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Yesterday, commenting on the ongoing debate about an increase in the national minimum wage, I wrote, in part:

This is going to be an ongoing debate, and I suspect there won't be any sort of resolution before the November mid-term elections, and maybe not before the 2016 presidential elections.

Does an increase in revenue compensate for lost jobs? I'd like to think that if companies were making more money because of higher sales, they'd be able to higher more people even though the minimum wage is higher … but life doesn't always work out that way. Besides, it isn't that simple - health care issues also are having an impact on hiring (whether or not it should - I found Michael Sansolo's column about this issue last week to be very persuasive), as is the broader trend toward a tech-driven efficient marketplace in which there may just be fewer traditional jobs.

In the end, what worries me is the disconnect between people at the top of companies and the people on the front lines. The people at the top often are rewarded for eliminating people and paying people as little as they can get away with, and those rewards come in the form of big salaries and big bonuses. I'm no economist, but that doesn't strike me as a sustainable long-term economic/social/cultural model.

It is more likely a recipe for disaster. Again, I'm not sure that a simple increase in the minimum wage is enough to solve the problem … it may well just be a band-aid that only momentarily (like through the next election cycle) covers up a more systemic and serious economic problem.


MNB reader Tom Raterman wrote:

You described, so well, a core problem facing all people in America.  As an older, unemployed person looking for a job, I am a bit more sensitive to many issues dealing with unemployment and related economic problems.  I don’t have the answers either.  But I am saving your words below, as a personal challenge, to stay focused on helping myself and others get out of this systemic and economic mess.

Another MNB reader responded:

I heard an statistic recently that the minimum wage is only earned by 1.6% of the workforce and that increasing the minimum wage is equivalent to a wage redistribution among the poor where some poor people will make more while others will lose their jobs and eventually inflation will rise to the benefit of neither.  Interesting take on the debate and one I mostly agree with.
 
Another way of looking at this minimum wage theory is to consider it valid.  Those in favor say that $15 an hour minimum wage is good for the worker and the country. So why stop there?, take it up to $20, but why stop there?  Why not $30 or $50 an hour?  I think you’re getting my point.  But isn’t that what they are arguing?  People wanting to see the minimum wage increased need to ask themselves at what point, at what threshold does the argument become invalid?  Entry level positions lead to advancement and I worry about how many of those opportunities will disappear for hard working folks looking for a way to get in to a company in order to get ahead.  Plus companies will compensate, how many white collar jobs or mid-level managers are going to get axed?  If you think that since you don’t make a minimum wage you won’t be affected your nuts!
 
I’m sorry but I was taught the way out of poverty was education not Uncle Sam.  Money spent on our education system and tackling graduation rates would be a much better discussion that would lead to even greater results.  The question shouldn’t be why people are making so little but why are so many so ill prepared for the workforce.  People succeed in bad situations all the time but only when they choose to.  Whether it’s bad schools, single households, low motivation or societal, or all of the above, that’s what needs fixing if there’s ever going to be a time when companies want to hire more Americans.
 
Incidentally it wasn’t that long ago I was earning $10 an hour as a store-level department manager for a local grocery chain.  I never worked so hard for so little but it was by choice.  And I left to pursue other opportunities that have paid off very well for me, in part because I had that $10 an hour job because I learned a ton working there that no amount  of book knowledge can teach.


From MNB reader Bryan Nichols:

I am not necessarily for or against an increase in the minimum wage—I can see the pros and cons—but the issue I recall from working in retail during past increases in the minimum wage is that many hourly employees near or over the new minimum wage expected (often demanded) a similar increase, creating a lot of disgruntled employees who believed many of his or her coworkers received a wage increase they had not earned.  The problem was not so much the effects of the minimum wage increase as the upward pressure on all wages.  The simple fact is that most companies measure wages as a percent of sales, and when wages go up without an increase in sales or productivity companies must rework the economics of the business—and that often means fewer jobs and fewer hours for employees—resulting in poorer service or quality—and the downward spiral  begins.

From another reader:

What about those of us that started at minimum wage and worked their way up through perseverance and hard work?  Taking on extra shifts, never calling in sick, having open availability?  Do we automatically get a raise as well?  Living in the Pacific Northwest, where we already have the highest minimum wage in the country, we have already had one town institute a $15.00 minimum wage and the mayor of our major city promises the same.  As a victim of the rapidly changing economy and retail landscape I have had to start over a few times as business has changed (my early career was in the retail music business which is now non-existent) .  I am the single wage earner in my household and while I am not currently struggling, if the $15.00 minimum wage passes I can see what little security I have developed being eroded away as prices skyrocket.  The money for these higher wages had to come from somewhere and we all know that the large corporations are not going allow the higher wages to eat into their profits and huge bonuses and are most likely going to raise prices and lay-off employees.  I certainly don’t know what the answers are, I sympathize with these people trying to support their families on minimum wage jobs and having to work numerous jobs just to survive and I do have friends that are currently working two jobs to pay the bills and we are in the same age range as you.  Raising the minimum wage is truly nothing more than a band-aid to a truly dysfunctional economic system.

And from another:

The argument that we would lose jobs if the minimum wage was increased puzzles me.  This supposes that existing companies are over staffed now.  My experience is that companies only hire the employees they need.  We might see costs increase to cover the increased labor costs but how can a business that is already minimally staffed expect to suddenly decrease their FTE’s and still handle the business they are doing now.  I don’t see people stopping their purchasing habits.  The end result may be a little inflation which generally is good for business.

MNB user Michael Phelan wrote:

The complaints from some about the possibility of lower wage earners choosing to work fewer hours if healthcare becomes more affordable demonstrate a lack of knowledge about how Americans and American families are getting by these days.
 
If the boot were on the other foot and a wealthy person decided to not do as much consulting work because they happened to receive an investment windfall, there wouldn’t be an argument.
 
For many in the middle class and working poor, the new healthcare law is just that windfall.  If they want to reduce their childcare expenses or spend more time with their family or return to school instead of working that second (or third) job, who are we to judge them? 
 
Why has beating up on poor people become a blood sport in this country?


From another reader:

I think you nailed it with you comment about the disparity between workers and those at the top.
 
We have a great and growing problem in this country that a shrinking middle class is struggling to tread water, while a working class no longer sees a realistic prospect of earning a comfortable living or getting ahead through hard work. The Democratic response is incomplete, lacks anything new, and is not likely to have much effect. The Republican response it to oppose the Democrats and ignore the problem, while calling for additional deregulation and tax cuts for the wealthy. It is not only the economy that is broken.


And another:

On the minimum wage debate. I agree that it would be great if there was more alignment between higher salaries/bonuses for execs and the pay of their workers. But that discussion is a waste of time. The amount of $ expended for exec pay for a large company is negligible when spread across the rank and file.
 
Your comment “Does an increase in revenue compensate for lost jobs? I'd like to think that if companies were making more money because of higher sales, they'd be able to higher more people even though the minimum wage is higher.” … Why would a for-profit company plow all revenue gains back into workers’ pay? That’s not the capitalistic model. There is no guarantee or in fact likelihood that companies would achieve higher sales from people who get the higher minimum wage. In fact, it’s more likely that  an increase in the minimum wage would lead to reductions in the work force in companies big and small. The math just doesn’t work!
 
We need jobs spawned from a robust economy and this will ultimately come from private enterprise creating them, not government intervention. Government does not have a great track record in running much of anything. Why would we want government to establish the rules for how companies pay employees? Not sure our founders would approve…..


I'm not saying that company should invest all revenue gains into employee pay. But a company that does not feel the ethical responsibility to invest at least a percentage of those gains into wages for people on the front lines, as opposed to the salaries of the people in the executive suite, strikes me as one that is ethically lacking and strategically misguided.

Clearly, there are a lot of divergent opinions here. And as I said, I'm not entirely persuaded that a minimum wage increase is anything other than a band-aid, though sometimes you need a band-aid to stop the bleeding whole considering what to do next.

One thing I would argue with, however, is the notion that we cannot increase the minimum wage because the people now working for us started at a lower minimum wage; sometimes, this gets translated into "I didn't make that kind of money when I started, so why should they?"

Which strikes me as nonsense. The world changes, and it strikes me that the rules have to change to keep up. When I started working in retail stores, I made $1.45 an hour - the minimum wage - and slowly worked my way through private high school and college, paying every penny of my tuitions. But I could do that, because my high school tuition was about $600 a year and college tuition was just a few thousand dollars and I bought my first car for under a grand. Clearly, times have changed.

People who work hard and full-time, and most people do, ought to be able to support themselves and their families on those wages. I find it fascinating when the people who say they put a high premium on hard work don't seem to put as high a value on front lines people being rewarded for that work.
KC's View: