I came across an article on Yahoo Finance about Bill Clinton's reasons for stagnant US median household income growth. One reason, among others, is that we should increase in minimum wage. I'd like to focus on this one as many of the others I believe to be cogent. I believe this reason to be fallacious (though perhaps cogent on the fact that it could actually raise household income in the US, it doesn't affect the purpose of increased incomes, less poverty and less government assistance), as minimum wage increases tend to not have long term positive effects on purchasing power and poverty, inflation quickly corrects for the legislated wage increases as corporations and businesses increase prices to counteract the hit that general across the board wage increases have on their profits. The proposed wage increases to either $9.00 per hour or $10.10 per hour would still result in many of these households still being below the poverty line and still reliant on government assistance programs. A better tool to combat poverty and have lasting and significant affects on low income households would be to increase the Federal Earned Income Tax Credit as this lowers the tax burden if not eliminates it from low income families and may provide additional income that truly helps these households while not significantly affecting businesses and their pricing models. In today's economy the minimum wage increase statement or legislation is more of a political tool to garner support of a mass of lower income voters, than it is an effective economic tool to maintain or spur a robust and increasing economy. It sounds good and may actually increase numbers, which looks good on paper, but does not positively affect peoples lifestyles which is what the end result of increased incomes should be.
The best way to increase household income and combat poverty is to try and get jobs back in the US and not shipped overseas, so adults can get a decent job, perhaps even without a college degree ,then many of these minimum wage jobs could revert back to part time, student, or teen jobs and not seen as careers. But I don't know how to do that.
I like your thinking. I believe it fallacious to believe anyone can reasonably live on 9.00 per hour. I see an incredible disparity at my work place. Some of the employees that work the hardest are paid less. This has a direct correlation to their education/licensure. I often wonder if the partial answer is to lower the cost of goods. Making 9.00 per hour wouldn't be a problem if you could buy more than lunch for one.
ReplyDeleteI've heard this line of reasoning many times before and I believe it to focus on the potentially negative effects without fairly considering positive benefits. I personally know people who could effectively feed their families with an additional $40 per week, I also know business owners who would not raise their prices due to competitive pressure. A closer look at the reality of a poor family is worth consideration.
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