3/18/2013 8:16 PM ET|
Senator: Should hourly minimum wage be $22?
Elizabeth Warren said that a much higher baseline would be appropriate if wages were tied to productivity gains.
If we had adopted that policy decades ago, the minimum wage would now be about $22 an hour, said Sen. Elizabeth Warren (D-Mass.) last week. Warren was speaking at a hearing held by the Senate's Committee on Health, Education, Labor and Pensions. You can see the video here.
Warren was talking to Arindrajit Dube, a University of Massachusetts Amherst professor who has studied the issue of minimum wage. "With a minimum wage of $7.25 an hour, what happened to the other $14.75?" she asked Dube. "It sure didn't go to the worker."
The $22 minimum wage Warren referred to came from a 2012 study from the Center for Economic and Policy Research. It said that the minimum wage would have hit $21.72 an hour last year if it had been tied to the increases seen in worker productivity since 1968. Even if the minimum wage got only one-fourth the pickup as the rate of productivity, it would now be $12.25 an hour instead of $7.25.
Some of the news media took this to mean that Warren is calling for a minimum-wage increase to $22 an hour. That doesn't appear to be the case. She seems to be merely pointing out that the minimum wage has grown more slowly than other facets of the economy.
Warren is taking some hits on Twitter for her comments. One user describes her as "clueless and out of touch" while another calls her "delusional." But other users are praising her arguments as "compelling," saying she is "asking the right questions regarding minimum wage."
It is the perfect way to artificially increase inflation.
I say we raise minimum wage to $100 an hour, that way we are all rich.
Who cares if a Big Mac costs $78, we'll all be rich, right?
For those that speak of companies leaving due to a higher minimum wage, why are they running to countries like China now? Those that say that 7.25 is for entry level jobs obviously only read limited news, there are people with degrees making that now. Finally, for those that say items purchased the price will go up, must not go to the store. Everything has gone up and the excuse at one point was the price of gas went up but lately prices are still climbing. Greed of corporations and the rich is what is keeping prices out of reach. For some it is that they are just lazy and don't want to move up but there are some people that do but can't seem to get a good foot in. When does one say okay I have enough money when you have purchased a bigger house or yacht or car. I have worked all my life and have never received a handout or asked for one for my family. I am blessed in this day to have a job that pays a decent wage. When is more enough?
Are you decietful or merely ignorant?
I would assume that the Professor was speaking about productivity as economists define it.
I will provide an illustrative example:
Lets say I want a house built. I hire 10 men and give them the most rudimentary of tools - shovels, hammers and hand saws. Lets say it takes them one year to built my house by hand.
Now, lets imagine that I hire the same 10 men to build the same house, but now they have a backhoe to dig the basement, a bulldozer to grade the lot, power saws and compressed air powered nail guns. (Yes - in case you ar worried - all of the nail guns are registered and only have ten round nail clips.) They will built the house in a fraction of the time it took to build it with only hand tools.
This increase in output is called "productivity" by economists.
The increase in productivity is not due to the workers working better, or harder or smarter. It is due to the employer adding exponetially more capital goods (the power tools) to the mix.
But for sake of argument - what happens if we ignore the efficiency of the market and raise the minimum wage to $22 per hour? First of all I would expect 300% inflation. Now if everyone saw a threefold increase in their wages, that would at first blush keep the economic equilibrium, but would screw certain segments - for example retirees who have the same savings or pensions - but have to pay 3 times as much for everything.
If we do not have a 300% increase in everyone's wages (only the people making minimum wage) then why would someone who has a job that currently pays $22 an hour and bears some responsibility and effort and skills not quit - and take a minimum wage job where you can now get $22 an hour/$44k per year for falling out of bed and flipping burgers all day?
Finally, Senator Warren - I will tell you what I fear the worst. You can repeal the laws of the market as easily as you can repeal the law of gravity. I close my eyes and see the exceptionalism of free market results first lost to socialism, then to the dingyness of East Germany, descending into the hell of Stalinism and Pol Pot's Cambodia.
If the minimum wage is raised, it usually affects the entry-level workers, young workers more than others. Most businesses will find a way to hire less employees. Also, if minimum wage increases greatly, then those in our society which are required to have an education, take enhancement and certification update education, such as teachers, would have a right to demand much higher pay. Most are underpaid at the present time, and much more so when and if the minimum wage is greatly increased.
A raise in minimum wage may help businesses, that is help them to move to China or southeast Asia.
For all you people that do not understand unintended consequences on this kind of stuff and raising the minimum wage this is what will happen. It will create better jobs for some. The people that repair and sell equipment that will replace people. Such as robotics and kiosk. This stuff work 24/7 are more reliable. More and more equipment don’t fail, they are replaced by obsolescence. Checks used to be processed on million-dollar check sorting machine. They are processed on your cell phone. Be prepared to have more jobs transferred to third world countries and get your meds from Medicaid
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A basic income policy can actually ensure a decent standard of living for everyone.
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