One of the biggest financial news item for today was the Congressional Budget Office's release of employment forecasting numbers, which focused on the impact
a proposed hike in the minimum wage would incur on the labor market. It was stated that a $10.10 minimum wage would allow 16.5 million workers to have higher wages but at the expense of 500,000 jobs. Curiously, a $9.00 minimum wage, an -11% reduction, would only cost 100,000 jobs, or an 80% positive impact. The math could be excused, I suppose, since the CBO admitted to using a controversial methodology that incorporated assumptions over hard quantification into their forecasting model. As reported by CNBC, the margin of error was extremely wide, between zero and a million.
The minimum wage debate of course has been roaring for quite some time now,
exacerbated by select controversies such as McDonald's patronizing remarks to
its low-wage workers that suggested returning gifts for cash and eating less,
amongst several other hot tips. At the heart of the debate is the concept of
whether people should have a right to maintain a minimum lifestyle through
working in non-skilled manual labor positions : the proponents of the minimum
wage (usually the non-skilled workers themselves) say that they cannot move
ahead in life and stay afloat of current liabilities without an increase in
wages. The opponents (the rest of us) say that increased wages increases costs
for businesses, resulting in both lower job opportunities and higher consumer
prices.
What are they complaining about? The federal minimum wage was increased from
$4.75 in 1996, during the hey day of the American economy, to $7.25 in 2009,
amidst the greatest crisis in modern financial history. This is nearly a 41%
increase, essentially a 3% annual raise for doing nothing other than receiving a
decree by fiat. Government always rewards mediocrity but that's a different
story for another day.
It is true that the minimum wage, as an entity unto itself, is in a pretty
plum position. It always receives public attention, has powerful friends and
even more powerful sentiment leverage (the classic proletariat struggle). This
all leads us to one conclusion : the minimum wage can only go up. No
presidential administration has the willpower, nor the clout, to reduce
wages. At best, capitulation in the form of the status quo is the most we
would ever see in terms of contrarianism.
But why couldn't the minimum wage be reduced? This is the missing key to the
debate : so long as the entire nation is embroiled in a bifurcated battle, the
puppeteer that controls the framework of the discussion is hidden in plain
sight. While the 41% increase in the minimum wage from 1996 to 2009 is
mathematically valid, using 1996 dollars, the value of the minimum wage has only
increased a pathetic 11.5%. The classic divergence, get people to look one way
to disguise the truth in the other, is clearly evident.
The reality is that the federal minimum wage would need to be increased to
$15 just for non-skilled laborers to maintain the lowest threshold of the
American lifestyle, which includes calories, a used car, and an apartment in a
sketchy part of town. There would be very little room for medical expenses,
other insurance fees, and a sliver of discretionary funds. Retirement and
college tuition for the kids? Fuggedabout it!
The general question is, aren't we all victims of inflation, which amounts to
usury by the Federal Reserve? How many middle-class Americans truly feel better
off now than they were even a few years ago? We're an optimistic bunch, that is
for sure, but even a Tony Robbins session won't mitigate the hidden (ignored?)
damage that was done to millions of portfolios over the last decade.
Even though the direct means and the specific dialogue are different, the
struggle regarding the minimum wage is our struggle. You just need to peek
behind the door to see it.
a proposed hike in the minimum wage would incur on the labor market. It was stated that a $10.10 minimum wage would allow 16.5 million workers to have higher wages but at the expense of 500,000 jobs. Curiously, a $9.00 minimum wage, an -11% reduction, would only cost 100,000 jobs, or an 80% positive impact. The math could be excused, I suppose, since the CBO admitted to using a controversial methodology that incorporated assumptions over hard quantification into their forecasting model. As reported by CNBC, the margin of error was extremely wide, between zero and a million.
The minimum wage debate of course has been roaring for quite some time now,
exacerbated by select controversies such as McDonald's patronizing remarks to
its low-wage workers that suggested returning gifts for cash and eating less,
amongst several other hot tips. At the heart of the debate is the concept of
whether people should have a right to maintain a minimum lifestyle through
working in non-skilled manual labor positions : the proponents of the minimum
wage (usually the non-skilled workers themselves) say that they cannot move
ahead in life and stay afloat of current liabilities without an increase in
wages. The opponents (the rest of us) say that increased wages increases costs
for businesses, resulting in both lower job opportunities and higher consumer
prices.
What are they complaining about? The federal minimum wage was increased from
$4.75 in 1996, during the hey day of the American economy, to $7.25 in 2009,
amidst the greatest crisis in modern financial history. This is nearly a 41%
increase, essentially a 3% annual raise for doing nothing other than receiving a
decree by fiat. Government always rewards mediocrity but that's a different
story for another day.
It is true that the minimum wage, as an entity unto itself, is in a pretty
plum position. It always receives public attention, has powerful friends and
even more powerful sentiment leverage (the classic proletariat struggle). This
all leads us to one conclusion : the minimum wage can only go up. No
presidential administration has the willpower, nor the clout, to reduce
wages. At best, capitulation in the form of the status quo is the most we
would ever see in terms of contrarianism.
But why couldn't the minimum wage be reduced? This is the missing key to the
debate : so long as the entire nation is embroiled in a bifurcated battle, the
puppeteer that controls the framework of the discussion is hidden in plain
sight. While the 41% increase in the minimum wage from 1996 to 2009 is
mathematically valid, using 1996 dollars, the value of the minimum wage has only
increased a pathetic 11.5%. The classic divergence, get people to look one way
to disguise the truth in the other, is clearly evident.
The reality is that the federal minimum wage would need to be increased to
$15 just for non-skilled laborers to maintain the lowest threshold of the
American lifestyle, which includes calories, a used car, and an apartment in a
sketchy part of town. There would be very little room for medical expenses,
other insurance fees, and a sliver of discretionary funds. Retirement and
college tuition for the kids? Fuggedabout it!
The general question is, aren't we all victims of inflation, which amounts to
usury by the Federal Reserve? How many middle-class Americans truly feel better
off now than they were even a few years ago? We're an optimistic bunch, that is
for sure, but even a Tony Robbins session won't mitigate the hidden (ignored?)
damage that was done to millions of portfolios over the last decade.
Even though the direct means and the specific dialogue are different, the
struggle regarding the minimum wage is our struggle. You just need to peek
behind the door to see it.
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