Minimum Rage!

January 23, 2021

Now that the Dems are in office, I thought it would be a good time to look at the argument of raising the Minimum Wage to $15 per hour. President Biden has already authorized the pay raise to government workers, but would it be good for the country as a whole?

The first question to ask is when was Minimum Wage instituted and for what reason? In 1907, President Theodore Roosevelt called the “greatest problem of civilization” the fact that minorities and immigrants were taking white Anglo-American's jobs. The solution wasn't to protect the lowest earning wage earners, but rather give the minorities a pink slip because white people would take their jobs once the wage was high enough.

Some use this argument today that a disproportionate amount of immigrants and minorities will lose their jobs if the Minimum Wage is raised to $15 per hour too quickly. They say small businesses cannot afford this and it will drive them out of business, as it also removes jobs from the lowest wage earners.

If it does drive small businesses to close up shop, it stands to reason it will be a boon to big businesses like Amazon, Walmart and Costco. Currently, wages paid by big businesses are near or exceed $15 per hour at the low end, so it is no sweat off their back. It makes you wonder if big business is behind the push for $15 minimum wage to force the smaller competitors under?

So what is fair? That is another question. Minimum Wage is not tied to Inflation. It is simply a mechanism employed by government. The irony is that in REAL Inflation-adjusted Dollars Minimum Wage have been falling steadily since 1968!

In fact, in real Dollars, the current purchasing power of Minimum Wage buys what it used to buy in 1948. I think if you agree that there should be a minimum wage, and there are people who don't, then I think you will agree that the Minimum Wage should at least keep pace with Inflation. I don't personally agree with the 'living wage' argument because I don't think Minimum Wage is meant to live on. The one positive thing it has created is the environment allowing small business to compete with cheap inexperienced labor.

It makes room for incentivizing growth in the youngest workers, to better themselves and demand more money for their efforts. That is true Capitalism. The problem, on the other hand, is the potential for businesses to exploit workers. I don't think there is a 'fair' rule to apply here, but rather use what has been working since 1908. The Minimum Wage attempts to curtail the exploitation of workers, but also not pay workers a wage to incentivize them from actively seeking and earning a real wage.

One promising idea is to tie Minimum Wage to Housing Inflation. Everyone needs to live somewhere. According to the Consumer Price Index (CPI), the average Inflation in rent prices is almost 3.5% per year over the last 20 years. If we tie Minimum Wage to real estate rental prices, we should raise Minimum Wage by 3.5% per year since 2015 when it was $5.15. The current Minimum Wage using this formula would put it at almost $11.

I think this is as fair as you can get considering there is no real 'fair' in Capitalism. Since the Federal Reserve is the organization controlling housing prices by consistently devaluing the Dollar, the Federal Government should step up and put in a ruling matching increasing housing prices to the Minimum Wage.



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