But then, I admit that I'm selfish. I think of myself first. And it's been a long time since I worked for minimum wage -- the summer of 1966, in fact, when I made $1.25 an hour slinging hamburgers at an amusement park. (According to BLS inflation figures that $1.25 is equivalent to $9.02 today.)
I remember that summer during high school. We had a great time, me and my buddies, until a bunch of us got fired for having a mustard and ketchup fight. (You can see, we didn't take our jobs too seriously.)
People advocating raising the minimum wage point out that you cannot support yourself, much less a family, on the minimum wage of $7.25 an hour. They get no argument from me on that.
Some people point out today's minimum wage, when you account for inflation, is less than it was in 1968. What they neglect to tell you is that 1968 marked the highest minimum wage in history. And in 1968 there was a booming economy, followed by the malaise of the 1970s when people felt lucky just to have a job.
Supporters of raising the minimum wage also cite studies saying that it will have a negligible impact on employment. Very few people will get fired, they say, and it will raise everyone else out of poverty.
But those studies come from liberals and are not to be trusted by objective measures (any more than studies coming from conservatives can be trusted). Basic economics says that if you make something more expensive, you will get less of it. If you make employing low-wage people 40% more expensive, you can bet there will be less demand for low-wage labor -- meaning some people will get fired; and a lot more people will simply not get hired (which is harder to measure).
As you might have guessed by now, I'm skeptical of the idea of raising the minimum wage to $10.10 an hour (although President Obama hasn't exactly asked for my advice). It will help some people, for sure. But it will hurt many others -- the few who get fired, and the many who don't get hired. And it's entirely possible that those hurt the most will be uneducated workers washing dishes, and not the sons and daughters of the middle class who take on summer jobs.
And yet, I share the sympathies of those who want to raise the minimum wage. I have a couple of acquaintances trying to supplement their Social Security with minimum wage jobs, and they don't get very far. And I certainly agree it's a miserable life for people working full-time at minimum wage, in menial jobs, trying to support themselves let alone a family.
So do I have a better idea? Yes!
Instead of raising the minimum wage, the Federal government should exempt the first $10,000 a person earns from the payroll tax. This would give everyone an immediate raise of some 14% on their first $10,000 of income. (The government would need to make sure employers give their portion of the payroll tax to employees, rather than keep it themselves.)
How do we make up the lost taxes that go to Social Security and Medicare? We eliminate the salary cap on the payroll tax. So we treat everyone equally. Everyone gets the same exemption. The person making $1 million a year gets his first $10,000 of income exempt from the payroll tax. And so does the person making $10,000 a year. (This would also eliminate the silliness of a retired person receiving Social Security with one hand, while paying Social Security tax on their supplemental job.)
Then, in addition, the government can introduce a higher minimum wage on less drastic and more gradual basis, which would avoid any kind of shock to the economy -- and the unintended consequences such as higher unemployment, higher wage inflation, and the economic distortions that come with wage and price controls. So instead of ratcheting up the minimum wage by 40%, the Federal government could raise the minimum wage by, say, 5% this year, and another 5% next year, and another 5% a couple of years after that. And then we're back toward the levels of 1968 -- without killing any businesses and without hurting the very people we're trying to help.
Meanwhile, it's entirely reasonable for certain jurisdictions, where the cost of living is high, to institute their own, higher minimum wage. In fact, most states already set their own minimum wage, and many have higher rates than the Federal government. After all, it makes little sense for Connecticut and California, with a high cost of living, to have the same minimum wage as Alabama and Arkansas, where the cost of living is much less.
So you tell me. How does this not make sense?
|Bottom line shows actual minimum wage since 1938. Top line shows equivalent in inflation-adjusted dollars.|