Minimum Wage Redux

I read this article last summer, but never got around to putting it on the blog. Since the Democrats (and apparently the President) are about to go full scale Minimum wage increase, I thought I’d share this with you.

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11 responses to “Minimum Wage Redux

  1. Headline from today’s Arkansas Democrat Gazette:
    “2 plant closures to cut about 300 jobs”

    From that article: “Norman said the manufacturing jobs required a high degree of skill and paid more than $8 an hour.”

    When highly skilled jobs merit than level of pay, our country is in trouble. Welcome to “Made in China.”

  2. I’m confused as to what you were saying. Did you mean when highly skilled jobs merit THAT level of pay?

    Its our economy changing. Its happened over time. Just think… originally industry started in the north east… then as wages increased because the mini economy in that area was improving, manufacturing jobs moved to the southeast, where there were many poor people and labor was plentiful and cheap. Eventually, these people became more wealthy and industry moved to mexico after NAFTA was adopted. Now its moving to other parts of the world. Capitalism is constantly enriching people because of that.

    But what does that mean for former plant workers? It means the economy is diversifying. No longer will a high school degree get you a job you want (unless you are in sales). You need to get an education because we are moving to a white collar economy. And things are also becoming more urban. If you want a really good job, you need to move to the city. That has happened before and its happening again.

  3. For the literally hundreds of workers in our county whose jobs moved to China this year, capitalism has not been significantly enriching.

    There is only so much room at the top for chiefs. For a nation to survive, there must also be room for the indians.

  4. You’re right shannon, we can’t have an aristocracy. But the thing is, because of the way our economy is set up, there are always new jobs being created. New needs to businesses. I mean, we used to have guys that fixed buggys. Then cars came along and those guys didn’t have a job anymore. What did they do? They figured out something else to do. Should the government shut down the manufacturing of new products because its going to put some people out of work? No! What about guys that delivered ice for iceboxes? They lost their jobs when refrigerators became cheap. Should we have banned them to make sure ice men still had jobs?

    Government intervention does more harm than good to the market and to people involved. We have to be flexible about what we do. If someone else will do my job for cheaper than I will and better than I can, then they deserve that job, not me. I should do something about that. Work harder. Get more education. Do something.

    If someone works harder and better than you and for less money, would you say you still deserve the job just because of the country you were born in?

    Hmmmm

  5. Amen, Justin.

    When the government gets involved in business, it is always a bad thing.

    Didn’t we learn that from the Carter years?

    “Jimmy Carter?!? He’s history’s greatest monster!” — The Simpsons

  6. Hmmmm. I do struggle with that.

    However, I also struggle with parts of our nation becoming third world. Thanks to Mao-Mart using cheap imported goods to destroy local competition (Carnivorous Capitalism at its best) the eastern portion of my state (AR) has become a desolate wilderness.

    Fortunately, I have not been reduced to looking on a job at Wal-Mart as a good thing or shopping there as a necesssity (Clean for over one year now). Many without my gifts of heritage and resources have not been so fortunate.

    Lev 19:9-10 “‘When you reap the harvest of your land, do not reap to the very edges of your field or gather the gleanings of your harvest. Do not go over your vineyard a second time or pick up the grapes that have fallen. Leave them for the poor and the alien. I am the LORD your God.

  7. Shannon, since you have thrown out the example of Wal-Mart, I will run with it. Wal-mart’s purpose, as a public corporation, is obviously to make a profit (a large one at that). It accomplishes this by meeting the demands of its customers.

    In the early days, Sam Walton realized that he could attract a lot of customers by having low prices. Everywhere a WalMart opened, pretty much everyone in the town was better off: the shoppers were better off because it was cheap and convenient, the employees were better off, by definition, because they chose to go there and get a job, and many others in the town who owned or worked in businesses were better off because Walmart customers had more money to spend at those businesses and the WalMart employees were earning more money to spend other places as well. For many small towns, Walmart was the first stable employer the town ever had.

    You also mention Walmart selling goods made in China. Sure, there were some jobs lost here, but what about the jobs created there? Isn’t there something to be said about the need for those billion people over there to find jobs?

    Another aspect to that false argument of “foreign competition destroying jobs” is to look at history. Two hundred years ago, the majority of our country was agricultural. Don’t you think if you could go back in time and tell those people, “Yeah, your great great great grandchildren won’t be farmers, and won’t know anyone who is. They will buy all their produce and meat from stores and won’t even know where it comes from” that they either wouldn’t believe you or lynch you? In two hundred years, people in America will laugh that there was ever manufacturing in this country just like we now laugh that we all used to be farmers.

  8. http://www.huffingtonpost.com/steven-hill/henry-ford-and-the-minimu_b_38140.html

    Henry Ford and the Minimum Wage (1 comments )
    READ MORE: Henry Ford, Steven Hill

    By Dmitri Iglitzin and Steven Hill

    As President Bush and the Congress prepare to debate an increase in the federal minimum wage, they could learn much from the economic wisdom of one of America’s most successful business leaders — Henry Ford.

    Ford was, among other things, a famously domineering employer and a supporter of fascists, but he was also an economic pioneer.
    He not only perfected the techniques of mass assembly of automobiles, but he also foresaw that his efforts would not amount to great profits if average Americans could not afford to buy all those cars. He saw that putting higher wages in his workers’ pockets was good for his own bottom line, and good for the national economy too.

    So Ford shocked the world in 1914 when he unilaterally introduced his own minimum wage for his employees, more than doubling the average wage in the auto industry by raising it from $2.34 per day to $5 per day. As Ford put it, raising wages “has the same effect as throwing a stone in a still pond,” creating an “ever-widening circle of buying” that increases everyone’s prosperity.

    It was a simple formula that the U.S. has utilized many times since: adequate wages create happier consumers which contribute to a humming economy. Thus was born the American middle class.

    This lesson should inform the minimum wage debate. Recent proposals call for increasing the current federal minimum wage of $5.15 an hour — the lowest minimum wage in inflation-adjusted dollars in more than 50 years — to $7.25 an hour. According to the Economic Policy Institute, an estimated 14.9 million American workers would benefit from an increase in the federal minimum wage — 6.6 million who currently earn less than $7.25 an hour, and 8.3 million who are likely to receive raises due to the spillover effect of a minimum wage increase. Over half of these workers work full-time, and another third work between 20 and 34 hours per week.

    Assuming a minimum wage increase raises earnings for those employees by an average of one dollar per working hour each year, we’re talking about a net increase in purchasing power of well over $15 billion annually being pumped into the economy. Those are the kinds of numbers Henry Ford understood.

    In other words, raising the minimum wage will positively impact the entire American economy, not just low-wage earners. From a macroeconomic point of view, if low wage workers have more money to buy things, then businesses selling their products and services will have more customers. And more customers will mean greater sales, higher profit, and a “trickle up” effect that creates a more robust economy.

    But President Bush and Democratic congressional leaders don’t seem to grasp the wisdom of Fordism. Typically the debate over a minimum wage increase follows predictable lines pitting the poor against the middle class, a useless and no-win battle.

    Democratic proponents usually focus on the impact of a wage increase on low-wage workers living below the poverty level. They will tell harrowing stories of minimum wage workers trying to live on a measly $5.15 an hour.

    Republicans and business leaders will counter that the minimum wage increase will lead to fewer entry-level and low-skilled jobs, and also to higher prices for goods and services as the cost of the wage increase is passed along to the price of a hamburger at McDonalds. They will paint support for a minimum wage increase as yet another example of Democrats trying to help the undeserving poor at the expense of middle class consumers.

    Yet a broad swath of the middle class can easily understand how giving low-wage workers more money in their pockets will result in a lot more money being pumped into the economy. Moreover the Republicans can’t dispute this impact of a minimum wage increase because it is precisely this “trickle up” phenomenon they have pointed to for the past several years to justify the Bush administration’s massive tax cuts.

    So when the debate gets fired up this January, let’s hope the president and congressional leaders, Republicans and Democrats alike, remember the economic lesson of Henry Ford. An increase in the minimum wage will be good for the national economy, including most businesses, the middle class and workers at the bottom of the economic ladder. And that makes it an idea that all sides ought to endorse. 718 words

    [Dmitri Iglitzin is a labor law attorney in Seattle and a lecturer at the University of Washington School of Law. Steven Hill is political reform director at the New America Foundation and author of “10 Steps to Repair American Democracy” (www.10steps.net).]

  9. Ok Abott, I remember why I didn’t respond to your post. You didn’t say anything. You just left an article, without even a small comment of your own.

    But, I will tell you I have no problem with business owners increasing wages on their own. Smart business owners will do this, especially if it gets them better workers, or makes their current workers more productive/reliable. I have a problem with the government mandating it, because when its not the market doing it freely, but government regulation, the whole ballgame changes.

    Henry Ford probably didn’t realize it, but when he raised wages of his own accord, the best workers from all around came to his plant to work, giving him a more talented pool to pick from and giving him a better product. If every business had been forced to raise wages like he did, inflation woudl occur, because companies that had not yet begun using assembly lines to increase productivity (and decrease cost) couldn’t afford the higher wages and would either cut workers or go out of business.

  10. It just strikes me as incredibly naive to trust people (business) to avoid every single situation that would take advantage of someone.

    Can you honestly tell me that you’ve never taken advantage of someone for your own gain?

  11. They don’t. That’s why you have laws. Laws are to protect people’s rights from being infringed upon. No where in the constitution does it say that it is a right to be wealthy or a right to a job. Its not there.

    No, unfortunatly I can’t say I haven’t taken advantage of someone before. Corporations are probably going to take advantage of people occasionally. When they do, other businesses will enter into the market to take customers that are dissatisfied with the dishonest business.

    Capitalism isn’t perfect. But its the best system we have. And in order for it to work for us, we have to adhere to principles of it. When you raise the minimum wage, it hurts the people at the bottom. Walter Williams explains it well in the article I cited. Did you read it?

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