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Your Take: Should We Increase Minimum Wage?

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Minimum Wage SignIn President Obama’s State of the Union address last week, he talked about increasing minimum wage to $9 an hour over three phases. The last time minimum wage was increased was in 2009 (effective Jan 1, 2010) when it was bumped up to $7.25. Even bigger was the call to tie minimum wage to inflation, which is something we should do for everything (didn’t we learn anything from AMT and the million other non-inflation indexed numbers?).

I get the argument against raising minimum wage, it hurts job creation and increases costs. When you increase labor costs, businesses don’t hire as many people if they want to keep the same profit margins. You don’t automagically earn more when you add employees and you certainly don’t earn more when you simply up their pay. Business owners don’t like minimum wage increases because anyone earning minimum wage get’s a bump and it comes straight out of profits.

The problem is that minimum wage isn’t inflation adjusted. With every passing year, the minimum wage actually falls in terms of purchasing power. $7.25 in 2009 has the same purchasing power as $7.76 today. Go back farther and it’s even worse, that’s the painful magic of inflation.

What do you feel about minimum wage? Should it get increased or is it fine where it is? Or should it not even exist in the first place? Shouldn’t we let the markets determine what is a fair wage?

(Canadian! Photo Credit: mag3737)

{ 50 comments, please add your thoughts now! }

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50 Responses to “Your Take: Should We Increase Minimum Wage?”

  1. James says:

    I manage a small business and our payroll is “x” number of dollars and not a penny more. If I am forced to pay unskilled labor more I will be forced to cut workers hours while still demanding the same amount of production. Overall our expenses will not change.

  2. I agree with cubiclegeoff. Minimum wage should beadjusted to inflation. We get the whole point about companies forcing to cut off some people or freeze hiring ebucase they can’t afford to pay their employees. But you can’t deny that there’s too much of self-interest there.

  3. John says:

    We should focus on increasing our purchasing power. Technology keeps advancing, everyone’s got a PC, game console, TV, smartphone now. Unfortunately, healthcare, energy, food, keep rising. We need a revolution in those markets and people will be able to have more with less.

  4. xbalance says:

    I was listening to a podcast and learned that FDR almost implemented a maximum wage. He had propsed a 100% tax rate on all income over $25k per year, which the people on the podcast said was the equivalent of $350k per year today. The Republicans fought this and we ended up with a compromise, a 94% tax rate on income over $25k.

    The people who say that if the US implements a tax or other cost increase that they will slash labor are, IMO, overstating their knowledge of how even their own business would react. Much higher costs have existed in the past, and the US economy still grew.

  5. admiral58 says:

    I don’t think there should be any minimum wage. The pay should be based on the market.

  6. James says:

    One problem with setting an arbitrary minimum wage is it results in certain jobs no longer being worth paying someone to do.

    If a company has to pay an individual $9.00 per hour to produce work that only has $7.00 per hour of value, then either that individual won’t be hired or the value of the work produced is artificially raised to $9.00 per hour, and the company passes the difference in cost on to its consumers.

    …so you either end up with fewer people employed at the low income end of the spectrum, or you end up with the same number of people employed, but with no change in their overall purchasing power since products are now artificially more expensive.

    I would expect a bump in inflation due to any increase in minimum wage.

  7. Ray says:

    We need a minimum wage because in times of economic recessions the supply of labor is much higher than the demand for labor, thus businesses can take advantage of their workers while still producing the same output. If they choose to lay off some workers due to higher wages, then their total output will decrease accordingly.

  8. Bucksprout says:

    The minimum wage in San Jose, Calif. was just raised to $10/hr. A friend of mine also a small business owner is considering firing 2-3 of his employees because he doesn’t believe they are producing enough output to justify a $10/hr pay rate. An increase in minimum wage is good, it holds employees accountable and keeps up with inflation rates. If the cost for labor rises so should the output. Now the bigger question is other employees who already make $10/hr or more. What about the entry level account assistant who makes $15/hr? Is it just to ask for an increase because the minimum wage increased? Granted this employee is doing well at his/her position.

  9. stenz044 says:

    Minimum wage should be raised. My parents worked their way through college. I’m trying to work my way through college. I would have to work 37+ hour weeks every week just to pay for my tuition and fees. I didn’t even add taxes in this! This is not possible while going to school full-time! If minimum wage would be raised to $9 then it would cut the hours per week to 29. This is much more reasonable!

  10. John says:

    Indexing to inflation is ideal. Just need to figure out minimum purchasing power and BAM. Trouble comes with straight raising the minimum wage- won’t that just lead to inflation as it pumps more money into the economy without matching sinks?

    • John says:

      ….thereby pushing the purchasing power back down to wherever it started, eventually? (in theory)…

  11. Johnny says:

    I think it should be raised to $9 an hr. That would help a lot of low income families struggling to make ends meet.

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