Thursday, June 09, 2016

Conservatives Are Just Plain Wrong On Minimum Wage

Let's consider the conservative stance on the minimum wage. Their conventional wisdom holds that raising the minimum wage will cause jobs to be lost. On its face this seems valid, but once you start looking at the underlying assumptions it becomes clearer that this is flawed premise. But let's break it down.

Assumption #1: Raising the minimum wage will cause employers to lay off workers.
This is not going to happen. It ignores completely the cost of hiring a new employee: initiation of benefits (if any), training costs, lost productivity, and so on while the position is open and/or the employee is trained. Raising the minimum wage will increase retention, actually lowering costs for employers.

Assumption #2: The spending patterns of minimum wage workers will not change.
The conservative thinking here is that workers will take that extra money and ... what? Hide it under a mattress? Use it as wallpaper because they're not educated enough to know better? I don't know what the thinking is here; I do know that it is fundamentally flawed.

The truth is, raising the minimum wage means that money is circulated back into the economy. Workers will be spending that money, being consumers, instead of living off food stamps and government largess. Which brings me to ...

Assumption #3: They're already sucking the government dry. Why should we give them more money?
The minimum wage in the United States is the biggest boondoggle perpetrated against the Federal government in history. Because the minimum wage is so close to the poverty line, minimum wage workers qualify for all sorts of government assistance at both state and Federal levels. Raise the minimum wage and they do not qualify any more.

Why is this important? Simple. As it stands right now, a minimum wage worker earns $15,080 a year. However, conservatives like to trot out the fact that, after the Earned Income Tax Credit, minimum wage workers earn $19,656 a year (source: The Fiscal Times, http://www.thefiscaltimes.com/Articles/2014/03/13/Truth-About-Minimum-Wage-Workers-Take-Home-Pay, Rob Garver, 3/13/2014) . Which is all well and good, except when you consider the following:

  • $19,656 ain't that much either.
  • In Garver's example it raises a family of three just above the poverty line. Add another non-earner to the family, and they are now magically below the poverty line again.
  • The EITC may help with big ticket items around tax time (say, a major car repair, or needing significant dental work), but it does very little for the day-to-day because it's received as a lump sum in the tax refund instead of being distributed equally throughout the year.

In addition, there are the various subsidies for the working poor -- Temporary Assistance for Needy Families (TANF), food stamps, child care credits, etc. -- which amount to nearly $153 billion a year. That is money paid out by the Federal and state governments subsidize employers such as Wal-Mart and McDonalds who pay minimum wage. In short, the American taxpayer is paying part of the real salary earned by these folks instead of the employers. Pretty sweet deal for Wal-Mart, when you think about it ... your employee gets the equivalent of around $15 an hour, but you pay less than half of that.

So what happens if the minimum wage is increased? A few things ...

  • The employee doesn't actually see much of a raise, if any; it's simply a case of money being shifted around. Instead of some coming from an employer and some coming from the government, now virtually all (if not all) money comes from the employer.
  • The government saves money on these programs, because people will no longer qualify for benefits and therefore expenditures can be reduced.
  • It also increases the amount of taxes collected by the government ... instead of benefits being paid out, the worker is paying taxes on higher wages.
  • Taxpayers are no longer on the hook for part of the worker's salary.


So what does all this actually mean?

Quite simply, it means that the conservative view that raising the minimum wage will result in job losses is patently false ... in fact, the opposite is true. By raising the minimum wage, we create a whole new crop of consumers, who will generate economic activity, which will cause employers to need more workers, and so on.

So why the big pushback from conservatives on this? Simple, really. Conservatives (and, by extension, the Republican Party) is quite proud of the fact that they are the party of business. Conservatives are very sympathetic to business interests, and one of those interests (even though it is not explicitly stated as such) is that businesses quite enjoy having more than half of their labor costs for low-wage employees subsidized by state and Federal governments. I can't blame them, really ... if I could get the government to pay over half of my mortgage, I would. I don't have armies of lobbyists working on my behalf, though, so I'm not holding my breath for that one.

In the end, it comes down to a fundamental question of what people believe is better for the country. Progressives believe a strong middle class makes for a better economic climate, and points to data from the 50s and 60s (when the middle class was strongest, and before Republicans started in with the ridiculous "trickle-down" thing) as proof. Conservatives, on the other hand, still want to stick with trickle-down economics and believe that if the top earners are doing well then the rest of the country is too, because fuck the poor. I gotta lie down.

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