This is NOT a column by Linda: I did explain in my first post, that I might post other things occasionally. This was a letter published in the Appleton, WI Post-Crescent Media, Jan 8, 2014. The author is my grandson.
Andrew Leat
It’s debated by politicians, dreaded by businesses and needed by impoverished citizens. It’s the minimum wage. With movement being made on the federal budget, and steps by both parties moving away from severe polarization of government, the minimum-wage issue is being pushed into the political limelight.
Setting a proper minimum wage that will both benefit laborers and firms is a fundamental problem in economics because it’s hard to find an equilibrium that will allow low-wage earners to live out of poverty yet won’t force employers to cut back on hours and workers.
If the minimum wage was adjusted for inflation, according to The Economist, it would be around $21 an hour. However, this figure doesn’t take into account that the price of basic necessities such as food has been substantially reduced by improvements in agriculture and technology since the first minimum wage was put in place. The figure of a $15 minimum wage is often tossed around, which is reasonable when all costs of living are accounted for.
Adversely, firms believe that more than doubling the minimum wage to $15 will cause widespread cuts in workers, in turn raising unemployment.
In some aspects, this is an accurate assumption. Small businesses with few workers may not be able to handle so a dramatic shock to their payroll. However, with the top 1 percent of America earning around 19 percent of the nation’s income, it’s feasible to believe larger corporations would be able to handle a higher minimum wage.
Both low income earners and firms present valid arguments to raise or, conversely, keep the minimum wage, which is why the issue often results in a stalemate. With the Federal Reserve tapering bond-buying and unemployment declining, the true question is not if America should raise its minimum wage, the question is how.
The problem with current wage law is it blankets all 50 states, creating a minimum wage that may be too high for some firms and too low for some workers. A smarter law would include factors on how the minimum wage is set according to business size, age of employee and average cost of living from state to state.
Bigger businesses able to handle a higher minimum wage would be inclined to pay that higher wage, without forcing smaller businesses to cut profits drastically or even go under.
The age of employee should be a heavier factor in deciding on a minimum wage. Generally, minors working low-paying jobs aren’t doing so on a need basis. Their incomes are, for the most part, expendable, and thus not a total necessity. Older workers could be compensated with a higher wage that would cover their costs of living.
Though some may argue this age rule may give employers incentive to strictly hire lower-age citizens, current child labor laws would prevent this from happening. The benchmark would be set at age 18. Then, the older workers’ wages would vary on factors such as number of dependent children. Any prejudice against workers with children could be easily spotted if a firm has a low number of employees with children. Providing incentive for firms to hire more workers with dependents may come from a tax credit for firms that hire such workers.
Lastly, costs of living vary so drastically, from the highest of the highs in California and New York to the lowest of the lows in North Dakota and Wyoming. Accordingly, a better minimum-wage law would adjust to such variations in the local consumer price indexes.
All these factors could be drawn up in a form that would be filled out upon hiring, similar to a W-4 or I-9.
The faulty minimum-wage system is a problem and, if not properly and carefully handled, it could become much worse.
President Ronald Reagan once said, “Status quo, you know, is Latin for ‘The mess we’re in.’”
Minimum wage is truly a mess because there seems to be no right answer. But implementing a different law, rather than a higher or lower wage, may be the first step toward greater economic prosperity.
— Miller Jozwiak is an Appleton resident and an Appleton North High School senior. He can be reached at pcletters@postcrescent.com
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