There has been a lot of uproar in the media lately about raising the minimum wage so that those people earning it would earn a “living wage.” But what do demographics about those earning the minimum wage tell us?
According to the Current Population Survey (CPS), which is a joint effort of the Bureau of Labor Statistics and the Census Bureau, 3.7 million workers reported earning the minimum wage of $7.25 or less per hour. Now 3.7 million is a lot of people, but when looking at the entire workforce, it’s a small portion – only 2.9 percent. Slightly more than half of them are aged 16 to 24, and 62 percent of that group are students.
Nearly 80 percent of those earning the minimum wage work part-time jobs and belong to families that earn nearly triple the poverty level for a family of four at $65,900 a year, while only 22 percent live at or below the poverty line. Three percent have finished college and obtained a degree, and 5 percent are married.
Many of those aged 25 and older work in jobs where they also earn tips, like restaurant workers, so their total pay most nearly always exceeds the minimum wage. While most do not live in middle- and upper-income families, they also are not living in poverty, having an average family income of $42,500, just less than double the $22,350 poverty line level for a family of four.
Advocates of raising the minimum wage – and many minimum wage earners who respond to the hype those advocates produce – complain that you can’t raise a family or even live a decent life on the minimum wage, so therefore it should be raised to provide a “living wage.”
When you realize that only 3 of every 100 workers earn the minimum wage, the problem doesn’t seem as dire as the advocates for a wage hike want you to believe. And when you look at the kinds of work that minimum wage earners perform, and who minimum wage earners are, it seems even less dire. These jobs require little education or training, and are overwhelmingly held by young people living at home.
Based upon the demographics, there’s no economic reason for a higher minimum wage.
You won’t find trained and educated people like electricians, mechanics, carpenters, plumbers, nurses, pilots or teachers, or lawyers, doctors, CPAs, engineers, and others who have gotten an extensive education and additional training making minimum wage, or anything near it.
But more importantly, the number of minimum wage employees who really need a “living wage” because of family or unusual personal needs is very small, and there are better ways to help them.
Assuming all minimum wage employees worked 20 hours a week, a $2 increase in the minimum wage would cost employers $2,080 a year for each employee, plus increased payroll taxes. For all 3.7 million workers, the increase would cost $7.7 billion a year, plus increased payroll taxes. Those working more than 20 hours a week adds even more costs.
Additional costs arise when those making between the old and new minimums get increases to get them to the new minimum, and when those making close to the new minimum get increases to keep them proportionately higher than the new minimum. The costs would be substantially higher than $7.7 billion. And guess who bears that cost? Employers? No.
Consumers will pay higher prices, producing reduced sales, and those higher prices will also affect those who just got a raise.
A Heritage Foundation research report released last February notes that while many advocates of higher minimum wages suggest a higher wage “to help low-income single parents attempting to survive on just a minimum-wage job … just 4 percent of minimum-wage workers – or 148,000 – are single parents working full-time, compared to 5.6 percent of all U.S. workers.”
To add billions in increased consumer costs to benefit a relative few doesn’t make sense. They need to become qualified for better paying jobs, and if that is difficult or impossible for them, and if government is going to provide welfare, those people should receive help.
“Contrary to what many assume,” the Heritage report notes, “low wages are not [the] primary problem [of the poor], because most poor Americans do not work for the minimum wage. The problem is that most poor Americans do not work at all.”
The faction promoting a higher minimum wage consists primarily of two types of people: those who do not understand or don’t care about the most basic concepts of business economics, and politicians who benefit from pandering to minimum wage earners.
Current government policies are designed for purposes other than to help people escape poverty; therefore government needs to start encouraging job creation so that people in poverty have better opportunities to take control of their own lives and work their way out of poverty.
Returning America to the land of opportunity it used to be, where people were able to go as far in life as they were able, should be President Obama’s major goal.
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Random thoughts on the passing scene
Some of those who think the American health care system needed to be trashed and reformed in the image of the Canadian system might be interested in the opinion of Bacchus Barua, a senior economist with Canada's Fraser Institute.
"Healthcare in Canada is anything but free," he states, noting that the average family of four pays more than $11,000 a year in taxes for hospital and physician care. However, he explains in an article for The American "surely such expenditure is justified if Canadians receive a stellar healthcare system in return for their tax dollars. Unfortunately, that simply isn't the case."
Specifically, he lists some problems with his country’s system:
** Canada has fewer physicians, hospital beds, and diagnostic imaging scanners, and performs fewer medical interventions than its American and European counterparts.
** Canada has one of the lowest physician-to-population ratios in the developed world.
** A recent survey found that Canadians must wait an average of about 4 1/2 months for medically necessary elective procedures after referral from a general practitioner.
** The wait for diagnostic imaging technologies like MRIs is over two months on average.
** Patients in Canada are likely to wait two months or more to see a specialist, six days or more to see a doctor when sick or needing care, and four hours or more in the emergency room.
** Due to the lengthy waits, about 40,000 Canadians leave the country for treatment elsewhere each year [like the U.S.].
** Public drug plans covered only about a quarter of the new drugs approved for sale in Canada between 2004 and 2010.
He concludes: "These realities serve to dismiss the mythical notion that a Canadian-style healthcare system" is highly desirable.
We are headed in that direction.
*****
During the mortgage banking crisis the federal government pressured large banks like JPMorgan Chase to take over the bad mortgage loans sold by failing banks Washington Mutual and Bear Stearns. Now the government is fining JPMorgan $13 billion for helping the feds deal with the crisis. Can you say “shakedown?”
*****
Planned Parenthood involves itself with topics other than planning parenthood on its Facebook page, discussing topics like why some types of sexual activity are painful, transgender issues, and promoting Obamacare. Not exactly family planning.
An article on the Internet site bighealthreport.com reports that on Planned Parenthood’s Facebook page for teens it answers the question: “Is promiscuity a bad thing?” and that the organization defended doing so with the statement, “there’s nothing bad or unhealthy about having a big number of sexual partners.”
Isn’t this the mentality that has led to 40 percent of our babies being born out of wedlock, and males with multiple children from multiple “baby mamas?”
This “advice,” such as it is, increases the likelihood of HPV and cervical cancer among females, in addition to STDs. “Even the Guttmacher Institute, the former research arm of Planned Parenthood, considered ‘a person to be at direct risk for STDs if he or she had had two or more partners during the 12 months preceding the interview’ during one of their research studies,” Big Health Report said.
The article notes “a person with low self-esteem has been shown to engage in sexual relations earlier, and engage in riskier, unprotected sex with multiple partners.” Does that sound like “nothing bad or unhealthy” to you?
Seriously? This is what we get for $542 million in federal subsidies?
*****
The “government shut down” really amounted to about 17 percent of the government being “shut down,” and that is somewhat like going to a mall that has 100 stores and finding only 83 that are open for business. So, while things were uncomfortable for some folks, it bore no resemblance whatsoever to the government actually shutting down.
Of course, if the mall management blocked off stores that otherwise would be open, things would be more uncomfortable. No sensible businessperson would do that, but a petty, politics-dominated administration would, and did.
*****
The emotional push to raise the minimum wage to $15 dollars an hour for those working the least skilled jobs in the fast food industry puts the spotlight on a fundamental misunderstanding of basic economics.
Advocates think the wage ought to be based upon concerns totally unrelated to the job and the business the job is a part of. “I flip burgers at Burger King, and can’t support my family on what I make, so raise the minimum wage,” is the mentality behind this ill-advised movement. In their mind, if a PhD. in English, mathematics, biochemistry, or any other field somehow ended up ringing up Happy Meals at MacDonald’s, the wage ought to be based upon his/her training, or some arbitrary “living wage” concept.
A job is worth whatever the employer says it is worth. Anyone who doesn’t like the wage is free to not take the job, or to look for a better one. If the employer can’t find people to work at the selected wage, he or she will have to raise it. Anyone who tries to find a better job, but can’t, needs to pipe down and do the job the employer allowed them to have until they can find a better one.
"Living wage" mentality reflects misunderstanding of business reality
Fast food workers in seven cities were on strike last week demanding a "living wage" of $15 an hour, more than twice the $7.25 they currently make. Empathy aside, this expectation is a fantasy.
Every job has a value, but it is based not on what the person who has the job thinks it should be worth, or what sympathetic observers think it should be worth, but on its role in the business.
How important is the job to the business, compared to other jobs? Are other people who can do the job a scarce commodity, or are there thousands of them? Some jobs require substantial training, while others do not, and individuals with the required training deserve higher pay than those without training. Minimum wage jobs in the fast food industry require no formal training; the worker can learn on the job, and while the worker is learning to do the job satisfactorily, the boss endures lower-than-necessary productivity.
Who exactly works for the minimum wage? These jobs are entry-level work intended for people just getting started in the workaday world, like students trying to earn a little money while pursuing their education, or people with little or no skills or experience looking to get some skill and experience. About half of the 1.6 million minimum wage workers are under 25 years of age. The minimum wage is not intended to be, and cannot be, a “living wage.”
The minimum wage is, indeed, a low wage, but most of those workers get a raise in less than a year, and there are fewer of them today than in the past. The number of people making at or under the minimum wage today is 28 per 1,000 wage and salary workers, while in 1976 there were 79 per 1,000 wage and salary workers.
Most employers want the best workers they can find, so if most workers produce 10 of something an hour and Joe can produce 12 an hour, or if Mary’s work is of higher quality than other employees, the boss is likely to give them a raise to keep them on staff.
For people in minimum wage jobs with few or no skills, demanding their salary be doubled to a "living wage" is somewhat akin to high school students demanding they be given a college diploma. And anyone earning minimum wage that is unhappy with it can go look for a better-paying job. If they can't find one, do their best at the current job, and get some training that will qualify them for something better.
An organization calling itself Socialist Alternative illustrates graphically the failure of a “living wage" minimum wage in an article titled "Profit is The Unpaid Labor of Workers."
"Hypothetically, lets assume that our job pays $7.50 an hour and our boss wants us to work for twenty hours," the article says. "At $7.50 an hour for twenty hours, that’s a total of $150. In that same period of time, however, the work we do will probably make $300, $400, or $1000 worth of pizza."
And here's where it gets good: "What does this mean? Just for arguments sake, lets assume we only create $300 worth of pizza. After our boss gives us $150 for our week’s worth of work – meaning our own labor essentially pays our wage – he is left with an additional $150 that he did not work for."
There’s a brilliant bit of insight hidden in that paragraph: "our own labor essentially pays our wage." To the socialist mentality, the only cost of running the pizza parlor is what the boss pays the pizza maker. Everything else – flour, sauce, pepperoni, cheese, insurance, rent/mortgage, electricity, water, sewage, trash pickup, taxes, fees, etc. – the boss apparently gets for nothing, and the money collected for the pizza that is not paid to the pizza maker is ill-gotten gains.
The "living wage" strikers similarly do not understand business, and what happens when wages go up. Raising the minimum wage requires a commensurate raise in all wages, to avoid causing strife among the other workers, and that means price increases that make the business less competitive. That could lead to staff cutbacks or ultimately closing the business.
The strikers and the socialists fail to understand and appreciate the investments of the owner(s), who may have mortgaged their home to finance the business, and managers of larger businesses, who usually have spent years in training and working to get where they are, perhaps starting as a minimum wage employee themselves.
Owners get whatever is left over after everyone else – employees, venders, lenders, taxes, etc. – have been paid. Often, particularly in the beginning or during hard economic times, that is little or nothing. And, few employees work as hard as the owner of a small business, and particularly a new business, yet the Socialist Alternative begrudges them making a decent return on their investment of capital and time.
It’s easy to criticize the boss from the sidelines. The best course for these critics would be their forced entry into the business owner’s world. At their own expense, of course. They would undoubtedly see things differently in short order.
Obamacare’s serious weaknesses driving even strong supporters away
Commentary by James H. Shott
Although Sen. Max Baucus (D-Mont.) only recently acknowledged that the health care reform bill he helped create – the Patient Protection and Affordable Care Act (ACA), also known as Obamacare – is a “train wreck,” most Americans suspected that at its creation.
Things are so bad that President Barack Obama, trying to prevent some of the disastrous results, did something he is not allowed by the U.S. Constitution to do: postpone implementation of part of the law by suspending the employer mandate until 2015 and leaving the rest of the law intact. The Executive Branch of our government is obligated to enforce the laws – all of them, and all of each of them – and does not have the power to choose which ones, or parts thereof, it will enforce.
The House of Representatives passed two measures delaying the employer and individual mandates for one year, with 35 and 22 Democrats respectively joining in those efforts, which Mr. Obama has curiously threatened to veto.
And more recently, one of Obamacare’s most devoted groups of supporters has jumped ship. In a letter to Democrat Congressional leaders, Teamsters union president James Hoffa, and the presidents of two other unions, said this: “Right now, unless you and the Obama Administration enact an equitable fix, the ACA will shatter not only our hard-earned health benefits, but destroy the foundation of the 40 hour work week that is the backbone of the American middle class.”
The law has already encouraged some employers to trim their staffs to fewer than 50 full-time employees to avoid the expense of the mandate, and in other cases to decide against providing insurance altogether, and pay a much cheaper fine.
Nevertheless, Mr. Obama declared last week that "the law is working the way it was supposed to for middle-class Americans,” and criticized House Republicans for trying to dismantle it.
Polling data from five different polling organizations from mid-May through July 13 shows continuing disfavor among Americans, with the disparity of opposition-to-support running from as little as 5 points to as much as 15 points, and the Real Clear Politics average of the five polls at 10.2 points.
According to the Gallup poll from late last month, 42 percent say that in the long run the law will make their family's healthcare situation worse, and only 22 percent say it will make it better. And 47 percent believe the law will make the healthcare situation in the U.S. worse, while only 34 percent say it will make it better.
Republicans also are criticized for offering no alternatives while trying to dismantle the measure. “Three years after campaigning on a vow to ‘repeal and replace’ President Barack Obama’s health care law, House Republicans have yet to advance an alternative for the system they have voted more than three dozen times to abolish in whole or in part,” Sunday’s editorial in The Washington Post complained. That ignores, however, H.R. 3400 - Empowering Patients First Act, introduced in 2009 before Republicans campaigned for and won control of the House.
And now there is another, H.R. 2300 – the Empowering Patients First Act of 2013. Its principal sponsor is Rep. Tom Price (R-Ga.), who sponsored H.R. 3400, and he has credentials for health care issues matched by few in the Congress. Rep. Price is also Dr. Price, a physician who actually delivered and understands patient care.
This measure allows patients, families and doctors to make medical decisions, not Washington, DC. That is an excellent place to begin improving health care. What a shame that wasn’t the driving factor behind the ACA.
“You can get folks covered, you can solve the insurance challenges, and you can save hundreds of billions of dollars in this health care system,” said the physician/Congressman, “all without putting Washington or health insurance companies in charge of those decisions that ought to be between patients, and families and doctors.”
How can H.R. 2300 – a bill of only 249 pages, less than a tenth the length of the monstrous Obamacare bill – accomplish this?
Rep. Price describes it as comprehensive legislation under which “every single American has the financial feasibility to purchase the coverage they want, either through tax deductions, or credits, or advanceable credits or refundable advanceable credits so that they can purchase the coverage they want for themselves or their families, not what the government forces them to buy.”
He says further that everyone owns their own coverage, like a 401k plan, so if they change their job or lose their job, they take their coverage with them, and it allows all of those with pre-existing conditions to pool together, giving them the purchasing power of millions so that no one person’s adverse health status will change the cost for anyone else, including that one person.
While H.R. 2300 has the great advantage of being properly focused on patients and physicians, trying to straighten out the voluminous failures of the ACA in one bill is a Herculean feat. Obamacare needs to be repealed in total, and as soon as possible, and then Congress must undertake a sensible approach to correcting the problems of the health care system without turning it over to the government.
Cross-posted from Observations
Cross-posted from Observations
Minimum wage hike: Another bad Obama idea
Another of President Barack Obama's bad ideas is to force employers to pay higher wages to the lowest skilled and/or least experienced workers on the premise that by raising the take-home pay of these people, the world will be better.
Unfortunately, lots of people agree with him, including some who are usually far more sensible. They think that raising the minimum wage would put more money into the economy, and that can't be a bad thing, can it? First of all, it doesn't put money into the economy; it merely moves it around unnaturally. And, as usual, there are other repercussions that haven't been considered.
Since the number of people that earn the minimum wage is relatively small, any direct help is minimal. In January the U.S. Labor Force was 155.6 million, with about 102 million working full-time. Only 1.5 million earn the minimum wage, about nine-tenths percent. It is most often a starting wage level for teenagers with few or no skills and/or experience. And while the president didn't mention this, just because someone starts at the minimum, that doesn't mean they earn at that level for long. Research shows that nearly two-thirds of those earners get a raise from one month to a year after they begin work.
U.S. Census data shows that only 15 percent of minimum wage earners are single parents, and all are eligible for the Earned Income Tax Credit. The remaining 85 percent are teens living with their working parents or other working relatives, adults living alone, or married adults living with a working spouse. The average family wage of a minimum wage earner is more than $43,000 a year.
So, the problem the president believes he will solve by increasing the minimum wage is so small as to be no real problem at all, and there is evidence that far more harm than good will result.
Mr. Obama proposes to raise the rate from $7.25 to $9.00 an hour over two years. Something he never talks about – and may neither think about nor care about – is the question of where this money for higher wages will come from. Somehow, employers will have to find a way to pay every minimum wage worker 24 percent more over a two-year period, which works out to $3,600 in annual wage increases per worker over that time frame.
Will they reduce the number of minimum wage workers? The increase in pay for every four workers is nearly equal to the pay of one worker under the existing minimum wage. If you are a minimum wage earner, you might ask yourself: would you rather earn $7.25 an hour for 40 hours a week, or $9.00 an hour for zero hours a week?
Will they raise their prices by 24 percent, making their products more expensive for everyone, including those who earn the new minimum wage?
What about people who earn a bit more than the current minimum, but less than nine bucks? They will have to be increased to $9 per hour, which makes them minimum wage earners again after having been at a rate higher than the minimum, perhaps after having worked their way up from that level. What will employers do? Will they increase those hourly wages by $1.75 an hour to keep them where they were relative to the minimum wage; will they give them a smaller raise; or will they just pay them $9?
And what about those who earned more than $9 an hour, and are now $1.75 an hour closer to the minimum? How will they react? Shouldn't everyone get a raise; wouldn't that be the "fair" thing to do? How much additional costs to employers will this cause?
"The effects of the minimum wage are declines in employment for the very least skilled workers," according to David Neumark, a University of California, Irvine, professor who has studied the issue. He says the benefits of higher minimum wages sometimes go to teens in higher-income families taking part-time jobs. "A lot of the benefits of minimum wages leak out to families way above the poverty line," he said.
So, the minimum wage hike really helps only a relative few, sometimes helps those that don't need it, reduces hiring of minimum wage workers, and makes running businesses more expensive for employers, who would have to find a way to pay for increased wages for many more workers than just those earning the minimum. They might have to defer expanding their business or purchasing new equipment. Or, they might have to increase the prices for their products and services. Or they might have to do some of all of those things.
All jobs and workers have economic value based upon the importance of their work to the business of which they are a component that is not related to the desires of politicians to endear themselves to a segment of the populous.
Politicians cannot change economic reality, but they do not let that stop them from trying, and we can see all around us in the current economic malaise what happens when they try to manipulate the economic environment.
Unfortunately, lots of people agree with him, including some who are usually far more sensible. They think that raising the minimum wage would put more money into the economy, and that can't be a bad thing, can it? First of all, it doesn't put money into the economy; it merely moves it around unnaturally. And, as usual, there are other repercussions that haven't been considered.
Since the number of people that earn the minimum wage is relatively small, any direct help is minimal. In January the U.S. Labor Force was 155.6 million, with about 102 million working full-time. Only 1.5 million earn the minimum wage, about nine-tenths percent. It is most often a starting wage level for teenagers with few or no skills and/or experience. And while the president didn't mention this, just because someone starts at the minimum, that doesn't mean they earn at that level for long. Research shows that nearly two-thirds of those earners get a raise from one month to a year after they begin work.
U.S. Census data shows that only 15 percent of minimum wage earners are single parents, and all are eligible for the Earned Income Tax Credit. The remaining 85 percent are teens living with their working parents or other working relatives, adults living alone, or married adults living with a working spouse. The average family wage of a minimum wage earner is more than $43,000 a year.
So, the problem the president believes he will solve by increasing the minimum wage is so small as to be no real problem at all, and there is evidence that far more harm than good will result.
Mr. Obama proposes to raise the rate from $7.25 to $9.00 an hour over two years. Something he never talks about – and may neither think about nor care about – is the question of where this money for higher wages will come from. Somehow, employers will have to find a way to pay every minimum wage worker 24 percent more over a two-year period, which works out to $3,600 in annual wage increases per worker over that time frame.
Will they reduce the number of minimum wage workers? The increase in pay for every four workers is nearly equal to the pay of one worker under the existing minimum wage. If you are a minimum wage earner, you might ask yourself: would you rather earn $7.25 an hour for 40 hours a week, or $9.00 an hour for zero hours a week?
Will they raise their prices by 24 percent, making their products more expensive for everyone, including those who earn the new minimum wage?
What about people who earn a bit more than the current minimum, but less than nine bucks? They will have to be increased to $9 per hour, which makes them minimum wage earners again after having been at a rate higher than the minimum, perhaps after having worked their way up from that level. What will employers do? Will they increase those hourly wages by $1.75 an hour to keep them where they were relative to the minimum wage; will they give them a smaller raise; or will they just pay them $9?
And what about those who earned more than $9 an hour, and are now $1.75 an hour closer to the minimum? How will they react? Shouldn't everyone get a raise; wouldn't that be the "fair" thing to do? How much additional costs to employers will this cause?
"The effects of the minimum wage are declines in employment for the very least skilled workers," according to David Neumark, a University of California, Irvine, professor who has studied the issue. He says the benefits of higher minimum wages sometimes go to teens in higher-income families taking part-time jobs. "A lot of the benefits of minimum wages leak out to families way above the poverty line," he said.
So, the minimum wage hike really helps only a relative few, sometimes helps those that don't need it, reduces hiring of minimum wage workers, and makes running businesses more expensive for employers, who would have to find a way to pay for increased wages for many more workers than just those earning the minimum. They might have to defer expanding their business or purchasing new equipment. Or, they might have to increase the prices for their products and services. Or they might have to do some of all of those things.
All jobs and workers have economic value based upon the importance of their work to the business of which they are a component that is not related to the desires of politicians to endear themselves to a segment of the populous.
Politicians cannot change economic reality, but they do not let that stop them from trying, and we can see all around us in the current economic malaise what happens when they try to manipulate the economic environment.
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