Great news, minimum wage workers: if you spend the next year working without getting sick or, um, going on vacation, you’ll make $13,624! Uncle Sam’s $0.70 minimum wage hike is the second of three to take effect before next summer, but the meager raise is hardly a godsend for the working poor.
Last week, the Labor Department reported the fastest inflation since 1991 — 5 percent for June compared with a year earlier. Energy costs soared nearly 25 percent. The price of food rose more than 5 percent.
So the minimum wage hike is “a drop in the bucket compared to the increases in costs, declining labor market, and declining household wealth that consumers have experienced in the past year,” Lehman Brothers economist Zach Pandl said.
The new minimum is less than the inflation-adjusted 1997 level of $7.02, and far below the inflation-adjusted level of $10.06 from 40 years ago, according to a Labor Department inflation calculator.
25 states require employers to pay more than the national minimum wage, but 1.7 million Americans still rely on the federal government to set a wage floor. Only 20% of them are teenagers.
The nation’s top financial minds can’t tell us how the minimum wage effects the economy, but we’re sure our beloved cadre of ever-cheerful commenters not only knows for certain, but is willing to share.
Federal minimum wage rises to $6.55 today [AP]
(AP Photo/ Ellen Wznick)
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@Hongfiately: Plus, if the fruit-picker is here illegally they can get in-state tuition rates that citizens cannot.”
Yeah, because someone here illegally meets residency requirements. Or to be kind, you are spouting off a myth that certain groups have gone on and on about over the years without one shred of it being based on truth.
That’s unfortunate, Voodoopunk. Please tell us the name of the product so we can avoid purchasing it. What did your pay go down to? Can you handle it?
MuppetChrist: so were you being sarcastic or not? If you were (and your question mark puzzles me), that was a mighty sustained blast of sarcasm so subtle as to be indistinguishable from snark!
@MuppetChrist: “I can’t think of a SINGLE American corporation that has prospered on the back of slave labor.”
Besides Nike, Wal-Mart, and Disney?
@spdyvkng: The argument in Norway is the same as the arguments in this thread, except that we also apply the argument to the corporations. In other words, a right winger will say:
“That looser in a minimum wage job should study and get a better job and earn more, or let him starve.”
We say:
“That looser company doesn’t earn enough to contribute to society, it better sharpen up or should be disbanded.”
Strangely enough that sentiment is not shared by right wingers. They seem to think that a company paying minimum wage is okay, and that it is good use of resources, but someone working for minimum wage is not using his own resources well enough.
Talk about reality dysfunction.
@Glamourdammerung: I almost rose to the bait as well. Note how MuppetChrist first talked about sweatshops then when he wants examples he is talking about slave labor. There is a difference between sweatshop conditions and slavery, and it is disingenuous of him to pretend it isn’t.
I also were going to suggest those you mentioned (plus not least Dole and Chiquita), but I couldn’t find actual slave labor.
@spdyvkng:
Actually, I think you may have misread my last point. I don’t take any stance on the market being “fair” for small businesses to grow/expand, etc. As a matter of fact, I want the market to be as “unfair” as possible so that only the economically viable businesses thrive while those that can’t generate enough profit to survive don’t.
The point i was trying to make is that people talk in general terms about the lack of job destruction from things like minimum wage hikes. While the overall numbers may not change substantially, the impact to smaller businesses (which create the majority of new jobs [at least in America] b/c of higher intrinsic growth rates vs large corporations) is substantial. I don’t want a handout to small businesses who just muddle along, i just don’t see a need to impose artificial constrains on businesses which could have potentially limitless potential. I mean, not to use an blatant example, but Wal-Mart started out as only a one location ‘five-and-dime’ store compared to where it is today.
I only want businesses who can successfully compete and generate economics returns to thrive and expand, but there are things like minimum wage laws which are simply unnatural restrictions and/or limits to the marketplace.
I want businesses to compete equally against each other, without the gov’t injecting artifically created definitions of wages and benefits. The invisible hand of market forces will do that quite nicely without any outside institutional interference.
@Karl_Marxs_Nightmare: You fail to grasp my main point: with a higher baseline the total value of society is higher than with a low baseline.
You say that “The invisible hand of market forces will do that quite nicely without any outside institutional interference.” Yet you fail to show anywhere were that statement holds true.
In those places where capitalism has been unbounded, for example Russia, it led to disasters as those who grabbed the resources were even worse than the communists in making that country livable for the majority of people.
In markets without regulation those with the power will make sure they get as big a piece of the pie as possible, even when that is against their long term interests.
That is why your government created anti-monopoly laws, oversight of stock markets and other not so invisible bounds and definitions of wages and benefits.
Did you read the comment about the Philippines? I wrote that before I registered.
No outside hand is as close to the truth in the Philippines as anywhere; at least from the viewpoint of the wage earner.
In one hours work a store clerk can’t earn enough for a burger and coke, in one day she usually can’t afford a garment off the rack in her workplace. In one month she can’t make enough to live on her own.
Compare that to how a full time store clerk in Norway can do more than that on her salary, without any sales bonuses.
In the US a waitress gets a very low hourly wage and is supposed to make up the rest in tip. In Norway the waitress is supposed to earn a union wage which allows her to live on her own, have her own household.
In the US, who will look after the worker when unions are busted and not tolerated in many low income positions? Those with the best benefits etc are those with traditionally strong unions, airlines, auto workers and truckers.
Of course those are failing industries today, but other, emerging industries doesn’t see that much unionization.
That is why you need government inteference. There are no-one making sure those earning wages are treated well. Frankly, the US government is a poor substitute for strong unions; at least under Bush.
Anyway, calling definitions of wages and benefits “artificial” is wilfully ignoring the fact that apart from Objectivist and Neo-Cons, the US (and the world) is full of people happy to accept these definitions. If there was no need for them, they would be “artificial”, but as I’ve tried to argue, there is a screaming need for this.
Don’t even get me started on benefits. I take that to mean pensions, health care, insurance, vacations, sick leave, things most of the western world, with the exception of the US, seem to think is what people is entitled to have.
Heck, EU even transferred billions to Greece, Spain and Portugal to help them create those security nets for the impoverished people of those former military dictatures. Now they are more stable and prosperous than one could dream of just 30 years ago.
Your “invisble hand” has never worked in the history of man. Objectivists will say it has never been tested (they are basically talking about an utopia), Neo-Cons will change the parameters of the discussion each time we point to somewhere were the “invisible hand” has had a free reign.
If I seem to put words in your mouth, I might be, I get very enthusiastic about this, and the keyboard is such a good place to hide.
Haha, indeed. The relative anonymity of the internet is useful for putting out strong and/or inflammatory opinions
First off, using Russia post-perestroika as an example of the “invisible hand” working is pretty laughable. The “market” did not have a hand in that transition; Communist insiders (who were decidedly not market driven) simply sold effective control to close non-party business associates and their friends. The net change was negligible; the “oligarchs” just replaced the Communist Party as the “owner” of effective monopolies.
As far as the Philippines comment, i had a hard time reading it b/c of no spacing, but i will circle back and re-read it before i post again.
With respect to unions, i believe that you and I simply have differing views on them. You view them as a positive b/c of various reasons (giving “living wages” [a debatable term, see my very first post in this article], protecting against corporate abuse) while I view them in a negative light (overcompensation for equivalent work vs a competitive labor market, unsustainable pension promises, restrictions on how an individual can work if he/she is not part of a unionized industry). I personally do not like institutionalized labor because in many cases, it disrupts the normal functioning of the marketplace (e.g. work stoppages/strikes, distorted compensation levels, limiting an individual’s right to pursue work, clinging to antiquated reward/compensation systems that fail to take note of changing states of the economy, etc).
I think a lot of where our opinions/views diverge boils down to a more fundamental difference b/w who is more important in an economic system: the worker or the owner. I would wager that you think the worker is, while I would argue that the owner is the more important piece of the puzzle. Marx/Engels/Lenin/Mao [the worker/gov't] have faced off against Adam Smith/Milton Friedman/Warren Buffett [the owner/free market] time and time again through various proxies over the past 200 years, and the ultimate winner has always been the free(r) market which emphasizes the individual/owner versus the worker/collective. While collectivist policies can work over short periods, the only sustainable system to survive economic shocks, depressions, plain vanilla human mismanagement and other extrinsic impacts has been the capitalist system as seen in the Western world. When socialist elements (state pensions, guaranteed wages, etc) are thrown into the mix, the typical results over the intermediate to long term are an erosion in economic growth b/c these socially just guarantees have to be paid by someone/something.
You won’t find me advocating for a dog-eat-dog world of zero social net at all; there is always some portion of the population that will slip through the proverbial cracks of whatever economic/social system you have in place. My arguments are solely against minimum wage and gov’t intervention into labor market and economic dynamics (but also against gov’t welfare systems, but that is another can of worms all together).
Should governments regulate some portions of the labor market? Of course; health and safety regulations, enforcement of legal work status, oversight on illegal behavior in the financial markets…these are just some o the many things that I think governments should do in terms of interacting with the “market.” However, (generally speaking; catastrophic occurrences are considered exceptions to the rules I’m laying out) I’m against the gov’t setting wage floors, instituting price controls, controlling amounts of production, bailing out industries/companies and other general market interference.[caveat: i am against bailouts; the american taxpayer is obviously not as evidenced by the housing bailout just signed by congress] In my view, gov’t interference into the private marketplace (beyond certain regulatory bounds as mentioned above) is a bad thing, and most certainly will lead to more bad things (e.g. the moral hazard). I have many historical examples to back my opinion up, as i’m sure you can cite many examples to show how gov’t needs to step in more.
My overall view boils down to the fact that I do not believe that anything (subjective “living wage”, housing, etc) is implicitly guaranteed by the United States or its constitutional/founding documents. The only things (at least here in the States) that are true guarantees are life, liberty, the pursuit of happiness and along with equal protection under the law. I also believe that the fundamental basis of competition is what drives human social, cultural, intellectual and economic development; without it, i believe we would still be chucking rocks at each other grunting about how many mammoths we were going to hunt today.
If i missed your point again, i apologize; i will re-read your Philippines post and try again later.
Also, just as a small corollary about your comment regarding that the rest of the world views minimum wage (and associated gov’t interventions) as ‘correct’:
Simply because the majority believes something is the correct thing to do is not a logical or true validation of said idea/doctrine. I do not believe that the majority of the planet’s population is well-versed enough in even basic economics to understand the real impact of things like wage floors, price controls, and other economic policies which are thrown about within the modern political scene.
That same lack of economic background is why you see people in countries around the world denouncing free trade principles (the US included), when free trade has been the primary driver for the relative economic strides worldwide over the past quarter century.
@Karl_Marxs_Nightmare: I will get back to your longer comment above, but this one can have a quick response.
It doesn’t matter what people understand of economics or not. If enough people can’t have their daily bread, housing and security, they will end up voting for change, or if the pressure is extreme, revolt.
I agree that majority opinion isn’t neccessary supporting the best, but if you look at how people struggle in the US, even the middle class, versus how the middle class in countries using the Nordic model. The Nordic countries have had to do some changes, but we are still enjoying the same benefits as we have the last 30-40 years.
Some of that is because we have put a higher baseline for costs in the society. You say “the real impact”, as if it will be negative, but from where I stand, it seems the real impact is positive. Getting rid of low paying and high labor work is beneficial. Look to farming, until mechanisation it was a high labor work with low pay. Granted, it is low pay still, but there is much less labor, we have freed all that labor for more productive use.
Having someone wash your car by hand is low pay high labor, and using a machine frees that labor for better use. Having someone cut your grass with a manual cutteris low pay high labor, yet it can be done much faster with one guy owning a machine doing more fields.
Of course some would say that he then deserves less pay per field, but I’m sure he will get better pay total.
Free trade, btw, has rarely been free. Look at the Doha round of WTO. The industralized countries want the developing countries to remove import duties on industrialized goods.
Never mind that our industries prospered and grew because of the same kind of import duties in the industrializations infancy, and that local industries can’t compete with international companies.
The problem is that this makes those nations dependant on high value imported goods, while they themselves only export low value materials and foods. And many types of food which are easy to produce in say Africa, are unfairly subsidized in Europe and the US, thus, even with zero import duty in those terretories the more effective food can not compete with the subsidized local/international food.
Free trade is an utopic idea built on non-real world premises. Real free trade would have to remove subsidies and tariffs, and that would depopulate wast areas in many countries, leading to security conserns.
For example, without subsidies Norwegian farming would be completly uneconomic, especially in the north near Russia. It is already sparsely populated, but taking away even more of the livelyhood would drain the area even faster. That could be a security problem for Norway and Nato.
That’s an example which I know, b/c I’m Norwegian. For many other countries it would leave them depending on food from foreign sources. Now, such dependency is good in the long run, it will hopefully make us trust others more, but it leaves the country vulnerable to market forces and manipulations.
Just like the US is vulnerable to market forces and manipulations in the oil sector.
These are just a couple of the hurdles which makes free trade unrealistic.
As for the utopian part, free trade suposes that those with access to the resources and the markets will behave responsibly, honestly and to maximize the overall value. I’m going to point at super-fund sites in the US, those are areas where tax payers are cleaning up after companies. In India they still remember Bhopal.
Now tell me, how do you suppose that owners, who will not even take responsibility in any meaningful manner for these gross negligent acts will allow others their “pursuit of happiness”?
In fact they are even a threat to the “life and happiness” of the workers, because they don’t provide safe working coniditions, nor safe living environments near their “investments”.
I don’t think the very simple (in the meaning just a few pages long) constitution of the US ever meant that the ills of the colonial government in England should be freely left to corporations to pursue in the future?
As for maximizing value, the only thing free trade will lead to is maximizing profit for those owning for example the railroads, oil production or phone lines. Just to point to three examples in US history which shows what an unregulated market leads to.