Posted on 08/01/2016 5:21:29 AM PDT by IBD editorial writer
The most absurd plank to appear in either party's platform this year is the Democrats' call to "raise the federal minimum wage to $15 an hour over time and index it." It is policy written for the nation's very wealthiest enclaves, but incoherent for economically distressed regions. Looked at from El Paso, Texas, where the median hourly wage is only $12.70, a national $15-per-hour minimum sounds no saner than a $29-per-hour minimum would in Washington, D.C.
Until very recently, even proponents of minimum wage increases acknowledged that a minimum should retain some rational relationship to a labor market's median wage -- a ratio called the Kaitz Index. If the minimum wage is too far below the median wage, it would fail in its goal of lifting low-wage workers toward the middle class. If it is too close, its distortions would be too great for too many jobs.
Writing for the Brookings Institution's Hamilton Project in 2014, University of Massachusetts professor Arindrajit Dube observed that "a natural target is to set the minimum wage to half of the median full-time wage." Last year, Larry Mishel and his colleagues at the Economic Policy Institute likewise focused their analysis of viable minimum wage increases on the Kaitz Index and targeted a ratio of just over 0.5.
(Excerpt) Read more at investors.com ...
Bad policies create competitive disadvantages for jurisdictions that adopt them. The left, which is addicted to ideologically driven bad policies on multiple fronts, typically seeks to nationalize bad policy to shield leftist policy misadventures from competition. Federalism at the state level and local autonomy at the municipal and county level tend to create a policy market. They create real diversity and real choices, and allow people and businesses to vote with their feet.
It really doesn’t matter what minimum wage is set by law. The real minimum wage is zero. That’s what people whose labor is worth less than the legally mandated minimum wage will inevitably earn.
If there must be a legal minimum, and politically that probably is the case, it’s certainly far better to have the level determined by states or even local municipalities. Going by my own state of Pennsylvania, there is quite a variation in prevailing cost of living even within the state. A minimum wage of $15/hr might not do too much harm in Philadelphia, but a much lower wage might be better in the rural central part of the state. No minimum makes the most economic sense, but a flexible minimum set locally would be far less disruptive than a one size fits all federal mandate.
I have a question here. Let’s say we do go to a $15.00 per hour minimum wage. What happens to the U.S. Tax Code? The more you make the more the bite is.
So if the average pay goes up and the Tax Code doesn’t change to reflect it then not only do jobs go flying away to other countries, those who do manage to have a job are going to be taxed even harder. Making most of them ‘working poor’ as a result.
No wonder being on the Dole, Welfare and disability is so enticing. Work for a living for yourself or for a wife and family and you are just screwing yourself over when there’s ‘FREE’ money waiting for you at the welfare office.
Nobody talks about marginal taxes, marginal effort, marginal income, etc.
Margin has a very real effect on behavior.
It is far, far easier for a lobbyist and an activist and a communist to convince ONE national level group of bureaucrats in ONE department or agency in ONE hearing than 5000 local bureaucrats, who in turn need to face 50000 local election-led politicians.
218 democrats can be told what to do by one decision, and six network news shows will do what they are told.
IF the news media were unbiased, or even openly biased but honest, then this new national-control-of-everything would die because of knowledge like this.
The government has no right to set a minimum hourly rate.
If IBD is against something then the idea must not be without some merit.
“The government has no right to set a minimum hourly rate.”
Minimum wage isn’t a minimum hourly rate to be paid., It is a restriction on the minim job allowed to be performed. It is a prohibition on commerce.
I am not positive, but I believe the tax brackets are indexed for inflation. If minimum wage is raised, then prices will rise (absent a corresponding increase in GDP). More money in aggregate with the same aggregate supply of goods means higher prices for those goods, hence inflation. Sure, absolute tax bills will rise, but only in nominal, not real terms; and more importantly marginal tax rates will be relatively unaffected (in aggregate, not necessarily on an individual basis)
The median wage in our rural area is probably about 10 an hour. A 15 minimum will shut the area down. It’s irrational.
The problem, though, at election time — and that’s always when this comes up — is that it’s too hard to explain economics to someone who has just been promised a raise by someone else. So, these minimum wage workers become a large voting bloc.
Your goal is to win the election. Far more voters DON’T understand economics than do. Do you give a voting bloc to your opponent just so you can maintain economic purity?
Trump is right to counter with a 10 dollar minimum that’s regionally flexible. He can say Clinton has no chance to get her passed in tough times, but his will pass. So would you rather have a real 2 dollar raise or a 7 dollar promise that will never happen?
Agreed. No minimum at all is the best policy, but that’s politically nonviable. Next best would be allowing your municipality to set its own minimum at something more sane like $7 or $8/hr rather than having $15/hr mandated by the Feds. That $15/hr might be reasonable elsewhere, like NYC or DC for example, so those localities should be able to set the minimum at a level that makes sense there.
Agree totally
Our region is so different economincally from New York that we could be different planets.
economically
A $2 per hour increase would cost a business with 10 FTE or equivalent well over $40K per year after factoring in other employment costs. If you can't pass those costs on to the consumer or drastically alter the business model, it is likely they would shutdown.
And if you lose the election, they will also shut down.
Agree completely!
This country used to have no minimum wage - and people would work their whole lives with nothing but rented room & board to show for it. I don’t know what the right figure is (it might even be lower than the current minimum wage), but labor was organized in this country in response to business owners’ outright exploitation of workers. Along the NY/NJ border are several former mining settlements where people worked six and a half days per week, twelve hours per day, and when the mines closed many had to flee at night because they owed the company money for their rented shacks and the food with which they fed their families. Don’t believe we can’t go back to those days; in some fields we are already well on our way. The 40 hour workweek is increasingly becoming a thing of the past for more and more American workers; Uber and airbnb seem to be acknowledgment that car or home ownership are only possible if the “owners” share those assets...
This minimum wage debate wouldn’t even occur without the artificial standard of living afforded to those on public assistance; rather than trying to gauge the minimum value of an hour’s work it seems they are just trying to put the wages slightly higher than that of those that breed for a living.
Workers are either doing 50 to 60 or 29 and under..
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