To Raise the Minimum Wage, or to Not Raise the Minimum Wage: A False Choice

Fast food workers around the country went on strike thursday, protesting less-than-living salaries and employment conditions while demanding a $15 minimum wage as the national dialogue shifts once again to the prospect of what to do about the topic. It is hard to argue that current minimum wage laws serve the purpose of guaranteeing employees a first-world standard of living while working basic hours, as many today scrounge for the funds to feed themselves and their families while holding down multiple jobs, sometimes between two parents. As the insular monied elite continue to condense in proportion while the middle class stagnates and the poverty line rises, it’s clear that out of all persistent efforts to keep the country’s citizens prosperous, the minimum wage is, at the very least, severely failing in its job.

Many will argue that the minimum wage needs to be renewed and updated responsibly in order for it to have a positive effect. The problem is, even when that is the case, raising the minimum wage can have a negative impact on overall employment. Specifically, it results in a net loss of jobs. How many jobs? No one knows for sure how much a $15 minimum wage would affect employment, but the Congressional Budget Office estimates about 500,000 (at most 1 million) jobs lost. That may not seem like very many when wage increases affect millions of workers, but I’ll get back to that in a moment.

In addition to slightly lowering employment, a higher minimum wage results in altered employer behavior, especially in smaller businesses. Intent on maintaining profit levels, companies respond to higher employee overhead by cutting costs and raising prices elsewhere. Employees are made to work harder while their hours are cut. The price of food goes up; the price of shipping goes up, increasing the price of goods. All of this translates to… a higher cost of living.

The degree of increase in cost of living is hard to determine, but it’s certainly a reality. What is produced as a result of a minimum wage raise is this self-defeating loop: wages increase, cost of living increases as inflation increases, the higher wages buy less, soon they can no longer afford the cost of living, which raises when and if wages are raised again. Keep in mind that minimum wage is hardly enough to really meet the standard of living, so the system results in a constant game of catch-up, where millions of people will barely be making ends meet until the day they die: it’s not hyperbole to use the term “wage slavery.” The act of increasing the minimum wage cannot be enacted in isolation, and affects the entire structure of every business which complies. It’s naive to assume that giving a blanket raise to 20-30% of the country (including not only minimum-wage earners, but those within range of minimum wage also likely subject to wage increases) will not cause an economic reaction.

Now, let’s get back to those jobs. 500,000, even a million, may seem miniscule. Let’s spread a million lost jobs out over the course of a year, so just over 80,000 a month. At its best, the country has managed to create just under 500,000 jobs a month, and at its worst just over 200,000. Accounting for that loss, the average range decreases from 120,000 to 390,000. That might not seem significant, but consider that since the financial crisis, the country lost around 11 million jobs, and is still struggling to recover from that loss. The country’s ability to return to pre-2008 levels of job creation depends upon keeping the creation rate high. With a high rate, we could return to those levels as soon as next year. With a low rate, we may not until nearly 2020.

Think now of the millions of people who have lost their jobs, are struggling to find work, and depend upon that job creation rate in order to attain a civil standard of living; it’s the same struggle made by those working at minimum wage today.

A democracy should not sacrifice the few for the sake of the many, let alone the some for the sake of the others. Hopefully I don’t need to expand on my last article to explain why slavery is bad for exploiting minorities (and incidentally, guess which ethnic groups are most likely to get the proportionally shortest end of the stick in all of this).

And yet, you know what? Barring any other solutions, we need a higher minimum wage immediately. Even $10 an hour is not a proper living wage, and the fact that America calls itself a first world country by forcing so many people to make do on so little while working so hard is nauseating.

The minimum wage is a band-aid measure, at best first-aid, but even if it is meager and inadequate, that doesn’t mean you should simply let an open wound fester. The less financial security more people have, the more that risk falling into poverty, a rut that is very hard to get out of, and one which benefits very few people indeed.

So once minimum wage is given first-aid, then what? I and others would suggest something radical: abolish it.

I’m talking about basic income.

While only small case studies have been done, BI has incredible potential. If everyone who would otherwise be subjected to poverty is given a stipend which annually adjusts to the cost of living, poverty might just disappear overnight. Remember how higher wages result in a higher cost of living? If companies set their own wages (although competitively, in a market where work must truly be incentivized) they would cut their overhead enormously, generating much higher profits while permitting lower prices on their goods.

Because employers benefit so much from what is essentially a government subsidy to offset their overhead, it’s only fair that they pay progressive taxes towards what is essentially a security fund for workers who, without that stipend, would otherwise amount to serfs. They would also benefit indirectly from the annual net increase of American GDP due to the reduction or elimination of poverty to the tune of as much as $500 billion a year.

I’m not the first one to come up with, let alone argue for, this idea. In limited practice, the cons have proven to be few and the pros to be many. Instead of using the opportunity of a national dialogue to regurgitate a tired and painfully incompetent means of ensuring prosperity for all Americans, perhaps we should try shifting it to something else.

Something that might, just possibly… not suck.


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