I totally understand how many people enjoy pushing what they believe is social good, and I know that feels wonderful to advocate for the less fortunate, I get it, I really do.. I don’t want people to suffer any more than anyone else does. I’m a humanist, I despise waste, corruption and suffering and believe in sexual dimorphic equality, but pushing political propaganda that is founded in absolute nonsense is not helping anyone, it actually hurts people, especially the poor.
So I’ve seen some “raise the minimum wage” memes and each time I scratch my head, thinking I guess research and history escapes these people with these flawed ideas of social good. So I decided to do a quick bit of research to explain why raising the minimum wage is a really, really horrible idea.
In the first graph I posted, the blue line is the Amount of minimum wage since 1938, the red line is minimum wage compared to 2014′s value of the dollar, that is how much is minimum wage worth in a particular year compared to 2014. and the green line is how much buying power $1 in a particular year is worth, compared to 2014.
As you can see, the value of $1 has dropped since 1938, crossing minimum wage in the late 70′s and on down. This is a result of what economists call “inflation”, and is what happens when you create a regulated pay floor, it then pushes the cost of labor up from the previous pay floor, thus increasing the price of goods and services. Now if this is done once, wonderful, but each time it is raised a cycle is created. So each time this happens, the cost goes up, the price goes up, each time dropping the buying power (value) of the dollar.
Raising minimum wage, although it sounds wonderful, and makes one feel like their actually doing something to help those who don’t make as much, just for the “feels” of social activism, but what they’re actually doing is advocating for a horrible idea, making things worse by continuing the inflation cycle which has been going since way before 1938′s minimum wage act.
We’ve had minimum wage since 1938, and it has been raised about 22 times, and in all those 22 times, did it solve poverty? did it even put a dent in poverty? no it didn’t, it actually has made things worse over time, widening the gap between the “haves” and the “have nots”, how can people not see history staring them in the face? it is like each time minimum wage increase is proposed the previous 20+ times it was raised is totally forgotten as if “well this time it’ll work to help with poverty!!”.
Inflation is why the middle class is disappearing, a family who’s income is $30,000 won’t get a pay increase when minimum wage is increased, but when the cost/price goes up for goods and services as a result of increase minimum wage, how much that $30k a year will buy decreases, this is a basic economic fact. Raising minimum wage only creates an increased pay floor, it does not increase everyone else’s pay who is making more than minimum wage, it doesn’t improve the buying power of the poor, since the costs/price of goods and service goes up with it. So each time we increase minimum wage, we cycle inflation. See the problem yet?
In the next two graphs, is comparing a single minimum wage income with poverty levels for 1, 2, 3 and 4 person households adjusted to 2014.
A single person income at minimum wage has stayed above the poverty level for a single person since 1950, while a two person income at minimum wage household has always been above the poverty level for 2 persons. You start adding children, a two income family with one child has been above the poverty level for a family of three since 1950 as well.. When a second child is added, it too has been above poverty level since 1950. Poverty levels is calculated by the Department of Health and Human Services based on many factors.
So where does the term “living wage” come from? the living wage is a result of the socially accepted level of living conditions in a consumer based economy. This term is used to muddy the waters so as to infer the inability to survive on minimum wage, with a life style that is far more costly than what minimum wage can provide. The problem in this is that people make bad financial choices as a result of a lack of education and proper financial decision making skills. Raising minimum wage will not fix a lack of skills, it only pours more money into a consumer based economy at the cost of the middle and poor classes.
An adult making minimum wage, working 40 hrs a week makes approximately $15,080 a year.. ($7.25*40*52=$15,080). With an apartment costing $600 a month, costs about $7200 or about 47.7% of their yearly income ($700*12=$7200) and ($7200/$15,080=0.4774) that’s if they choose a $600 apartment.
That leaves approximately $7800 for all other bills and expenses ($650 a month), so please explain to me how minimum wage isn’t enough IF a person is being responsible with their money, and explain to me why I or anyone else should be forced to pay a higher price for goods and services so people can continue to live reckless lifestyles that are above their means. Now I understand, that isn’t very much, but when did lifestyles beyond one’s means become an entitlement?
I am by no means advocating that people should remain poor, far from it, by cycling inflation through increasing minimum wage, we can see from history that the poor are becoming more impoverished as a result of social wage engineering in order to “feel better the poor have advocates” when in reality most people don’t take the time to educate or research what happens when we raise minimum wage, only that is sounds like a good idea for the poor thinking “higher pay means more money, yeah that will fix it, then they’ll get out of poverty”.
We need to focus on education, training and skill development in order to stop the cycle of increasing the number people falling into poverty. It won’t be done by making the rich more money via the ability for people to spend more money recklessly.
It is often said that insanity can be defined as “doing the same thing, over and over and expecting a different result..”
Please stop the insanity, there ARE other solutions to reduce suffering of the impoverished class in the US, but inflation (aka raising minimum wage) isn’t one, it only makes things worse.
Data from The US Department of Labor – http://www.dol.gov/
The US Department of Health and Human Services – http://www.hhs.gov/