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Wednesday, January 10, 2007

Minimum Wage

The House approved a minimum wage hike today. Now, just to get my cards on the table, I am a free market capitalist. A hard core free market capitalist, if the truth be told.

When proponents start spouting about how wonderful it is to increase wages of those at the bottom of the pay scale, I always say the following thing. "I agree. And I think there needs to be a specific minimum wage for accountants."

"What?" they invariably respond. "Accountants make much more than the minimum wage."

"Oh, I know, but I think we need a new, accountant minimum wage. I say $50,000 a year."

"You're whacked, lady."

"Well, yes, but why not? If we can mandate a mimimum wage for fast food workers, why not accountants?"

"Because fast food employees need more money to have a living wage."

"Accountants need a living wage too. They probably have student loans. Plus, what if they are married, with kids, living in an expensive area? They need guarenteed paychecks as well. Sure, some jobs labeled "accounting" aren't really CPA type jobs, but I don't want to leave those people out. I don't think $50,000 is too much to ask."

"The market and each accounts abilities determines their salaries--we don't need--"

And at that point I smile and say, "we don't need a minimum accountant wage because the market and their abilities determine their salaries? Shouldn't we allow the market and abilities determine everyone's wage? I can't hire you unless you bring me more money than it costs to employ you. Creating a minimum wage just means that if you aren't capable of bring me more than $7.25 an hour then I have to fire you. Sorry about that."

Reality is, very few people earn minimum wage. And most who do, only do so for a short time period. Most are young and do not need a true "living wage." Why? Mom and Dad are supporting the living. The worker is supporting music, a car, and good times with friends.

In my town, I doubt there are any jobs that pay the minimum wage. I see fast food restaurants advertising "Staring at $8.50 an hour." Why? Because that is what the market demands.

For an interesting article on the impact on the proposed wage increase, the Washington Post published an article titled Life at $7.25 an Hour that discusses some of the people who will be affected by the raise in the minimum wages. Regarding a store owner:
It's not that he's against raising the minimum wage -- "I don't think $5.15 is adequate," he said, adding that $7.25 seems fair -- but his profit margin is thin, and wages are his biggest controllable expense. So if wages go up, he said, hours will have to come down, and the question will become: Whose?

And a low paid employee:
At the register, meanwhile, Shannon Wilk, 33, who makes $6.25 an hour, said that of course she would like to earn more money. It would help her. It would help her 18-month-old daughter. "It would be good," she said, "but also, for me, I live in income-based housing, and if I get a raise, my rent would go up, and I would lose my assistance." Even the tiniest raise would affect her, she said, and with nowhere to go, the last thing she can afford is a raise to $7.25.


1 comment:

Mrs.Bart said...

You are 100% right; this is one of the many reasons I love your blog. When the minimum wage goes up, prices soon follow. Once the prices go up, non-minimum wage salaries need to increase. Basically, the minimum wage increase gives minimum wage earners a 2 week period with a bit more cash.

If minimum wage earners really want to make more, they need to do a couple of things. Work hard and be noticed. Whether they move into sales or simply get the opportunity to attend McDonald's University, good work is what will ultimately improve one's lot in life.