“I got a job but it ain’t nearly enough …” — “Good Ol’ Boy” by Steve Earle
Apparently, two-thirds of Americans think minimum wage should be increased. By how much is an overriding issue.
“Polls show that raising the minimum wage is broadly popular,” writes Zach Goldfarb in the Washington Post.
Last week we highlighted the career of Ray Kroc, who utilized teenage workers and low wages to keep costs down and build a fast food empire. And to make his company’s stock a favorite for investors. Many start-up businesses survive by minimizing overhead. If the new wage law is enacted as proposed, many small enterprises may be forced out of business. Those that manage to stay afloat may cut back on hiring and even institute layoffs. Some small businesses which are voluntarily offering medical insurance to employees may be forced to forego providing that benefit to offset new costs.
The CBO report (non-partisan Congressional Budget Office) says that if the minimum wage rises to $10.10 that layoffs could be relatively minimal, or they could amount to a million jobs lost. Some greater degree of specificity would certainly be helpful here. Losing 30,000 jobs is one thing. But a million jobs lost is quite another.
On the flip side, the CBO says that such a move “would increase earnings for 16.5 million low-wage Americans,” according to Goldfarb. The report also predicts that such a move could lift some 900,000 Americans out of poverty.
Uplifting a million Americans above the poverty line is a powerful idea. The cost of basic goods and services, like housing, food and fuel, has increased markedly, even though technically inflation is not rampant. We all know that living on minimum wage, even at $10.10 an hour, is a sketchy proposition at best.
Some economists believe that raising the minimum wage will boost the economy and increase discretionary spending. It’s hard to imagine, though, that minimum wage workers are going to plow a lot of cash into big-ticket items when they get a pay hike. It’s more likely that they will buy more and better food and cover their current expenses more expeditiously.
Still, pay should somewhat mirror living costs. And pay is lagging behind. It seems reasonable that we could lift the minimum wage to, say, $9 per hour, without doing irreparable harm to the economy.
Unfortunately, the debate diverts our attention from a much larger and more pressing issue: how to recreate the decent paying, middle class jobs that can bring back the kind of salaries that allow a breadwinner to raise a family and pay for a child’s college education.
Margaret R. McDowell, ChFC, AIF, a syndicated economic columnist, chartered financial consultant and accredited investment fiduciary, is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a fee-only and fiduciary registered investment advisory firm located near Sandestin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.