Minimum wage not keeping up with productivity
By Caroline Fairchild, Huffington Post
President Obama’s call to increase the federal minimum wage to $9 an hour was one of the more significant proposals he laid out in his State of the Union address Tuesday night. But $9 an hour is still a far cry from what workers really deserve, a 2012 study finds.
The minimum wage should have reached $21.72 an hour in 2012 if it kept up with increases in worker productivity, according to a study by the Center for Economic and Policy Research. While advancements in technology have increased the amount of goods and services that can be produced in a set amount of time, wages have remained relatively flat, the study points out.
Even if the minimum wage kept up with inflation since it peaked in real value in the late 1960s, low-wage workers should be earning a minimum of $10.52 an hour, according to the study.
Between the end of World War II and the late 1960s, productivity and wages grew steadily. Since the minimum wage peaked in 1968, increases in productivity have outpaced the minimum wage growth.
The current minimum wage stands at $7.25 an hour. In 2011, more than 66 percent of Americans surveyed by the Public Religion Research Institute supported raising this figure to $10.
The last time the federal minimum wage increased was in 2009. Currently observed in 31 states, the federal minimum wage translates to an annual income of about $15,000 a year for someone working 40 hours per week.
Connecting improvements in technology and efficiency which leads to the ability to provides goods and services at less cost to the minimum wage is not totally rational.
When you consider that few if any workers and supervisors of those enhanced operations are minimum wage people, this think tank observation shows a poor understanding of what minimum wage jobs are and who fills them.
Unlike factory workers (when we had factories)most minimum wage jobs today are service jobs; wait staff, cleaners, Lifties and other tasks that are not easy to automate or speed up with technology.
There will always be a need for these workers, it is where most of us entered the work force as teenagers, and where our work ethic was developed. Smarter, thinking people usually figure out how to be more efficient and more useful and courteous to customers, which ultimately results in some recognition for talent, diligence and promotions to supervisor or other position requiring judgement and understanding and therefore worth more dollars per hour.
The minimum wage needs to be at a level where the worker is rewarded with an income above the poverty level. It is an important training ground where work ethic and acceptance of responsibility are developed, which will benefit all of our society in the future.
Tahoe Observer,
Very well put in regards to the minimum wage. Working for what some companys pay now is why so many people are working two or sometimes three jobs. Those that can’t find work are destined to be on some form of govenment assistance if they can meet the standards set forth by govt. agencies.
Raise the minimum wage and promote growth in our communitys! More money in the pocket, the more you spend, thus creating more prosperity for all. More jobs, more businesses opening, maybe even more things made in America as factorys re-open here in the good old USA.
Can raising the minimum wage really turn things around in this country? Sure is worth a try! If for nothing else than to help alot of people out so their not living paycheck to paycheck, worrying about how they’re going to pay rent, their utility bills and put food on the table.
People should be paid a decent wage for a days work. Restaurant workers, bartenders, casino workers and so many others make a portion of their living from tips, but they should also be paid a fair wage so when business is slow they can still make ends meet.
Raise the minimum wage and it will maybe, just maybe, will help float all the boats. Old Long Skiis
Minimum wage laws do not decrease poverty, they actually increase it, probably more than any other single law.
Scott Blumenthal:
“Minimum wage laws do not decrease poverty, they actually increase it, probably more than any other single law.”
I’m not tracking how minimum wage laws increase poverty. Could you please explain the methodology on how that works?
Thank you.
Scott,
How does it really feel to have been completely wrong about supply-side economics for 30 years yet continue to soldier on in some delusional world where the trickle down is just around the corner?
Minimum wage arguements tend to be political but without economic merit on either side. Only about 2.5 percent of workers make minimum wage and they only make it for entry level jobs. Even a modest amount of experience tends to be rewarded in labor markets. Unskilled labor and felons are different. A failure to obtain a high school diploma tends to prolong the period of time that a person makes minimum wage.
The arguement that raising the minimum wage increases poverty does have some merit. It goes something like this. Minimum wage jobs are training jobs that prepare people for better paying jobs. Increasing minimum wage reduces the number of entry level positions and therefore reduces opportunity and thereby increases poverty. Mehhh, I doubt its that important.
That arguement has some limited merit in businesses where the major cost in unskilled labor ie: hamburger joints. Obviousely Google doesnt care if the minimum wage is increased.
Conservatives tend to note that wage controls in the Great Depression fueled unemployment and liberals note that other increases the the minimum wage were accompanied by prosperity. Neither side is very good at telling the difference between causation and correlation. Clearly magnitude is important and so truly meaningful increases probably do influence labor markets, but only in a small number of service oriented businesses that are not really long term jobs anyway. So its a debate that tends to be heated, but probably not very important.
S Cofant, what is you alternative?
John,
I believe the policies of Nobel Prize winning economist Paul Krugman pretty much reflect my views on the economy. Basically the complete opposite of the conservative failures since the sell-out to the global mega-corporations by the Reagan administration. The complete opposite of the failures of austerity in the last decade promoted by conservative policies worldwide. In simple terms, I think American prosperity depends on growing from the middle class out, not the argument that the consolidation of wealth to the 1% will trickle down.
Should the minimum wage be reduced for companies with more than 50 employees?
Today a company cost for an employee without benefits is the minimum wage ($7.25/hour) plus the companies’ match for SSI, SDI, etc. of about 15% or $1.10/hour. This is with no healthcare expenses.
When the new healthcare law takes affect the company with 50 employees will pay the above plus their costs to provide healthcare.
The company I worked for paid $6.73/hour for their share of my family healthcare. I and every employee with family healthcare paid $2.30/hour.
Where will these companies, those not providing employee healthcare today, get the money to pay for it? You guessed it, Those costs will be passed on to you and me through what we pay for the goods or services the company is selling. So will any increase in minimum wage.
If Government ran a good business (low to no debt, low costs [taxes] to the citizens, etc) then I’d be willing to accept their advice.
If you are running a business would you hire our government to advise you on how to manage yours?
Not me.
Tahoeadvocate, you are missing the hidden cost of having uninsured people out there. People who are uninsured do receive treatment and those costs are paid by you and I. That is why mandatory health makes sense…we pay it anyway. So in order to recognize the costs we have to get the freeloaders into the system through reasonable penalties, which should reflect the fair market value of health insurance. Plus we should subsidize low income folks. We do that anyway. No critically ill person is turned away fromthe hospital and it is illegal to do so.
Single payer probably makes the most sense but we will ultimately end up with more of a Swiss model and maintain the insanity of having employer provided health care.
The point is, yes, you can pay a little more for goods and services, pay more in taxes or pay a lot more for your current insurance. Anyway around it, we pay for people who refuse to purchase health insurance now.
Government run programs such as Medicare run much more efficiently than the ripoff Insurance Cos. The health care for all model the rest of the industrialized world uses is exponentially better for everyone. What a joke defending the status quo theft.
The freeloaders end up being people like fulltime Walmart employees that are unable to get any coverage that they can afford.
My first job in Tahoe paid $1.00 a day. I worked at Ski Run Marina and was 9 years old in the summer of 1963.I bounced around being a dishwasher at several restaurants when I was a kid, worked at the drive-in theater on Glennwood during high school, then on to becoming a tram attendant at Heavenly, a summer of construction, worked for several family owned businesses, and a bunch of other stuff here and there. All very low paying jobs.Then on to very long stint at STR.
Ya know what? As time progressed I gradually was making more money and I was and still spending it LOCALLY. That’s how you help the local economy!
Yep, I’m one of those rare birds that still shop in So. Shore. Gotta support your local businesses and help your friends, neighbors and our town prosper.
The moral of the story? Yes,raise the minimum wage, shop locally, tip well if you can afford it and help to fix this town!
Thank you, Old Long Skiis
John,
I’m not missing the hidden cost of the uninsured. I’ve very aware of it as you and I both pay it through our taxes and inflated healthcare costs.
What I don’t believe is that when mandatory insurance is in effect, that you and I will see a decrease in what we pay even though the uninsured will now be insured.
I believe my taxes will stay or go up.
I believe my healthcare costs will stay or go up.
I believe employers who now have to offer insurance will raise their prices to cover them and you and I will pay more.
How does this benefit you and I?
The economic principal of getting the freeloaders into the system is sound. So hopefully that will put some downward pressure on costs. As you know, we both pay for the uninsured already, so if we can get a dime out of them we are better off. I just wish the penalties were bigger, much much bigger.
I have already received a letter that I am being dropped on 12-31-2013. United has wanted out of Califonia for 5 years but there was no reason to drop me before, I am pure profit. High deductible and good health. So I am canary in the coal mine as it were. We shall see.
Its hard for me to see any system being as bad as what we have now. So in my mind its hard to mess up.
S. Covant- If you believe that Medicare is well run, you must not be covered by it. The task of finding a doctor who will accept Medicare is becoming difficult. Wouldn’t you think the quintisential medical provider which was pointed to as the example of how heathcare providers should operate (Mayo Clinic) should accept Medicare as payment for services. If you go there, Medicare’s payment is not accepted. What Medicare is willing to pay is sent to the patient and the patient is fully responsible to pay what Medicare won’t. I would have thought that the leaders who passed the Mandatory Insurance bill would have made sure that medical providers accept Medicare.
An example would be that if you went to a Doctor in the Barton Group which accepts Medicare and they provided you with services billed at $1000. When they submit the bill to Medicare, Medicare might allow $500 of the $1000 and pay them $400 (80%). You are responsilbe for the remaining $100.
If you went to Mayo Clinic for the same service and they billed at $1000, Medicare would allow $500 and pay you $400 (80%). You are responsible for the remaining $600 since they don’t accept Medicare.
Here is a link that goes into minor detail about what TahoeAdvocate is talking about. http://www.kevinmd.com/blog/2010/01/mayo-clinic-refusing-medicare-patients.html
Now keep in mind, as of right now we have a group of healthy people who can but do not purchase health insurance and we have moved old sick people out into their own pool. Our present system is crazy. But getting the healthy, able and uninsured into the system is a start.
tahoeadvocate – my 84 yr old mother is on medicare and is with Kaiser, her premiums are quite cheap (much cheaper then mine by a lot) and she gets great coverage and care. As far as she is concerned, it is working very well for her.
May not be true for all, as it does force people to be a good consumer. Luckily for my mother, my father researched this out well for them, sadly he passed away (because of his ability to believe the symptoms he had were simply getting older) before he could get full use out of the system.
Rick