Tuesday, November 28, 2006

Raising the Minimum Wage

Dana Pico has this excellent post on raising the minimum wage over at Common Sense Political Thought.

Raising the minimum wage is high on the list of Democrat objectives once they take over Congress in January. Their proposal, which would raise the minimum wage to $7.25, is relatively modest and, according to Dana, won't even raise those workers above the poverty level.

According to the Census Bureau’s Poverty Threshold calculations for 2005, a family consisting of one adult and two children under 18 is in poverty with an income below $15,735; a family of four, with two adults and two children, is in poverty below $19,806. The most common proposal for the new minimum wage is $7.25 an hour, or $15,080 per year (based on 52 weeks at 40 hours per week, or 2080 hours). The most common proposal still leaves the workers our Democratic friends wish to help below the poverty line.

I've argued before over at Liberal Avenger that very few jobs even pay minimum wage anymore. In fact, in my locale, those burger-flipper jobs are already paying $7 to $8 an hour. Will those employees now get a pay boost to, say $9.50? I doubt it, and that's a problem.

But Dana goes on to explain that if Democrats were really interested in a living wage, they would be proposing a minimum wage of $12 an hour or so.
I think that would be a great thing. If the Democrats are right, and that gives people a real raise (meaning: one not completely consumed by inflation and higher taxes), the American people will be better off. And if people who really understand economics (those would be people who aren’t Democrats) are right, and such a raise simply triggers inflation, to the point that the new minimum wage is right about where the current economic minimum is in real terms, well, I will benefit (because my mortgage payment will decline as a percentage of my income) and the government will benefit (because the national debt, which is held in the form of dollar-denominated treasury bills, will cost less to pay off) and the Chinese and Japanese will suffer (because they are holding all of those dollar denominated treasury bills!) There wil be some American losers, too, of course: people on fixed incomes, people whose retirement savings decrease in real terms, and the people who lose their jobs. But what the heck, the Democrats won’t believe that they’ll exist!

Don't hold your breath waiting for that sort of a wage increase to be put into effect. The Democrats' proposal is a feel-good measure which will (hopefully) have little, if any effect on real wages.