Minimum Wage: When Less Is More

We would all love a chance at more money. Money enables us to buy many nice things, and go where we want, when we want.

Especially where I work and train at Job Corps, where despite the fact that we each are valued at a $30,000-$40,000 investment, the amount of money we take away at the pay line every other Tuesday is very small (well below the federal minimum wage– typically a senior student like me, grandfathered in on the old training pay plan, makes $0.53 per hour). Small wonder then, that there is significant clamor for national minimum wage reform, with calls to increase it to $22.62 per hour– which is honestly where it should have wound up anyway as the cost of living went up since minimum wage was first enacted. There’s a lot of money circling around out there, and we each want to know how we can get more of it.

Except that minimum wage increases is a short term band-aid on a long term problem. Raising minimum wage, and then patting ourselves on the back for a job well done, would be the ruin of anyone currently seeking an entry level job, and would wind you up with less money, not more.

Wait, what?

I mean it when I say it. Minimum wage exists in a very funky zone. The rules as you think they exist don’t often apply. They rank more in the territory of “helpful suggestions” than anything else.

Some history: the first attempts at minimum wage standards were begun on a State level in 1912, but these were each ruled unconstitutional by the United States Supreme Court on the grounds that they “restricted a worker’s rights to set the price for his own labor”. The result was that greedy corporations were free to exploit their workers during the Great Depression, when the massive demand for jobs meant that employers were able to pay workers mere pennies, and sometimes only a dollar or so, per day for potentially life threatening work. With no deterrent to such activities, workers could only accept their employer’s word that they should be grateful to be paid at all, and starve, or resign… and starve even faster.

Eventually, the problem came to a head. As the Supreme Court had ruled each individual state-held initiative to establish a minimum wage unconstitutional years before, the States had been left powerless to effect reform. Enter Franklin Delano Roosevelt.

The federal minimum wage was first instituted in 1938 under President Franklin D. Roosevelt’s administration, as part of the Fair Labor Standards Act (FSLA). The law was meant to be a protective measure, to shield hard-working citizens from the worst of the Great Depression, and to prevent them from being exploited as they had been. The very first federal minimum wage was set at 25 cents per hour in order to provide a “minimum standard of living necessary for health, efficiency, and general well-being, without substantially curtailing employment” (emphasis mine).

Current minimum wage law puts us at $7.25 an hour.

A higher minimum wage would be a great and fine thing, if nothing else changed when we raised it, but this is not a perfect world as featured in a Walgreen’s tv advertisment.

As it stands, the economy is predicated on minimum wage remaining the way it is right now. A status quo stands for a reason, and everything is connected. The current federal wage reform debate calls for raising the minimum wage from $7.25 per hour to $22.62 per hour, nearly tripling the existing wages as required by federal law.

So what’s the problem? That means we get triple the pay!

Except where does that money come from? It comes from employers, who must make a profit. If they are suddenly required to pay three times as much per worker, they will cut employees to cut costs to their businesses and maintain their profit margins. If they don’t, then expenses will be cut elsewhere: quality of products (made with cheaper materials), less profitable store locations (which may be closer to customers, forcing them to drive further), reducing the number of products manufactured or sold (creating product shortages), and prices would soar.

When each worker suddenly is required by law to be paid the same wages as 3 people, employers, especially small businesses, will be forced to cut something, and that something is usually a someone. The smallest businesses, such as locally owned used bookstores, will likely fold and go under soon after such regulations are passed, having nowhere near enough income to pay for the new wages and keep enough employees to remain functional. Larger and more wealthy businesses will simply move more American jobs to other countries with labor laws more friendly to their bottom lines, like India and China, and in so doing will entirely avoid paying the higher wages required for hiring Americans.

Here, we find the fine point of it: the people who remain employed will find themselves with more money when their checks come rolling in. For the unemployed, getting entry level employment would become even harder, as finding an employer who is willing to pay over 22 dollars an hour on an untried and untested teenager or long-time unemployed citizen will be comparatively few. If you have a job if/when this is enacted, you are immediately at risk for termination the moment your employer has any reason to doubt your value to the company. And the “One Percenters” would still walk away with most of their wealth intact.

A tripled minimum wage would in fact create conditions that are in stark contrast with the original goals of the minimum wage, as it would most definitely curtail employment opportunities nationwide, raise prices on goods and services, and possibly lead into other serious issues on a potentially global scale in short order– America is not an economic island, and what goes on here directly affects the entire world.

We would have more money in the very shortest immediate terms, but a tripled minimum wage, without a larger and more revitalized American national economy, would be economic suicide in the long run.

So there’s a lot of money circling around out there; how do we get more of it?

While wage reform is an important issue, attention has been unfairly aimed by both proponents and detractors alike at raising the wage all at once to triple the current amount. A “rolling update”–raising the national minimum wage by 25 cents to a dollar each year for ten to fifteen years to account for increased productivity and costs of living– as favored by Senator Elizabeth Warren (Dem., Massachusetts) would be a much less catastrophic way to ease the American economy into this, give it chances to grow and strengthen, and adapt to the new wages without causing a crisis like the one inferred above.

That’s all well and good for future-us ten years down the line, maybe? But what about now? We all need more money NOW!

Well, there’s an answer to that too. It’s called not waiting around for these laws to bail you out, being proactive, getting a proper career education, going to college, getting your degree, and getting out there in the workforce.

In short, you get your $22.62 an hour by working hard for and then earning it.

That’s what capitalism has always been about: prove your value first, and then earn it. May the best workers win.


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