I often hear that a parent should be able to support their family on the minimum wage. This is a load of bull, with a very simple question. How big is the family? Should a single mom be able to support three kids? 4? 5? Where do we draw the line? What about a two parent household? Should they be able to support any number of kids on minimum wage? This notion of supporting a family is one that doesn't allow for the continuation of the logic. 

Myth 2: Minimum wage increase won't help anyone if other costs go up too
Liberal/Progressive Take: This won't make a difference in inflation because it will take people off other welfare programs, and will also stimulate the economy with additional spending.

This argument is basically that paying people more will take them off welfare, and allow them to get off food stamps and other welfare programs. The problem with this argument is that it is that it is also just as possible that because people on the welfare system know it so well that instead of earning more, they will try to cut back hours to stay on welfare because it is familiar. We can't be sure as to the response of people to this particular stimulus.

As to the argument about stimulating the economy, this is the standard broken window fallacy. The workers who are getting paid are spending more, sure. But you don't see the employees who were never hired and what they spend, or the other spending that the businesses would have made if they didn't have to pay workers the additional amount. 

Myth 3: An increase in the minimum wage is bad for employers
Liberal/Progressive Take: This will spur workers to be productive, and make business run more efficiently.

It will certainly spur employers to find ways to cut employees out. The way that wages actually rise is by individual workers becoming more productive on average. Raising the minimum wage will indeed force employers to do more with fewer workers, which goes against the progressive response to Myth 5. If we pay workers more, they have to work harder to compensate, or work with additional capital investments to make them more effective.

As to other arguments about paying more being a good business practice, that is something that individual business owners have to determine. For most industries, this is true, since according to the Salon piece, only 4.7% of workers are on minimum wage. This means that 95% of employers ALREADY KNOW that paying employees more is good for retention, and I think the reality is all employers know it, but they don't care about keeping the 4.7% that is on minimum wage, otherwise they would pay more. Duh.

Myth 4: $15 is a random number.
Liberal/Progressive Take: It is what is required to raise workers above the poverty line, while being feasible for businesses.

So that means if the poverty line changed, this number will change. So who defines the poverty line? Also, who determines what is feasible for businesses? The minimum wage would take the ability of employers to find what is feasible for them, if that number is below this proposed minimum. 

Myth 5: It will cost us jobs and raise unemployment
Liberal/Progressive Take: There is no evidence from analysis of 13 states, and these states had faster job growth.

This directly contradicts point 3. If workers become more productive, that means that you can do the same amount of work with fewer workers. Also, this is a causation is not equal to correlation. Just because these states had faster growth and increased the minimum wage, doesn't mean that they are directly related. These states may have grown even faster if the minimum wage was not raised. I would have to see a more careful analysis rather than the aggregation at the state level, and other confounding factors. 

Myth 6: Only teenagers and uneducated people work for the minimum wage.
Liberal/Progressive Take: 4.7% of the working population is at or below minimum wage, and 88% of those are above the age of 20, and 43% have attended college.

What kind of college education? There are many fields in the social sciences and humanities that don't really have economic value to most companies. Do they have value? Sure, but not to companies trying to serve consumers. So college education can be (though isn't always) irrelevant. Should I care about your dance major? Depends. Am I a dance company?

The 88% of people on minimum wage who are over the age of 20 don't have a whole lot of other opportunities. If they did, they would be working for more than minimum wage. But that is irrelevant. What is relevant is if we are then advocating for age discrimination? Should someone be entitled to higher pay just because they are older? I would say no. Why should it be okay to employ a highschooler at minimum wage, but not a 21 year old, or a 30 year old? To use another social justice bugbear, that would be unequal pay for equal work, and that is not right. So why are these 20 year old unable to do more complex jobs that pay better? Have they not learned on the job? Why should they be entitled to more just because they are older?

Myth 7: Seattle already has a minimum wage of $15 and it's terrible
Liberal/Progressive Take: Totally not terrible, and the $15 minimum hasn't been reached yet

This is hard to argue about since it is true, they haven't gotten the wage to $15/hour yet, because of a slow roll out. So we can't judge the effects. Also, the big companies with large profits that they cite, Starbucks and Howard Schultz, are not the companies that would be most affected. Those are companies that are operating marginally, and just scraping by. That what is meant by the marginal change. It is not going to change for companies that are doing well, but a company that is doing barely okay will not make it. 

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