It’s Time To Raise the Minimum Wage

(This article was written by Rick Dacri & was originally published in the York County Coast Star on April 24, 2014)

It is time to raise the minimum wage. I did not come to this conclusion easily, as each side of the issue makes compelling arguments. It would be great if we could look to the leading economists for clear guidance, but frankly, they have become too partisan, damaging their credibility. But when you look at the facts objectively and consider the big picture, an increase is the right thing to do.

Companies need people to operate their businesses. While more and more tasks are being automated and outsourced, people are still badly needed. Many job openings remain unfilled. Part of the argument for immigration reform stems from this shortage — but we’ll tackle that issue another time.

Well-run organizations understand that if they are able to recruit, retain and motivate their employees, they will be at a competitive advantage. When you take care of your employees, they become loyal and they produce. People can be the differentiator.

Gap Inc. announced it would raise its minimum pay to $9 per hour, above the federal minimum wage. In the announcement, Chief Executive Officer Glenn Murphy said, “Our decision to invest in front-line employees will directly support our business, and is one we expect to deliver a return many times over.” The Gap gets it.

But the Gap is a huge organization, with tremendous resources, much more than the Dock Square shopkeeper or the restaurant owner in Ogunquit may have. When you’re struggling to survive, any cost increase can be hard. And that is the argument against raising the minimum wage. Employers will be forced to either absorb the hit or cut workers and reduce hours. And if that’s the case, why do this if the real purpose of raising wages is to restore some kind of income equality?

In 1968, the year I entered the world of work, the minimum wage was $1.60 per hour. If that number had been indexed for inflation, today’s minimum wage would be $10.50 per hour. It is $7.25 on the federal level and $7.50 in Maine. While costs have increased, wages have severely lagged.

Raising the minimum wage to the proposed $10.10 per hour will increase the wages for 16.5 million Americans. The move is expected to move hundreds of thousands out of poverty. Lower wage workers, those who live paycheck to paycheck and who will benefit the most from this, will likely spend most of that money, infusing additional dollars into the economy and giving it a badly needed boost. That’s the argument for an increase.

Those who oppose a wage increase cite the Congressional Budget Office (CBO) report that states that a minimum wage increase could result in a loss of 500,000 jobs. With unemployment at an unreasonably high rate now, why exacerbate the problem? Unfortunately, this argument does not hold water. The CBO report said job loss could be as high as one million or as little as zero, and they could not be certain. Not a strong position. And we know from history that minimum wage increases have had little or no effect on unemployment. Companies still need employees.

Finally, there is the argument that the government should not be dictating what you must pay your workers. While few of us like to be told how to run our businesses, we are already compelled to obey employment laws, tax laws and a myriad of other regulations, including an existing minimum wage.

Paying workers a decent wage makes good business sense. The starting wage is often the top factor candidates consider before applying for a new job and it is the main reason workers make for quitting a job. Smart businesses understand this and pay well above the minimum wage. The Gap’s decision to move now, rather than being told to, was a business decision, not a social one. But that brings us to my final point.

Raising the minimum wage is, in part, a social issue. It gets to the core of who we are as Americans. We pride ourselves in taking care of our neighbors. We have always required and lived by minimum acceptable standards of living. We demand the cars we buy to be safe, the restaurants we eat in to be clean, and our military to be there to protect us. We don’t tolerate discrimination and we expect everyone to behave civilly. And we want our neighbors to be paid a decent wage — a wage that will bring them above the poverty level.

I am not advocating a handout or an increase in welfare benefits. All I’m suggesting is if people work hard, they should receive a fair pay. It’s good for the economy; it’s good for business; and it’s good for society. It is time for Congress and the President to act. Raise the minimum wage.

Feel free to Comment below. I’d like to hear your opinion.


1 Comment

Filed under Economy, Legislation

One response to “It’s Time To Raise the Minimum Wage

  1. I appreciate your point of view, but respectfully disagree.

    As you report in your article, The Gap made a business decision to pay their front line workers more. That is the market responding to the need to attract and keep better employees- it makes sense.

    I keep citing a sign I see from time to time soliciting pizza delivery drivers at $10 an hour- plus tips. This is above even proposed minimum wage levels and yet they cannot attract and keep drivers at this rate.

    My core issue IS with the government setting the level- and here’s why.

    As a political move, politicians at the federal and state level continually push for minimum wage hikes, yet never set the minimum wage at the market mean for low skill labor. That’s why the pizza shop can’t find drivers at $10 an hour.

    Those same institutions expand social programs, as has happened in Maine, that set up a conflict in that for some (not all), it is a more appealing course to accept assistance rather than a minimum wage job.

    I agree that the CBO numbers are all over the place and that on the level of national data sets, increases in minimum wage seldom affect hiring over time. It is important, however, to note that where it does have an effect is on the small business operator who must cut into his or her own margin to provide the higher wage.

    You must also factor in the other costs of employment associated with any increase in wage, especially taxes- and the cost of health insurance benefits which is still a matter of great uncertainty.

    Of course, my focus is more on the individual-

    Minimum wage is minimum wage no matter what level the government decides that should be. I do not believe we will ever support a minimum wage reflective of a true “living” wage- nor should we; though that is really the issue that drives much of the social/political debate.

    I share more detail in “$7.25 is NOT Enough to Live On – Why You Should Not Accept Minimum Wage.”

    Here’s a quick summary…

    According to Bureau of Labor statistics, it’s still true the the vast majority of minimum wage workers are NOT trying to earn a full living or support a family. They’re largely young people and members of multiple income families making over $60,000 in the household. More than 60% are students, high school and college.

    In total, only about 3% of the workforce is making minimum wage at any given time- and the vast majority of them will far exceed that level within 4 years.

    The problem is looking at the data sets rather than tracking specific individuals- Thomas Sowell has contributed a lot in that area of research.

    Ultimately, we’ve got to change mindset. The factors that most bind people to minimum wage- or any level below living wage are:

    1) Education- the vast majority of minimum wage workers are deficient in education that positions them for higher earning. However, remember that the majority of minimum wage workers are also actively engaged in the process of improving their education and thereby, their earning potential.

    2) Children- particularly single parents and especially mothers who have given birth to children at ages where they would traditionally be completing their educations. The vast majority of minimum wage workers trying to support a family are single parents.

    3) Social conditioning- young people living in areas of urban blight or rural distress that see little or no hope for higher earnings and generally lack the education to escape.

    My argument is that the solution is in education and shift of mindset for individuals- not in setting an arbitrary rate, especially one that does not meet the mean market value of labor.

    Low income jobs are low skill jobs. Rather than accepting ANY minimum, the answer is in providing opportunity, for those willing, to improve their skills, education and value so that they will eventually earn more.

    Best Thoughts!

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