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 ...
A $10 min wage (especially if in a year or two from now) would have a relatively minor impact overall. I definitely don't agree with it, but its impact to business *overall* at $10 would be fairly minor in a couple years with additional inflation. At $15/hr, retail as a whole goes bust unless automation costs fall off a cliff.
Exactly; very disturbing. As a FReeper pointed out probably over a year ago, the math calculation of 40 hours at a generic minimum wage worked out to almost exactly the same result as 29 x $15 - the “new normal”...
That is not much over minimum wage these days. Fast food businesses had to pay $12 per hour before the financial crisis hit in my central Illinois town. Not sure what they are paying now.
David Stockman has a breadwinner chart in some of his articles. His definition of a breadwinner is income of $25/h or more. I haven't looked at it lately. but the general theme is there are currently less breadwinner jobs than in 2000 or 2007. I think the peak was around 80M jobs. There are about 40M more Americans now than in 2000.
In my town you don't have to be a breadwinner to have a halfway decent life. One can be a handyman or house cleaner for $20/h. A husband and wife team could gross $80K a year assuming full time work. Even if they pulled in only $60K, that is still a pretty good chunk of change for my town..
In my town (and much of NJ) $60K won’t get you much; property taxes alone would take 15% of that right off the bat. There definitely are less “breadwinner” jobs here; that is why the Americans are evacuating. The foreigners trafficked to replace them in classrooms and housing basically live at Third World levels...
Property taxes are high here too, but it is still possible to find reasonable priced homes without breaking the bank account. If you go too cheap, you risk living in a declining neighborhood. People also move to smaller towns nearby where homes are considerably cheaper.
Oh, the problem here isn’t that the homes are so expensive - it is that the taxes are so high people aren’t willing to pay much for them (unless they intend to convert the former single-family homes of Americans into 2- or 3- family homes, which adds a bunch of kids to the schools). These conversions are often “undocumented”, so the whole town bears the costs of those kids (instead of that homeowner alone). If they don’t move families into the new units but childless adults instead, then parking is a nightmare; homes without driveways really suffer price-wise. Someone earning $60K could buy a home here; they’d just lose it because of the property taxes (not the bank loan itself, which wouldn’t have to be very high).
The Alternative Minimum Tax was set up initially to prevent millionaires from hiding income from taxation through legitimate means (excessive but valid deductions in the government’s eyes); what has happened here is that the high cost of living is pushing more and more middle class people into that category. When the property tax deduction is five figures (even in areas that aren’t very “nice” or wealthy, and you add on mortgage interest, medical, and charitable giving deductions, you may easily find yourself subject to that Alternative Minimum Tax.
You raise a good point about high cost of living pushing people into higher tax brackets, etc. That hypothetical couple earning $60K here would be eligible for modest Obamacare subsidies. If they moved to NJ they would lose the subsidies if they earned $80K. An older couple might even need $90K+ to break even.
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