Tuesday, May 6, 2008

Greenspan's victory over the minimum wage (for AMERICAN BORN workers)

By 2007 Alan Greenspan got his wish: the minimum wage had disappeared via unindexed inflation -- for American born workers that is -- by that time it had been $5.15/hr for a decade. By 2007 virtually no American born workers would show up for said minimum wage (not in my personal observations of fast food workers in Chicago and SF anyway -- 300-400% turnover when airport security paid minimum wage).

$5.15 had become the Mexican and (in SF) Chinese born minimum wage.

Merely re-raising the minimum wage to the level at which some American workers begin to show up ($7.50/hr in my current home state of Illionis) will accomplish little more for low wage Americans than to make available more high turnover jobs they would be working somewhere anyway -- most of which jobs openings will therefore go on being filled mostly by (illegal?) foreign born workers.

To give low income American born workers a useful break in their currently unfettered labor market we really need to jump the minimum wage past FDR's $4.65/hr (w/no tax), past Eisenhower's $8.00/hr, past Nixon's $8.75/hr (done in one jump), all the way to LBJ's, 1968, $10/hr (today's 25 percentile American wage -- must mention at double LBJ's average income; mustn't be Malthusian).

A jump from $5.15/hr to $12.50/hr could plausibly pump over 400 billion dollars into the pockets of underpaid Americans: 30 million X $7,000/yr average (half) raise yields half that figure -- but I assume it would take reunionizing America to make said raise in which case I would guess pushing up other wages would double said effect (might in any case): median income ($17/hr) represents about half of average income ($33/hr = $14 trillion divided by 140 million workers, divided by 2/3 personal income component of GDP, divided by 2000 hours) which sounds to my admittedly non-scientific self like lots of headroom.

$400 billion would add all of 3.3% to the cost of output in a $14 trillion dollar economy -- and presumably as much or less to inflation: which should tell us how little money is involved. What is extreme is how desperately little money lowest end, deunionized American labor has been desperately taking home. (Today sector-wide collective bargaining is the only way to restore full bargaining power.)

Raising the minimum to $500/wk would bestow no rich bonanza on lower income Americans -- it would merely raise wages one increment beyond the very responsible minimum needs line (A.K.A., poverty line) drawn
in the 2002 book Raise the Floor .


Kevin Stanchfield said...

Minimum wage laws kill jobs. This is really econ 101. When the government forces a company to artificially raise it's wages, that company is forced to compensate by either raising prices, or cutting jobs. Either way, the poor take it in the pants.

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