Tuesday, September 2, 2014

On Raising the Mimimum Wage

On Labor Day (September 1st 2014), President Obama called on the U.S. Congress to raise the minimum wage in our country.  I believe this is the right thing to do.  First, I believe this is in line with the teachings of the Roman Catholic Church on just wages and benefits for workers.  Fiscal conservatives will (hands down) always win the economic argument of why we shouldn’t raise the minimum wage, and fiscal liberals will (hands down) always win the moral argument of why we should raise the minimum wage.  As a Christian I believe that paying just and fair wages is more of a moral than an economic argument.  Of course, we have to be fair with employers too, so striking a balance is important in coming to a reasonable compromise.

Second, the minimum wage has not kept pace with the cost of living.  I believe the Congress should consider indexing the minimum wage to the cost of living just as they do with Social Security.  This way it’s not such of a political fight every time our Congress considers it.  Back in the 1970s when I was earning the minimum wage of around $3.00 per hour, my wages went a lot further than they would now.  In terms of buying power, $3.00 back then would equal about $11.00 today.  Of course there are places like California and the Northeast where the cost of living is much higher than the national average. (The cost of living in San Diego for example is about 30% higher than the national average.)  In these cases, each state could make adjustments accordingly.

Third, I believe the cost of goods and services won’t dramatically increase.  Opponents say that raising the minimum wage will raise the cost of goods and services.  That may be partially true; however, a business cannot charge more than consumers are willing and able to pay for those goods and services.  If the cost of a McDonald’s quarter-pounder goes from $3.00 to $8.00, consumers will choose not to buy it.  They’ll shop around for other food choices and McDonalds will be forced to lower their price to a point consumers are willing and able to pay (maybe around $3.50).  The reality is the profit margins for businesses will decline, but they'll still make money (just not as much as they'd like to).  In a previous blog, my writing partner Allen Laudenslager and I showed that the reason Apple manufactures their iPads in China rather than the U.S. is because their gross profit margins would shrink from 80% to 20%.  When businesses use these scare tactics with consumers, they're being disingenuous and covertly greedy.

Fourth, I believe that raising the minimum wage will put upward pressure on all wages and ultimately stimulate the economy.  The sad reality is that everyone’s wages have been stagnating for years as corporations are recording record profits and sitting on mountains of cash.  Everyone has been adversely affected by the economic downturn which started in 2008.  Raising the minimum wage would prime the economic pump of our economy.  Inflation, is always a concern for any economy, but so is deflation.  Ironically, the cost of goods and services have been increasing while wages have simultaneously been decreasing.  Go figure?

Finally, there are people I admire and respect who may disagree with raising the minimum wage.  I believe most fiscal conservatives care about the downtrodden of our country too, they just want to solve the problem in a different way than fiscal liberals do.  So let's debate and discuss this issue and solve this problem together.

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