This post comes as Americans celebrate President’s Day, an agglomeration holiday meant to declare our gratitude towards our great leaders of the past. Sadly, we seem to always look backwards for an example of a great chief executive, and while not without reason this is disappointing. Much of our dislike for the office of the presidency in America has centered on our last president, George W. Bush, and the current president, Barack H. Obama. And while the former deserves every criticism thrown his way as a war criminal, neither he nor Obama is truly the worst president in American history. This is true regardless of what those on the extreme end of the GOP establishment may claim. I was particularly surprised by the outpouring of hate this week after the State of the Union address, when the president’s remarks about raising the federal minimum wage were touted as more socialist, anti-American policies intended to destroy us and our economy while attacking the very values our country was established upon. And so, in order to wash these rumors away, I’ve decided to write something in support of raising the minimum wage.
In his State of the Union address, President Obama noted that our economy is on the rise, but our loyalty to our workers and our treatment of labor is in decline. While saying comparatively little about unions as I had hoped, the president then pledged support for raising our federal minimum wage to nine dollars an hour. Should this be instituted, a person working full-time for 5 days a week would earn under 19,000 dollars a year, and this figure excludes holidays and other reasons for not working a few days. For a single person, this easily reaches over the federal poverty line (although it still ignores typical costs of living in America). For a family in America, however, this is still barely enough even with some small tax exemptions for those in the lower classes. In essence, it is similar to the stimulus package of 2009; it does not do enough to address the problem.
While raising the federal minimum wage to nine dollars may be small, it is still a necessary and beneficial step we can take. I would love if the minimum wage were $21.72 as it should be, but if we are going to raise wages we might as well start somewhere. Of course, raising that wage level starts at Congress, and we should hope that something which seems like common sense will at least be viewed favorably by some conservatives.
Arguments which argue against raising minimum wages are plentiful. One of the most prominent arguments tends to flow in the same “common sense” direction that raising the minimum wage does. This is a very basic economic argument which states that if employers have to raise wages for employees, they will start hiring workers less and start firing workers more to save money. It seems simple, and therefore it is easy to listen to and believe. However, economics are not quite so simple, and there are far more variables at play in a large economy than just business profits versus worker benefits. We must consider the realities of our so-called market economy if we wish to analyze what a raise in minimum wages would do to business and consumers alike.
For example, we must examine how consumption would be affected by such a raise. Obviously, we must exclude all people in the U.S. not working for the minimum wage. This still leaves about 30 million Americans as consumers on the minimum wage, when excluding those whom live in poverty above the minimum wage. So, that means we have just fewer than 10% of our population on the federal minimum wage. Now, remember that in a mixed-market economy business and trade is driven by consumption and production. This cycle is fueled by the amount of money consumers have to spend on items beyond necessities, otherwise known as disposable income. At the poverty line, disposable income does not exist; poverty is a state where wasting money on anything besides necessities is foolish. And while such spending occurs, it is fairly rare (hopefully) and does not do much to improve our economy.
By introducing a new factor like a raised minimum wage, the situation is altered. Now, there is more cash in the pockets of consumers. Undoubtedly, some of this will be put towards increased living standards, getting through bills, covering debt, etc. However, any leftover cash which does not get put towards these things only really has two uses from there on: investment and indulgence. It’s fair to say some of those experiencing this windfall of cash will invest it in retirement funds for themselves, college funds for their children, etc. But chances are that most people, when suddenly experiencing extra cash, will not make the wise forward-thinking decision of investment and will instead spend that cash on other things. People are impulsive with money, especially when there is so little to go around. And so consumption would likely rise dramatically with a wage increase for those earning the minimum wage today, thereby benefitting the economy and decreasing business incentive to cut down on employees to make profits. While paying a higher wage may be more difficult for employers on the surface, it becomes more than worthwhile in the long term.
Another common argument against the minimum wage increase is that doing so decreases a person’s incentive to work harder. This essentially compares a minimum wage increase to an automatic promotion that people do not necessarily deserve. The major problem with such a comparison is the implications it creates; do people not deserve a living wage? In what case could it be feasible to subject any person to life-long poverty? Why would any person ever deserve that kind of suffering and scraping by? It is hard to make the argument that any person making minimum wage deserves that kind of pay, even if they have a meager work ethic. The truth is that “welfare queens” do not really exist, as current American welfare programs are simply not enough to live any kind of comfortable life. We do not provide a hammock for the poor to rock in; the poor are called poor for a reason. Those in the lower classes of society do not live well, and no amount of food stamps helps enough to de-incentivize work. The same can be said of wage increases; even at $21.72 an hour, people will still always desire more than a living wage because they are greedy and envious. People want luxuries in order to make themselves feel successful and to lord these things over others. This is what capitalism breeds, so we may as well make it happen.
The only other argument I have encountered when opponents of raising the minimum wage stand up is that by requiring greater pay for workers, we take money out of company and entrepreneur pockets. If employees are not then fired to make up for lost revenue, we lose out on the private sector investment and expansion that our economy finds useful. However, this is a flimsy claim at best; private sector investments do not absolutely even have to buoy our economy if we increase public sector investment. Plus, increasing the minimum wage would not truly hurt a business unless the majority of its workers get the minimum wage. All those minimum wage employees in America do not work for one company, they work for thousands. Spread amongst the owners of these companies, the raise is not harmful. Even with some cash out of pocket, these companies and entrepreneurs will easily make up for it in new revenue through consumer spending.
That is all for this week, and I hope I have provided solid reasoning. I am still open for feedback through my email at email@example.com, as well as my Facebook, Twitter, Steam, and Tumblr accounts. I also now have a Reddit account as well, just look for KnoFear. And this is KnoFear, signing off.