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Monday, May 19, 2014

Why I Don't Support The Minimum Wage Hike

I attempted to avoid the minimum wage issue on here, but it just seems like it is everywhere, so not putting forth my opinion no longer seems smart.

So here is where I stand. I am NOT in favor of raising the minimum wage! Not now and not in the near future, with the explicit exception of the minimum wage for tipped employees, which in most states and federally still sits at just $2.13/hr. which is just disgusting!

That said, I understand more than most how hard living on minimum wage is. My husband and I have a family of 6 (3 adults & 3 children) at home and in 2013 we earned just over $24000.  And because we are in PA, where the Medicare expansion has not been done, my husbands monthly doctors visits and medication cost us just under $4800 last year.  What's left pays for our rent, utilities, car expenses, clothing, food and whatever else we need.  So yeah, I completely understand what it's like to be down right poor.  And I do not deny the difficulty in living this way.

However, raising the minimum wage is NOT the answer. If anything, it will lead to MORE poverty, not less. The White House keeps talking about how raising the wage will benefit 1 in 5 American workers and how it is going to "lift 1 Million Americans out of Poverty."  But that's not the reality of the situation.

One of the countless internet ads urging lawmakers to raise the wage.

First, business owners aren't going to take the hit. If they have to pay their employees more, they will simply charge more for their goods & services. So even though the "new" minimum wage ($10.10) is higher than the "old" ($7.25) it's not actually going to go further, because prices will simply go up to match.

For example: I paid $4.37 for a gallon of Milk yesterday.   The new minimum wage is approximately a 40% raise. This means, in order to not loose profits, businesses will have to raise their prices by around 40% as well. Which means that milk will now cost around $6.12 for a gallon.  And the same will happen with the price of gas, clothing and nearly every other need.  The ONLY possible exceptions will be your utilities, housing payment/rent and insurances (such as house & car) and those will only be temporary stays.

What's more is that while the minimum wage goes up, and prices go up to match (so the money does NOT go further) the welfare benefits that many minimum wage households depend on will not.  Food Stamps, Medicare, Cash and Housing benefits will be removed from individuals making this higher wage, at least temporarily.  So their new "higher" income, which has to pay for new higher prices, will also somehow have to cover a good deal of additional expenses. **Not that I think our welfare system is "right" but that's another post entirely**

But lets stop talking about those who will supposedly "benefit" from the raise, those who will get it. And start talking about those who are living on fixed incomes or who have worked years to earn within the range of this new range.  Those living on disability, social security and other forms of "fixed" incomes won't get this raise, but that doesn't mean they will be somehow get some reprieve from the suddenly new and higher prices for everything they need. Some of these individuals are making as little as $500/mo, which is already disgustingly low, so as prices raise, they will find themselves drowning even more than they are now.

And then there are those who have maybe worked years to earn $11 or $12 an hour - currently more than 50% above minimum wage - who will suddenly find themselves making less than 9% above it.  It's usually assumed that these individuals will get an equal raise to those earning minimum wage, but in actual practice, it rarely happens and isn't required by laws anywhere. So these families and individuals are in for, not just higher prices, but a significant "cut" in pay.

Finally there are those individuals who are considered "tipped" employees. These individuals work for $2.13 in most states, with employees in all but 18 states earning $4/hr or less. In just 7 states (plus Guam) tipped employees are legally required to earn the same minimum wage as non-tipped employees.  However, as prices raise, tips drop. Ask anyone who's ever waitresses when a restaurant raised it's prices and you'll hear the same story - tips drop! So not only will the majority of these people (with the exception of those 7 states & Guam) go from making between 30 and 40% of the minimum wage to just 2% in some cases, but they then have to deal with lower tips AND of course the same higher prices as everyone else.

I would say the math is pretty simple. Who benefits from this raise in wage? No one... Consumers - regardless of income - get to pay higher prices for everything.  Employees who don't get the wage hike find themselves making "less" than they had prior to it. Those employees who do get the pay raise find themselves struggling to make ends meet after loosing welfare benefits. Tipped employees not only earn an even lower wage, but will find themselves earning less tips. And those on fixed incomes will have to figure out how to stretch their already low income much further.  Even business owners are punished, because as prices go up, spending goes down.

In the end, raising the wage doesn't help anyone, although I can see why so many think it could.  IF it were as simply as people being paid more, it would be a good deal. But it's not. The idea is that because of inflation, people are making less now than they used to - and that IS true. But raising the wage will only push inflation, so even those who get the raise, don't actually make more because they're spending more to match. Worst of all, those companies that choose not to raise prices, in an effort to draw the business away from those that do, generally use these forced pay hikes as an excuse to stop hiring new employees or even fire those who they already employ.

Raising the wage doesn't pull anyone out of Poverty, if anything, it creates more. It means that those who are already impoverished will remain so, and that thousands of Americans who are living JUST above the poverty line, will soon find themselves below it.

I, as much as anyone, understand the growing poverty issue in the US. I see it every day, I live it to some extent. But I also understand that a simple "pay raise" isn't going to fix the issue. There is no such thing as an "easy fix" when it comes to poverty.  Raising the wage is a temporary bandage on a broken system...  But it's one that has failed before, will faith this time and will fail in the future. Because it doesn't fix the problem! It doesn't educate those living in poverty, it doesn't help them progress in the job market, it doesn't help keep their kids off the street...  It keeps things exactly as they are, but gives politicians another excuse to not pay attention to the "lower class." It gives them the ability to say "I did my part" and wash their hands of the situation.  In the end though, the problem doesn't get smaller though, it gets bigger!

Now don't go accusing me of not wanting to see the issue fixed - because I do. In fact, a large part of the reason I don't support this raise is because I want the issue fixed, not bandaged and then ignored for another 10 years. And I firmly believe there IS a fix to our poverty issue! But it's not as easy as simply raising the wage is. It requires money, time and effort - things that most politicians would rather put in to countless unnecessary wars. People need access to healthcare - decent healthcare, not just medical care.  People need access to education - without a risk of starving in the process. And as a nation we need jobs - good jobs, manufacturing jobs - we MUST stop outsourcing so much to countries like China. And of course I could list a dozen more "must do" things that should be on this list, but the point is, the answers to poverty in the US are there - we have them, we know what they are and how to implement them - but as a nation of instant gratification lovers, we don't want to go that route, instead, we want to simply pay people more and pretend that is going to fix things... As if raising minimum wage has EVER worked in the past...

Maybe it's time we learn from our past and move forward together!

1 comment:

  1. I appreciate your comments. I have often thought the GOP has a more logical argument here, and that Dems often use this issue when they NEED a win. It SOUNDS all good to raise the wage, but there is a 'natural inflation' issue, which you aptly describe. Sellers won't take the hit. and frankly, they wouldn't be conducting good business if they did. This all said, I am hardly a GOP wonk [nor a Dem wonk, either]. I think improvement in healthcare would actually be a better issue of Dems [nay, for Americans one and all] than this m inimum wage hike. Doing things that will ultimately devalue the dollar [and thus the price of living, in particular, for those on fixed incomes] will only hurt. I actually heard Newt make an argument the other day on Crossfire which, had he spoken slightly differently, would have argued for full socialized healthcare. He stated that many European nations such as Norway and Germany, who are so liberal as to have social healthcare, do NOT have a minimum wage. He was actually using these points to argue to NOT life the minimum wage, but one could also argue that perhaps the reason those countries have no need for a minimum wage is because they have 'socialized' in other areas, such as health, transportation, education, etc. I am sure these nations have fiscal problems too but the data often consistently reports that 'standard of living gap' in these countries is much less than in usa? AND, apparently no min. wage is needed
    Again, thanks for your thoughts...

    ReplyDelete

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