The minimum wage: Good or bad?
The answer is: Neither . . . or both. I’ll give you my answer.
The minimum wage, any minimum wage, affects:
- Low wage workers
- States, counties, and cities
- The nation
A recent article addresses some of these issues:
When Florida Gov. Rick Scott traveled to California recently to speak at the Milken Institute’s annual gathering of business leaders it was to persuade California companies to move to Florida.
“Our taxes are lower than in California, our regulations are less,” Scott, a Republican who’s been governor since 2011, explains in the video above. “I want more jobs in our state.”
Scott points to some research showing higher wages will lead employers to hire fewer people. “Raising the minimum wage means people are going to lose their jobs,” he says. “In Florida, you can compete globally.”
By that, he means that the Florida minimum wage of $8.05, while higher than the federal minimum, can help companies compete with foreign producers in China, Mexico, Vietnam and elsewhere that pay a fraction of U.S. wages.
States that have lost jobs and businesses to Florida recently include California (where the minimum wage is $10 and will rise to $15 in some areas by 2022), Pennsylvania ($7.25, but the state also has the nation’s second-highest corporate tax rate), New York ($9 minimum wage, rising to $15 in many areas by 2018) and Connecticut ($9.60, rising to $10.10 in 2017).
Immediately, we see the complexity of the minimum wage argument. Governor Scott conflates low taxes and few regulations with low minimum wage, to create a picture of a state that is more competitive with other states.
The difficulty is:
- Florida’s comparatively low minimum wage, low taxes, and few regulations do not make it competitive with other countries, especially poorer nations where wages, taxes and regulations are far lower than Florida’s.
- It is difficult to say what exactly accounts for any of Florida’s successes in attracting business from other states. Taxes? Regulations? (Which regulations?) Minimum wage? (At what level?) The weather? Sea port? Unionization? Some other factors?
Florida’s hardly the only state luring businesses with low taxes.
General Electric recently chose to relocate its headquarters from Connecticut to Massachusetts, swapping the threat of higher taxes in the Nutmeg state for tax sweeteners.
Foreign automakers and other manufacturers generally locate their factories these days in nonunionized, low-tax southern states such as Tennessee and Alabama instead of in the Northeast or Midwest.
Florida even nabbed billionaire hedge-fund manager David Tepper, who recently moved his personal residence from New Jersey, where the top individual income-tax rate is nearly 9%. In Florida, there’s no individual income tax.
The article switches focus from minimum wage to taxes.
Economists generally agree that a minimum wage can stifle hiring if it’s too high – but they don’t agree on what’s too high and what’s just right.
There are also some unhappy tradeoffs that come with low taxes. Florida typically ranks high in surveys of the most business-friendly states by organizations such as CNBC and the Tax Foundation, but low state taxes often mean a lower level of government services or higher taxes at the local level.
Wallethub, for instance, finds that Florida is friendlier for high-income taxpayers than for lower-income ones. It also finds that Florida ranks below average on government services, the overall economic climate and safety.
Let’s see if we can sort this all out. Florida is business-friendly, not because it has a low minimum wage, but for a variety of reasons, and no one is able to say, which of those reasons are most important.
Additionally, no on knows what level of minimum wage will “stifle” hiring.
And if we do identify a minimum wage level that “stifles” hiring, we still have to decide whether having more lower-paying jobs is economically and socially better than offering fewer, higher paid jobs.
Which do you think is economically and socially better?
-More, lower paying jobs, i.e. a low unemployment state filled with Walmart greeters and Wendy’s servers, many of whom require two jobs to survive, or
–Fewer, higher paying jobs, i.e. a higher unemployment state and a greater need for unemployment insurance payments.
(When salaries are low, more people take multiple jobs, which exacerbates the unemployment rate.)
In 2014, the Median Household income for the United States was $53,657. Florida’s was $46,140, 14% lower. Only seven states had a lower median income than Florida’s.
Being opposed to a wide Gap between the rich and the rest, I would opt for fewer, higher paying jobs — if that were the only alternative — which it isn’t, as we will see.
Florida, in it’s efforts to please the rich, charges no tax on income (good for the rich), but does charge a general, regressive sales tax of 6% (bad for the poor and middle classes). Florida’s lack of income tax dollars results in poorer social services for the lower and middle income groups.
Let us return to the “interested parties” and try to summarize how an increased minimum wage affects each:
- Low wage workers: There probably will be a reduction in available jobs as American businesses:
- become less internationally competitive
- or move more production overseas
- or mechanize to find more ways to cut human labor
- Unions: May focus more on non-salary demands (vacation time, insurance, tenure), which magnify the effects (good and bad) of an increased minimum wage.
- Businesses: Seemingly countering the above-mentioned negative effects would be increased demand by those workers who benefit from increased wages. However, because a higher minimum wage does not add dollars to the economy, and may actually reduce dollars as businesses spend more on overseas production, total GDP, total wages and total jobs offered probably would suffer.
- States, counties, and cities: Some would benefit and some would suffer, depending on local circumstances. There would be a widening of the Gap between the state, county, and city “haves” and the “have-nots,” as salary differences are reduced but local effects (weather, geography, mores, taxes, tourism) become relatively more important.
- The nation: Some workers will benefit and some will lose. With no net increase in the money supply — and even a possible decrease, due to increased imports — it is difficult to identify a source of national benefit from an increased minimum wage.
My opinion: Lowest paid workers should receive pay increases, but from the federal government, not from businesses. These increases can come from the first seven steps, and the tenth step, in the “Ten Steps to Prosperity” (below). For example:
*Eliminating FICA, instituting Medicare for All, free education for all, and salary for attending school (Steps #1, #2, #4, and #5) not only would put more dollars into workers’ pockets, but reduce U.S. business costs and add dollars to the economy, stimulating GDP — all of which would add jobs and narrow the Gap between the rich and the rest.
*An economic bonus for every man, woman and child (Step #3) would provide the same benefit to the lowest income people as a minimum wage increase, while adding dollars to, and thus stimulating, the overall economy.
*Eliminating corporate taxes (Step #6) would make American business more internationally competitive, while stimulating the economy and adding American jobs.
*Finally, increase federal spending in initiatives that benefit the 99.9% (Step #10) is a catchall that includes most federal domestic spending, from road building to computer programming, all of which would increase employment and wages.
Bottom line: The fundamental goals of an increase in the minimum wage are to: lift the lower income groups, narrow the Gap between the rich and the rest, and grow the economy.
But, forcing American business to pay more won’t do it.
The federal government is the only organization having the resources to accomplish those goals.
I oppose a minimum wage increase as being counter-effective, and favor instead, instituting the Ten Steps to Prosperity.
Rodger Malcolm Mitchell
Ten Steps to Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich afford better health care than the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:
Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012
Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefiting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-tranferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.)
Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be an good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.
The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.
10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt
THE RECESSION CLOCK
Recessions begin an average of 2 years after the blue line first dips below zero. A common phenomenon is for the line briefly to dip below zero, then rise above zero, before falling dramatically below zero. There was a brief dip below zero in 2015, followed by another dip – the familiar pre-recession pattern.
Recessions are cured by a rising red line.
Vertical gray bars mark recessions.
As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.
•Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
•Any monetarily NON-sovereign government — be it city, county, state or nation — that runs an ongoing trade deficit, eventually will run out of money.
•The more federal budgets are cut and taxes increased, the weaker an economy becomes..
•No nation can tax itself into prosperity, nor grow without money growth.
•Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
•A growing economy requires a growing supply of money (GDP = Federal Spending + Non-federal Spending + Net Exports)
•Deficit spending grows the supply of money
•The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.
•The limit to non-federal deficit spending is the ability to borrow.
•Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.
•The single most important problem in economics is the Gap between rich and the rest..
•Austerity is the government’s method for widening the Gap between rich and poor.
•Until the 99% understand the need for federal deficits, the upper 1% will rule.
•Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..