Curmudgeon's Corner

The Minimum Wage Discussion

Posted by Al Campbell on Feb. 16, 2013

U.S., Political, Economy, Taxes, Quality of Life

The perennial discussion about the minimum wage has been rekindled with the State of the Union address by President Obama.  He has proposed that the minimum wage be raised from the current $7.25 per hour in Wisconsin to $9.00 per hour by the end of 2015.

The Republicans have, for the most part, been opposed to such suggestions indicating they believe such an increase will actually backfire by causing job loss.  The Democrats have, for the most part, favored the increase which would play to Hispanics and females since those two groups make up a significant portion of minimum wage workers.

The Fair Labor Standards Act in 1938 established the Federal minimum wage to be $0.25 per hour as the country worked out of the recession woes it had experience during that decade.

If a person worked fulltime at the Wisconsin minimum wage today, that would generate a total of $15,080 in a year.  At the proposed new $9.00 level, that fulltime worker would earn $18,720 in a year.  Both of those amounts are below the poverty level.  I tend to think of minimum wage jobs as being part-time positions and being filled by students and spouses who have time available during the day.  I do not think of minimum wage jobs being filled by the primary breadwinner in families much less in families with children.  That may not be correct today and I admit my opinion in this was formed a long time ago.

An earlier analysis of the effects of a minimum wage of $9.80 implemented in full by 2014 suggested that fully 70% of all working families would be in income brackets (see below) that would be affected by the minimum wage standards.

If this is still reasonably accurate, and if it was reasonably accurate when developed a couple of years ago, the minimum wage increase would have a significant impact on those who are in the income groups from less than $20,000 annually to $59,999 annually and on a significant portion of our population.

Given the apparent impact, it strikes me that this is too important an issue to simply be used in the typical political gristmill.  Such a change would have significant impact.  If it resulted in fewer jobs as some say, that would hit a large group of people, including non-citizens as well as citizens.  If this change were to be enacted, it seems that it would have to have an upward effect on inflation.  If there were to be an automatic annual inflation factor made permanent in such legislation, there would be both good and bad results.  The people affected, and continuing to be employed, would be favorably impacted while those affected and becoming unemployed as the result would be greatly harmed.

Maybe the Congressional Budget Office (CBO) would have the ability to render an opinion of the likely results of such a change.  It should be given this charge if we are serious about such change and if this is not simply a political exercise.

Frankly, this coupled with the added costs we will bear as the result of PPACA (a/k/a ObamaCare) over the next several years could over-burden our economy.

And, this is a relatively small segment of the Administration's vision of the future being espoused today.  We do not, I fear, have the economic wherewithal to do everything that some would like to see occur.  If we overstep our capacity, no matter how great and just the thoughts might be, we will risk plunging the country into an economic abyss.