Minimum Wage and the Fight for $15

Tom Landquist Political Digest 0 Comments

The fight for $15 movement has been getting a lot more notice and got a lot of traction from the popularity of Bernie Sanders this last election cycle. The cause they are undertaking is a socially noble one, with the goal of realizing the original intent of the minimum wage. Plus as humans, we do have an obligation of sorts in making sure all of our fellow man are making a wage that will provide for them.  Whatever that wage may be.

However, the modern economy may not be suitable in achieving this end. With that in mind, let’s dive on in and explore this heavily debated topic and all the fancy background stuff we need to konw.

How Was the Minimum Wage Established?

The first federal minimum was established in 1933 by Franklin D. Roosevelt with the National Industrial Recovery Act. The wages were set at $0.25 an hour, and the mindset behind this move is best exemplified by a quote from Roosevelt himself.

“In my Inaugural I laid down the simple proposition that nobody is going to starve in this country. It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By “business” I mean the whole of commerce as well as the whole of industry; by workers I mean all workers, the white collar class as well as the men in overalls; and by living wages I mean more than a bare subsistence level-I mean the wages of decent living. “

This very clearly spelled out the intentions of the law, and is often used as the rallying cry from the “fight for $15” movement. There were some challenges to the law, and it was originally overturned in 1935 , but in 1938 under the basis of the Commerce Clause, they settled the debate and the minimum wage became a staple in America.

Ok Then, So the Fight for $15 Movement Is Correct?

Well… that is where the issue becomes more complicated. The original minimum set at $0.25 an hour would translate to roughly $4.25 an hour in modern day wages. This is the standard that Roosevelt had declared to be fair back in 1933, but obviously, $4.25 is not a sustainable wage.

This obvious fact leads us into the most important element of discussion. The need for flexibility when determining wages.

It may make economic sense for cities like NY, LA and Seattle to raise wages to $15 an hour, due to the extravagant cost of living in the area. However, rural Kansas and Nebraska not only does not need that level of increase but business would be unable to cope with such a dramatic change in wages. This would force many small businesses relying on low skilled labor in cities with weak economies to close up shop immediately or price themselves out of business slowly.

Another predictable element of this is the acceleration of the already impending automation in several low skill industries. While workers may have been on the path to being replaced by machines as it is, this drastic wage increase incentivises companies to pursue that technology more aggressively. You have no doubt seen the countless articles proclaiming this in almost a victorious manner, but that calloused approach really does diminish the struggle many people are having to just pay the bills.

The Solution

An increase of the federal minimum wage is overdue, but the idea of more than doubling the amount from $7.25 to $15 an hour is simply not realistic.

The flexibility needed for states and cities with varying economic strengths and functions would be lost. The fight for $15 is a simple blanket answer for a very complicated question concerning labor inputs for employer cost structures, and the cost of living in each region of the country. As with most simple answers to complex problems, it leads to unintended consequences that aren’t easily reversed.

A federal standard of $10 an hour to be raised incrementally should be an achievable federal minimum wage compromise the fight for $15 movement can pursue. (BUT even then we are risking putting many mom and pop stores out of business.)

Anything beyond that displays a lack of understanding concerning the realities most of the less prosperous areas of the US have to confront. State and local regulations are the most important focus. Finding the sweet spot for wages in the varying geographic and economic regions within the US would be a strategy that is sustainable for the movement to pursue.

If that simple change is accepted, then those fighting for a living wage, and those trying to find a way to provide those wages, may find themselves standing on some common ground. We will see how it plays out.

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