Minimum wage jobs leave millions in poverty

[Catawba]

"Most experts agree that to get out of the economic slump, we need more jobs.
But another problem is that millions of Americans already have jobs that don't pay very much.
Getting the economy going will require more than just creating a large number of low-wage positions, said Paul Osterman, economics professor at MIT. Raising the minimum wage to get more cash to the working poor is just as crucial, he said.
About 20% of American adults who have jobs are earning only $10.65 an hour or less, according to Osterman's analysis. Even at 40 hours a week, that amounts to less than $22,314, the poverty level for a family of four.
The federal minimum wage currently stands at $7.25 an hour (18 states set their own rates above the federal level, maxing out at $8.67 an hour in Washington State). But increases have not kept up with inflation. When adjusted for inflation, the highest federal minimum wage was in 1968, when it was the equivalent of $10.38 in today's dollars."

"With a greater percentage of the nation's income going to corporate profits than ever before, Osterman argues that businesses can afford a higher minimum wage.
"There needs to be standards in the job market," he said. "If the object is simply to minimize costs, we can use slaves again."
Minimum wage jobs leave millions in poverty - Yahoo! Finance

Time to revisit the minimum wage issue wouldn't you agree? What better way to get more money into the economy and reduce the welfare roles at the same time?

 

[Bob Blaylock]

What is better—a minimum wage job, or no job at all?

If we raise the minimum wage, then there will be fewer jobs, and more people completely unable to support themselves.

 

[Catawba]

What is better—a minimum wage job, or no job at all?

If we raise the minimum wage, then there will be fewer jobs, and more people completely unable to support themselves.

"But there's little empirical evidence to suggest that raising the minimum wage causes companies to cut back on hiring, according to Heidi Shierholz, labor economist for the Economic Policy Institute, a liberal think tank. In fact, one study conducted by Alan Krueger, President Obama's pick for his next chief economic adviser, found little difference in employment levels of fast food industries in Pennsylvania and New Jersey, which have different minimum wages." And as the MIT economics professor points out: "With a greater percentage of the nation's income going to corporate profits than ever before, Osterman argues that businesses can afford a higher minimum wage."

From a common sense perspective, a minimum wage that does not require welfare as a supplement and injects more money into our economy is better for the country.

 

[Neomalthusian]

From a common sense perspective, a minimum wage that does not require welfare as a supplement and injects more money into our economy is better for the country.

Passing laws that give money to the poor do not "inject" money into the economy any more than giving money to anyone else does. There's no "injection." It's just redistribution. If you want someone to get more, someone's gotta pay more.

Many seem to think the money to cover a minimum wage hike will just come out of the executive salaries, making everything "more fair." Is that how it goes? Really? Or does it work its way out more gradually in prices, other wages, outsourcing, mechanization, computerization, etc.?

 

[Fleshofthegods]

I'm not very knowledgeable about how minimum wage affects the economy, but doesn't increasing minimum wage cause inflation? or at least a spike in food prices or other commodoties?

 

[Henrin]

I'm not very knowledgeable about how minimum wage affects the economy, but doesn't increasing minimum wage cause inflation? or at least a spike in food prices or other commodoties?

Yup. That is why minimum wage earners don't get any richer when it happens.

 

[Henrin]

From a common sense perspective, a minimum wage that does not require welfare as a supplement and injects more money into our economy is better for the country.

Common sense will tell you that raising the price of employment does not raise the worth of the job. This is why with each raise more people are unemployed because more people are not worth the salary being given.

 

[Bob Blaylock]

I'm not very knowledgeable about how minimum wage affects the economy, but doesn't increasing minimum wage cause inflation? or at least a spike in food prices or other commodoties?

There's a lot more complexity than that, but that is definitely part of the problem.

Consider that money is not wealth; it is only a unit by which wealth is measured and exchanged.

If the minimum wage is $5 per hour, then the value of a dollar is defined as being the value of 1/5 of an hour of labor (or 12 minutes) from the very least valuable worker that is going to be allowed to be employed.

Now suppose that a can of soda costs a dollar. This means that a minimum-wage worker must work twelve minutes to earn enough to buy a can of soda.

What happens if you raise the minimum wage to $10/hour?

What happens is that you devalue the dollar. Instead of being worth 12 minutes of that worker's labor, now a dollar is worth only six minutes of his labor. The price of a can of soda will almost certainly go up to two dollars, so that same worker will still have to work twelve minutes to earn enough to buy a can of soda. The worker has more money, but he isn't any richer.

That's a terrible oversimplification, of course. As you go up the pay rate scale, wages are less affected by the minimum wage. Prices and values of commodities will go up, but not in direct proportion to the minimum wage. The worker who makes minimum wage, if he gets to keep his job, will find that he can buy more with his wages. But it makes him proportionally more expensive to his employer, and brings him closer to the point where the employer may decide he isn't worth what it costs to keep him employed. So in reality, what would happen with an increase in the minimum wage is that those who continue earning it can buy more, but you will have more who will simply become unemployed, and not be able to buy anything.

 

[Fleshofthegods]

I think that we should lower the minimum wage rather than raise it.

 

[Henrin]

I think that we should lower the minimum wage rather than raise it.

While at first that might sound logical I don't think it actually is. I might be wrong but I would imagine that would only lower payment. The only way to make the minimum wage workers life better is not have a minimum wage.

 

[atrasicarius]

In my opinion, minimum wage is something of an inelegant solution. A better solution would be to create a massive public works program that pays a good wage. If it's relatively easy to get a government job for $10 dollars an hour, no one's going to take the McJob for $5 dollars an hour.

 

[StillBallin75]

In my opinion, minimum wage is something of an inelegant solution. A better solution would be to create a massive public works program that pays a good wage. If it's relatively easy to get a government job for $10 dollars an hour, no one's going to take the McJob for $5 dollars an hour.

I agree to some extent, but public works jobs simply don't work the same way they used to. Something that required 40 people to do back in the 1940s and 50s probably takes 5 or 10 guys with heavy machinery these days.

 

[atrasicarius]

I agree to some extent, but public works jobs simply don't work the same way they used to. Something that required 40 people to do back in the 1940s and 50s probably takes 5 or 10 guys with heavy machinery these days.

Well, I have a solution for that, but it involves pretty much completely reworking the economy. I probably shouldn't derail the thread with it.

 

[Cephus]

Minimum wage jobs are intended for the uneducated and unskilled. The real question is why are there so many uneducated, unskilled people out there trying to raise a family?

 

[PeteEU]

Minimum wage jobs are intended for the uneducated and unskilled. The real question is why are there so many uneducated, unskilled people out there trying to raise a family?

That was not the original idea behind minimum wage.

The idea of a minimum wage was founded because it was thought (and rightfully so) that employers had too much relative power over the workers when it came to determining wages, and this meant that workers were given substandard wages for their work. At the time of the minimum wage was put in place this was very much the truth... sweetshops and so on where workers worked 12+ hours for next to nothing. And just because these people were not educated as per today´s standards, many were highly skilled at what they did.

The effect was very much social and in many ways did bring far more off the bottom of the poverty level and into lower middle class and up, since all wages got a relative "boost" up wards. And frankly it has worked. The amount of "poor" and the income inequality in many countries have shrunk considerably over the last 100 years or so since the first minimum wage system was put in place in New Zealand.

But the detractors of minimum wage have a point when they point out the negative aspects of minimum wage, however that is theory and very much unprovable since countries that dont have minimum wage often have much higher unemployment than countries with minimum wage. Minimum wage is only a small part of the issue of unemployment...but of course since business hates it, then the GOP hates it and want it gone.. seems we have to go for the lowest common denominator..

Now removing the minimum wage would put even more power into the hands of the employer's and will depress wages even more and push more people into defacto poverty, but it wont change the price level, since commodity prices are a much larger portion of "goods" price these days than wages. You cant just dump wages down to Chinese levels in the US... it would be catastrophic for the country since no American could survive on a few thousand dollars a year. Might as well start up death camps to kill off children and the elderly then and make Pol Pot proud, since there will be far far too many people for the limited amount of jobs there are that actually provide a decent living.

As for your comment on education, then that is a whole other discussion that deserves its own thread

 

[PeteEU]

While at first that might sound logical I don't think it actually is. I might be wrong but I would imagine that would only lower payment. The only way to make the minimum wage workers life better is not have a minimum wage.

So you claim that the workers will have more money in their pockets if minimum wage was abolished? That wages in fact would go up and not down? Do you seriously think that in today's USA that companies offering 4 dollars a hour work for 12 hours a day would be without candidates... and that those people earning those 14k a year can live off that? And what prevents these companies to lower the hourly wage for those employees they already have? It will ultimately be slave labour.

 

[Xerographica]

Workers should not receive more money than what the market says their skills are worth. When kids are deciding whether to drop out of high school they need to have accurate information regarding the consequences. The more they perceive that they can live off the minimum wage the less incentive they will have to stay in school.

It's absurd not to give kids the strongest incentive to get skills that the market values. It's essential that they witness the harsh realities of not having any valuable skills. Distorting market signals will always lead to less than optimal outcomes.

On one hand, people complain that we're not competitive with China but then on the other hand they want to maintain and even increase the minimum wage. Having lived and worked in China I made quite a few good friends over there...so I'm fine either way. If you want to give the Chinese more of a competitive advantage then be my guest.

Join a union while you're at it...they've unintentionally have helped more developing countries then all the USAID programs combined.

 

[Grim17]

Since we are discussing an article about minimum wage jobs and poverty, here are some numbers to ponder...

The poverty line in 2011 for a family of 4 in America is $22,350 a year.
A person working 40 hours a week at minimum wage earns $15,600 a year.
If 2 people in a family of 4 work 40 hours a week at minimum wage, that's $31,200 a year.
$31,200 a year for a family of 4 in the U.S. is 40% above poverty level.

I'm just saying...

 

[What if...?]

Since we are discussing an article about minimum wage jobs and poverty, here are some numbers to ponder...

The poverty line in 2011 for a family of 4 in America is $22,350 a year.
A person working 40 hours a week at minimum wage earns $15,600 a year.
If 2 people in a family of 4 work 40 hours a week at minimum wage, that's $31,200 a year.
$31,200 a year for a family of 4 in the U.S. is 40% above poverty level.

I'm just saying...

Excellent point.

Just bear in mind how much childcare for two costs.

It can be so expensive that it cancels out much of a second income.

It often raises the question of whether the kids would be better off if one parent stayed home with the kids instead of paying the lions share of the second income having someone ELSE raise their kids.

 

[What if...?]

Workers should not receive more money than what the market says their skills are worth. When kids are deciding whether to drop out of high school they need to have accurate information regarding the consequences. The more they perceive that they can live off the minimum wage the less incentive they will have to stay in school.

It's absurd not to give kids the strongest incentive to get skills that the market values. It's essential that they witness the harsh realities of not having any valuable skills. Distorting market signals will always lead to less than optimal outcomes.

On one hand, people complain that we're not competitive with China but then on the other hand they want to maintain and even increase the minimum wage. Having lived and worked in China I made quite a few good friends over there...so I'm fine either way. If you want to give the Chinese more of a competitive advantage then be my guest.

Join a union while you're at it...they've unintentionally have helped more developing countries then all the USAID programs combined.

Simple fact:

Most jobs can be performed by any 14 year old with an eighth grade education.

Pretending that education is going to somehow offset labor cost differentials is therefore just that. Pretending.

The "market" is a human construct.

People are not plywood.

Lowering/eliminating minimum wage laws puts americans into direct competition with $2 a day labor.

Are landlords goin to lower rents to $10 a month? (25% of $40 a month)

Doubt it.

 

[Deuce]

Guys, guys, they aren't poor. They have refrigerators and color televisions.

 

[What if...?]

Guys, guys, they aren't poor. They have refrigerators and color televisions.

Id be more pissed if they had black and white tvs. The poor should not have money to collect antiques!

 

[Catawba]

Passing laws that give money to the poor do not "inject" money into the economy any more than giving money to anyone else does. There's no "injection." It's just redistribution. If you want someone to get more, someone's gotta pay more.

Many seem to think the money to cover a minimum wage hike will just come out of the executive salaries, making everything "more fair." Is that how it goes? Really? Or does it work its way out more gradually in prices, other wages, outsourcing, mechanization, computerization, etc.?

No one is talking about giving the working poor money. What the MIT economics professor suggests is employers who's profits are up, paying the working poor a living wage, to reduce the welfare money given to them, so that they have enough money to spend and thus stimulate the economy.

 

[Catawba]

Common sense will tell you that raising the price of employment does not raise the worth of the job. This is why with each raise more people are unemployed because more people are not worth the salary being given.

Your vote for continued welfare vs a living wage for full time work is noted.

 

[Catawba]

In my opinion, minimum wage is something of an inelegant solution. A better solution would be to create a massive public works program that pays a good wage. If it's relatively easy to get a government job for $10 dollars an hour, no one's going to take the McJob for $5 dollars an hour.

That would be a sensible alternative from my perspective, but think it would meet more resistance than raising the minimum wage to $10.