Tuesday, December 31, 2013

Thoughts on a Minimum Wage

The beautiful thing about not being an expert at something is your opinions of stuff you know little about are quiet easy to form.  I was reminded of this the other day when it was pointed out something like 46 million Americans (roughly 15% of the population) are living in poverty, and a respondent said if we upped the minimum wage we could end poverty.  Of course poverty is a terrible thing, and it would be wonderful to end it, the only question is would increasing the minimum wage end poverty or only increase the number of people on it, by more rapidly increasing the cost of living?
Of course the definition of the poverty level is an arbitrary one, set by the government for its accounting purposes, and it is maintained by the Census Bureau.  In reading the Characteristics of the Population Below the Poverty Level: 1980,  issued by the Census Bureau in 1982, as part of its Current Population Reports, Series P-60, No. 133, you find that between 1979 and 1980 they reported an increase in the population below the poverty level rose from 11.7% to 13%, and blacks had a disproportionate rate of 32%.  Even though they constituted only 12% of the general population they accounted for 29% of the population living below the poverty level as it was then defined.
Now as we look forward to 2011 how has this demographic changed?  What I see in the current census data is minorities (Black, Hispanic, and Native American) continue to show greater than 20% of their populations are below the poverty level while Whites and Asians remain in the neighborhood of 10%, my takeaway is very little seems to have changed in the demographics since 1980, just the amount of dollars that defines what the poverty level is.
So we can speculate as to what are the differences between the populations, and without a doubt some will reflect on the racial implications, but I wonder, is the pursuit of a minimum wage job perhaps a factor, or is it the diminishing need for unskilled labor and an overabundance of college graduates that block any upward mobility?  As we move from a manufacturing economy to a service economy exactly how will the worth of a worker be measured?  In a world of supply and demand, where automation is taking over the mundane tasks, and thus making more and more people an unnecessary part of the labor force, will the artificial inflation of wages lead to a quality of life improvement for those without the technical skills necessary, or will it further hurt their economic outlook?
So please tell me, all those who so ardently support an increase in the minimum wage, how will this improve the lot in life of those who are paid these wages?  How will you control prices so that this new wage actually results in increased buying power, and not just fuel price increases that in the end maintain the current equilibrium, or in fact make life worse for whose who sustain themselves on these jobs?  Will you encourage automation so fewer people are hired or will you mandate acceptable profit levels for the industries that employ these minimum wage employees?  What is your path to improvement?
How about those who are making just above minimum wage?  Will there be an expectation they too receive wage increases, or will you accept the new minimum for a greater number of people there by increasing the numbers of Americans below the poverty level? 

Can anyone explain how an increase in the minimum wage will improve the long term outlook of those who earn it?  Can someone put all the pieces together to show how the economy is improved or sustained by this move?  I would like to know how it will actually reduce poverty and improve the lives of those who are being paid these low wages with little hope for advancement for more than just a couple of months when the cost of living again shoots past it.

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