Living Wage

Everyone should earn a Living Wage. But that’s not the same as mandating a minimum wage.

The minimum wage is a tax. It’s a tax that targets businesses most frequented by the poor (and near poor), both as workers and as customers. Microsoft and Apple Computer do not pay this tax.

And it’s a pernicious tax in that the more substitutes I can find for low-skilled labor the less I pay.

The Poor end up shouldering the bulk of this tax in the form of the higher prices they pay for the goods they buy, and in fewer choices for entry-level, low-skilled jobs.

You ever notice the first stores to close in a retail chain consolidation are those in poor neighborhoods?

Instead of the minimum wage, spread the cost of providing a Living Wage across the entire economy. If you’re a U.S. citizen and work 40 hours a week, in full- or part-time jobs, we as a nation make you whole up to a Living Wage.

Contents

  1. Living Wage
  2. The Looters
  3. The Work America Program
  4. The Looters’ Response
  5. Response to the Response
  6. Conclusion

The Looters

Instead of just agreeing with the need for a living wage, self-serving politicians and their labor-union backers[1] push an agenda of income inequality and outrage at corporate welfare.

The Waltons have their billions because they stole money off the backs of sweatshop labor in their stores. If the government didn’t subsidize labor with food stamps and other handouts the Waltons wouldn’t have had the labor they exploited to amass their fortune.

We want that money back!

Facts don’t matter. Politicians know low-information voters are motivated by envy and charges of unfair advantage for the rich. It’s more lucrative politically to target Walmart.

Voters are attracted to the simplicity of a higher minimum wage and are unable to see the hand giving is the one taking away.[2] Minimum wage “appears” to claim the moral high ground.

Politicians take credit for the lucky few who end up with higher wages. They are quick to blame subsequent unemployment and higher prices on those greedy capitalists.

The Work America Program

Instead I advocate the Work America Program, a replacement for the Earned Income Tax Credit (EITC). Work America rewards low-wage workers who put in 40 hours a week by adding bonuses directly to their paychecks. We’re internet connected and can validate and approve these bonuses no matter how many jobs it takes to reach 40 hours a week.[3]

Under Work America employees see the same amount on their paychecks as with a higher minimum wage. And it’s better than EITC for their self-esteem in that they receive a paycheck that looks more like earnings and less like a handout.

Under Work America we repurpose the minimum wage as a floor beneath which employers can’t fall, not the height to which wages can rise. The minimum wage now signals to business “no product or service which depends on paying less than this wage has any right to be supplied from within this country. Automate it, import it or forget it.”[4] The minimum wage does not signal to the employee this is the amount you should earn.

The minimum wage is kept low ($5 per hour) to allow businesses to retain and grow entry level and low-skilled labor, and to make available low-cost goods and services for the poor.

Don’t think Walmart. Think Dollar General or ALDI.

The Looters’ Response

I can’t raise taxes to pay for Work America so raising the minimum wage is my next best bet. It’s a free lunch. My job as a politician is to get things done. Beneficiaries and donors will remember me come the next election.

I can muster countless studies showing the collateral damage from raising the minimum wage will be slight. My lapdogs at the progressive think tanks will pump out reams of data and give countless talks in support of my position.[5]

Greedy Capitalists now paying the minimum wage will pay even less under Work America relying on the government to make up the difference.

Work America? What’s in it for me?

Response to the Response

Only ~15% of the 3.5 – 5.0 million workers on today’s minimum wage come from poverty-level households. It’s even fewer when you exclude non-citizens. Add to that any costs for today’s unemployed who will move into the labor force under Work America.[6] Helping the poor with this program is chump change.

If heads-of-household are so unskilled they must settle for the minimum wage then we as a nation have let them down with our crappy educational system.[7] We as a nation must subsidize their graduation into the job market.

We want Greedy Capitalists to pay less for low-skilled labor; to feel more comfortable when they hire and less ready to lay off or to close stores when times are bad. By god! Pay the lower minimum wage and give more overtime.

We want even more to take the pressure off local politicians who often feel compelled to raise the local minimum wage. They crush the unskilled workers who often have little or no means to escape their disadvantages by voting with their feet. Local politicians will be able to point to Work America as their morally defensible backstop: raising the local minimum wage will not increase take-home pay for the poor.

Conclusion

At $5 per hour I might be willing to mentor an unskilled worker. At $15 per hour gentrification kicks in.[8] Less care and feeding of new employees. At $5 you’re an apprentice. At $15 you’re a carefully monitored cost.

Unlike automation, imports, outsourcing, and other job-killing substitutes, raising the minimum wage shuts down low-skill employment opportunities across all industries, both present and future. It’s the unskilled worker who suffers the most under a high minimum wage. Nothing dramatic. But they steadily find themselves having fewer job opportunities and having to get by with fewer or lower quality goods. Life just seems to get more desperate.

A compassionate nation wants all its citizens to have an abundance of choice when it comes to employment. Forget about the “appearance” of subsidizing low-margin businesses. I’d rather subsidize and put unskilled labor to work than to have them sit on their asses.[9]

Under Work America we provide a solution where employers can take a chance on an unskilled worker, and yet the worker doesn’t realize their worst fears by dint of not having enough money to handle the day-to-day setbacks we all suffer.

Keep starting wages low for the employer and give the employee a chance to earn the trust that allows them to outgrow the need for Living Wage subsidies.

And who’s to say which low-wage startup might become the next Microsoft or Apple?


1. Labor union pay scales can be tied to the minimum wage.

 

2. Can we find isolated instances where mandated higher wages did not end up in fewer jobs, jobs not created, or higher prices? Sure. The economy goes up, the economy goes down. There are so many influences on labor markets and prices that cause and effect are often difficult to disentangle. But I believe a very high burden of proof rests on those wanting to concentrate all the taxes for a living wage on businesses most frequented by the working poor.

 

3. Subsidies are given for less than 40 hours, but they ratchet up significantly as you climb toward 40 hours. Subsidies are calculated in a way that employees who receive raises or move up the pay scale still feel those rewards. There are no penalties for working more than 40 hours a week. The goal is to subsidize households living near the poverty line up to a Living Wage as a reward for having one family member putting in a 40 hour work week.

 

4. I’m repurposing FDR’s oft quoted minimum wage pronouncement. Do we really want Big Government to decide which business should be allowed to operate in the U.S. based on wage rates? No. But as a political concession a wage floor blunts charges of corporate welfarism. We guard against the bad publicity of those few employers who put relatives on the payroll to trigger the subsidies.

 

5. One of the progressive’s favorites, The Card, Krueger study  study? purports to show moderate wage increases would not reduce employment levels (in the fast food industry). The study was disingenuous in that it ignored a significant geological barrier (the Delaware River) between its comparator sites in NJ and PA. It included all businesses, not just those predominately paying the minimum wage. It looked at employment during an economic boom, etc. When it comes to these studies each side gets the conclusion it pays for.

 

6. National wealth grows only as productivity grows, with labor as a key part of productivity. Incentivizing labor not to look for work (i.e., incentivizing employers not to look for employees) reduces national wealth, lowering funds for the environment, education, disease monitoring, infrastructure, etc. We want employers to ‘sweep the streets’ looking for labor, even to the extent of standing outside correctional facilities for work-release candidates. There should be no excuse for any teenager not wanting or having a job.

 

7. Sister Helen Prejean, author of “Dead Man Walking”, tells how in New Orleans she met a young man seeking to take the high school equivalency test. “How many years did you complete?” “I dropped out as a Junior.” “Great! We only have one year to make up.” Later it was found the young man could only read at a third grade level. The education system had shuffled him from grade-to-grade without regard for his future employment needs. As one who shops at the same stores as the poor, I can tell you many employees have similar educational faults.

 

8. Gentrification refers to semi-retired experienced labor getting lured back into the market to the detriment of entry-level, low-skilled labor. Experience drives out the inexperienced. Then there are cheap illegal aliens. Automation becomes more cost-effective. There’s contract labor. There’s outsourcing. Zero hour contracts. Prohibiting overtime. There are endless avenues for labor substitution all of which are unattractive for the working poor: JCPenney takes emergency measures to protect bottom line.

 

9. Don’t dismiss the many additional costs to employers from hiring unskilled workers.
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