Kathy Petersen’s Blog

Minimum Wage

Posted in frugal by Kathy on January 1, 2010

If increasing the minimum wage is always such a good idea and helps those who most need it, why not raise the minimum wage to $100/hr?

The obvious answer is that the price of everything will increase astronomically, and those making minimum wage will *still* be making minimum wage, and will *still* be at the bottom and will be the *worst* hit of all workers as price escalate exponentially, since employers will have to dramatically raise the cost of everything to pay their employees.

Are minimum-wage earners *really* better off now that the federal minimum wage is $7.25, as opposed to when it was $3.30 when I was first working? If so, how? If so, why do they need yet another increase? — shouldn’t they be twice as well off, since they’re making twice as much money?

“Oh, but think about inflation!” you may say. Yeah, that’s *exactly* what I’m thinking about — raising minimum wages makes everything cost more, as companies have to charge more for their goods and services in order to pay their employees the higher minimum wages and/or the higher non-minimum wages and salaries that are actually or tacitly tied to the minimum wage. “A rising tide lifts all boats,” but a rising minimum wage lifts all prices. And hits those hardest who are at the bottom, since they pay the largest percentage of their income on necessities.

Colorado recently lowered its minimum wage, by 3 cents per hour, which of course does add up — to about $60 per year, if you’re working 40 hours a week. What does $60 per year buy these days? Are there ways to cut back and save $60 over the course of the year? For almost every single person in America — you bet! If you’re having trouble figuring how to do that, take a look at The Complete Tightwad Gazette (or any of the single three volumes, because it might actually be cheaper to buy them separately than together, depending on who is selling them and at what price). Actually, if your first impulse is to buy the book, that may be an indication of your first problem — check your library out first! Then your local thrift store or used book store — save shipping, and you may find it cheaper there. Amazon is selling used CTGs starting at $14, and then you have to pay shipping as well; I found my used copy at a thrift store several years ago for $5. Granted it will be worth whatever you pay for it, if you put it to use, but why spend money you don’t have to?

In the Colorado article, a man is quoted, reminiscing about when he made minimum wage, “You’d… have enough money to go catch a poker game or take your girl out to a dinner.” Surely cutting out those things a few times a year or even entirely would save $60. Most people probably spend over $60 a month on their cell phone bill and could probably cut that down, if they had to (things like dropping unlimited texting, reducing your cell-phone minutes, disconnecting your internet capabilities, etc.). Not that I’m against cell phones — my husband and I have the minimum cell-phone plan our carrier offers, and it’s right at $70 a month including all taxes and fees, but we don’t have a house phone at all, and we figure this is the cheapest way for us. Downgrading your internet package or entirely eliminating your cable plan would also likely add up to more than $60 per year — we’re talking about $5 a month, which I daresay that most people spend more than that on soft drinks and candy. We don’t have a TV at all, so our “cable bill” is our internet bill. My husband plays online games with his brothers, so he insists on having the highest-speed internet, which is about $60 a month for us. We could pay half that and still have a decent internet connection and still be pampered.

But the thing to keep in mind, is that for the most part, we’re not talking about people struggling to make it, whose only source of income is minimum wage. By and large, people who make minimum wage are teenagers — they live at home, and minimum wage is pocket money for them to do whatever they want — they can spend it, save it, whatever. As Dave Ramsey says, he never worked for minimum wage in his life — he mowed grass and raked leaves as a teenager (and also to bring in extra money after he went bankrupt, as he worked his way back to becoming a millionaire again), and started in real estate as soon as he could sit for the license (age 18), and was buying and selling houses while he was working his way through college. He says (paraphrasing) minimum wage is for teenagers, and if you’re making minimum wage as a breadwinner, then you need to figure out how to get a better job — you need to look to the future and make some goals, and not sit there whining about making minimum wage and waiting for the government to solve your problems. And that if you don’t like making minimum wage, then figure out how to land a job making more than minimum wage, because “making minimum wage” is not a good life-long strategy.

I like what Thomas Sowell says about minimum wage, in the Wikipedia article:

Economist Thomas Sowell has also argued that regardless of custom or law, the real minimum wage is always zero, and zero is what some people would receive if they fail to find jobs when they try to enter the workforce, or they lose the jobs they already have.