MINIMUM WAGE

THE MINIMUM SOLUTION

Expenses rise to meet and exceed income,

no matter what the income comes to be.

(paraphrased from “Law and the Profits” by E. Northcote Parkinson)

If the Raise the Wage Act of 2021 (S. 53, as introduced on January 26, 2021) is enacted at end of March 2021, it would raise Federal minimum wage in annual increments.  The wage would jump to $9.50 this year and reach $15 per hour by June 2025. (Wikipedia)

**************************************************************

The subject, may I say controversy, of minimum wage has come up again. As of this writing Congress is still debating (okay, fighting) over the matter. Talk is that if it is raised to $15/hour it will end poverty on earth forever, so some such argument.

In this uneducated, not-an-economist observation of little over 60 years, raising the minimum wage has never solved anything. Maybe he who is ignorant of history is solving the wrong problem? Or, maybe old men just get stuck in the past.

In the fifth grade (why do I remember these things?) our teacher explained the “wage-price spiral”. Apparently if wages go up, prices go up; if prices go up, wages go up. Who knew?

When I turned 16 a minimum wage of $1.15 per hour was paid this high school kid with no experience in anything. It had only recently been raised from $1 per hour. This raise, Congress assured, would solve the poverty problem on earth forever. About this time someone introduced me to McDonald's hamburgers, they were fifteen-cents – another nickle for cheese.

The last raise mandated by Congress was from $6.55 to $7.25 effective July 24, 2009. This increase of $.70 would certainly be the solution! At that time Computer Central had one employee to whom we were paying minimum wage, a 15 year old high school student who started his first job with us on a work-study program. We also had another employee who had been with us for a while. Our son Nathan insisted that to be fair the experienced employee should receive an equal raise. If you do the math, this was a total increase of $200 a month.

Employee #1 – $.70 X 20 hours X 52 weeks = $728

Employee #4 – $.70 X 40 hours X 52 weeks = $1456

Additional employer taxes (est) @ 10% = 216

Now, do the math with 1,000 employees or more.

We, as did almost every other business in America, raised our rates in order to stay in business. When was the last time a McD’s burger was fifteen-cents? For the record, Nathan did not take a raise.

In the sure and certain knowledge few will read my ramblings, and even fewer agree with anything I say, may I respectfully suggest raising wages leads to price increases.  If I have to raise what I pay you, I also will have to raise what it cost others to live. It’s only a matter of time before you’ll need more income. Why not have wages follow prices, instead of Congress arbitrarily pre-ordaining the rise in wages and thereafter prices?

Here’s the thing. I get Social Security. Each year it may or not be increased a small percentage because cost of living has or has not gone up. What if we’d do this with minimum wage, raises following cost of living? That is, minimum wages follow, but do not force prices up.

According to my fifth grade teacher if prices don’t go up, wages don’t go up; if wages don’t go up, prices don’t go up. Who knows, maybe my idea could break the wage-price cycle long enough to end poverty on earth forever!