Jan 08

There’s been much discussion in the news recently regarding the minimum wage, currently $7.25, and the efforts to raise it to a level which would at least keep pace with inflation. You’ll hear nonsense that if the minimum wage is raised, jobs will be lost. After all, if you raise the cost of something, the demand goes down, right? Even if this were true, it’s rhetoric with no data behind it. There’s more to supply and demand than the simple result of ‘less.’ That something is called elasticity of demand. Simply put, if you raise the price of an item by 1%, you look to see how much the demand goes down. If it goes down a very tiny amount the relationship is considered inelastic.

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What’s interesting to note is that this experiment has already been performed for us, by states that raised their minimum wage above the federal minimum. Data accumulated, graphs made, truth exposed. Stores have already cut back on employees. Ever go into a Home Depot where there’s one clerk monitoring 4 self check registers? Or the local supermarket that has multiple self-check lanes, and a few full-service? Will an increase of 39% from $7.25 to $10.10, the current democrat goal, have zero impact on jobs? No, probably not. But the loss in jobs is likely to be quite small compared to the positive effect on the millions working at minimum wage.

The next issue is that trickle down economics doesn’t work. Corporations are sitting on over $2Trillion and for various reasons, still aren’t hiring or repatriating this money to the US. On the other hand, the extra $5700 this wage bump would give to the minimum-wager will be spent almost immediately. An immediate boost to the economy. There are nonsensical arguments out there such as, “if $10 is good, why not raise the wage to $25, or a $50K salary?” These arguments are red herrings, and should be called out  as such. At the start of this past holiday season, I heard the National Retail Federation CEO Matthew Shay say,”Since most of 2M min wage workers are young, it’s ‘more like a starting wage.’” Sir, you are out of touch with reality. Granted, slightly more than half are 16-24 years old, but this leaves the other half, adults that are trying to making a living on this wage. What I don’t see in the mix is a discussion of a lower wage for those under 25. It would make sense for the teen and students to stay at the current wage and would dismiss the notion that minimum wage earners aren’t those who are supporting themselves and their families. I offer such a proposal as compromise, not a position I’d otherwise push.

Now, let’s get to the punchline, the true transfer of wealth. It’s simply a matter of following the money. Wal-Mart has long history of establishing stores in neighborhoods and driving out the local stores. No wonder when Walmart submits a permit for a new location, there’s nearly always pushback and protests if the permit is approved. Given the low wages, their employees are typically reliant on some type of public assistance programs to help make ends meet. This assistance doesn’t come from thin air, it’s from the taxes that you and I are paying. You see where this is going? Our tax dollars are directly subsidizing Wal-Mart shareholders, more than half of which are members of the Walton family. The data shows that Wal-Mart’s net earning were $17.2B this past year. I wonder how much of this can directly trace itself to the subsidies its employees received. Yes, it’s time to raise the minimum wage, not as a means of redistributing wealth, just the opposite, as a way of stopping our collective wealth from going to this one family.

written by Joe \\ tags: , ,

9 Responses to “What Wealth Transfer Looks Like”

  1. Sara Says:

    Excellent! I wholeheartedly agree with this. It is high time for a change!

  2. buck Says:

    1. Minimum wage is paid to people who have minimum skills. If you want higher pay, develop better skills.
    2. That being said, there are millions of workers with no skills, so there is plenty of people to choose from.
    3. If you don’t like my above comments, raise the minimum wage to $20.00, and eliminate all welfare programs.
    4. My daughter is a teacher with 10 years experience, and her salary amounts to $17.00/hr. So her college degreeS, are $7/hr. short of someone of no skills??? Her salary is based on the rule of supply and demand ( there are thousands of unemployed people with teaching degrees) not the fact that teaching is a noble profession.
    5. The real reasons for raising the minimum wage are to buy votes, and is a hidden way to increase tax revenue on the backs of the unskilled.

  3. Joe Says:

    buck – I don’t dispute (1) and (2). As I note in my article, there’s a point of red herring, “why not raise it to $X?” In a perfect world, I’d have a dial I could turn to see the unintended consequence of raising it too high.
    Teachers? Don’t get me started on that. The bar should be set high and the pay should reflect that we give them a responsibility that impacts the future of all of us. The good ones should be making 6 figures, and the bad ones, let go.

    Your points are well presented, but my issue is that you tax dollars are funding minimum wage workers so the Waltons can grow even richer. A rise in the wage will lessen the burden on you, help the lower paid worker, and squeeze the company earnings a bit. To see who minimum wage benefits, just follow the money.

  4. buck Says:

    Joe, The point about teachers ( my wife and daughter are teachers) is the fact that while the job is important to society as a whole, there are literally millions of people with degrees. This depresses their wages regardless of their teaching skills. Unions contracts are based on length of service and level of education, not on performance like most in the private sector. I am not condemning unions; it’s how it is done.
    As far as the Walton’s, as long as people apply for and accept the wage that is offered by an employer, the onus is now on that employee. If no one accepts the job at that wage, the employer is forced to raise the wages to attract employees.
    My employer offers a job at $65,000 minimum with benefits, but cannot attract applicants that 1) pass a drug and alcohol test, 2) preform shift work, 3) show up on time and when scheduled, 4) actually work for6 hours out of eight.
    My tax dollars will not be reduced if the minimum wage goes up, they will only be increased to fund another vote buying handout. The middle class and affluent are forever screwed.

  5. Joe Says:

    Sorry, it’s easy to go off on a tangent to the topic.

    Just thinking out loud here. We subsidize these workers. What if we said that anyone working for Walmart would get no government handout? This would have some consequence, no? Instead of protesting, they’d do what, go on strike? So long as there’s people at the bottom, we will be paying for their support, one way or another.

  6. buck Says:

    I’ll agree to your proposal that Walmart workers get no gov’t handout. Let them strike. They’ll be another 50,000 standing in line the next day to take their place. They know the check will be good, working conditions okay, and if they quit or strike, there will be another 50,000 available the next day to take their place. It is a minimum wage job for no skill/minimum skilled workers. The jobs aren’t meant for 30 year employees, just like the hardware store clerk I was in the 70′s earning $1.80/hr. We learned our business/job skills and moved on. I now successfully supervise 450+ hourly and 65 salary employees.

  7. Rob Bennett Says:

    I agree with you, Joe.

    Most people would call me a conservative because I am a huge Sarah Palin fan. But I worked for George McGovern and voted for Carter and Mondale and Clinton (the first time). So I guess that I am a funny sort of conservative (or perhaps I am a funny sort of liberal).

    Pat Buchanan is as conservative as conservative gets. I remember that he called for a higher minimum wage too.

    Ideological labels serve a purpose. But they are at times taken too far and give us an excuse to stop thinking things through.

    I remember eating at a Pizza Hut and getting into a conservation with the waitress. She was working another job at night and yet another job on the weekend. She had a kid. I’d rather see her paid a higher wage and pay a bit more for my pizzas than have her fall into the hopelessness that follows from living on welfare.

    Sometimes the heart aided by the head makes more sense than the head acting alone.

    Rob

  8. Joe Says:

    Rob, as always, I appreciate and respect your views. I think there are some issues that at their root, are non-partisan. But maybe that simply isn’t possible. For what it’s worth, when I took a 30 question quiz, the result determined I was Libertarian. To the right on some issues, to the left on others.

  9. Barbara Friedberg Says:

    Joe, This is a superb argument. I really like your clear definition of the important economic concept of elasticity. Great way to show how raising the minimum wage may reduce need for citizens to pay low wage earners through our taxes.

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