100
1 vote
Jun 16, 2015

Would like to hear some reasonable arguments for a minimum wage increase since 2012 Census results tell us that:

91% of those 16 and older who are living in poverty either do not work or do not work full time.

Of the 91% and again according to Census results; 66% do not work at all and 25% work less than full time.

A secondary issue with minimum wage increases has to do with cost of living.

Recently there was a piece posted showing how the US minimum wage was lower than a dozen other countries; I will compare two of them and with luck, spur additional discussion regarding any benefit of minimum wage increases.

Canada which is #10 on this list and our nearest neighbor has an average 17.54% less disposable monthly income after taxes. Local purchasing power in the US is 26.28% greater than in Canada – meaning we have the ability to purchase 26.28% more goods and services than our Canadian counterparts.

France which is #2 on the list has an average of 18.03% less disposable monthly income after taxes. Local purchasing power in the US is 44.76% greater than in France – meaning we have the ability to purchase 44.76% more goods and services than our French counterparts.

Yes dollar-wise these countries may give you more for minimum wage, but at what cost are these minimum wage increases afforded?

The Canadian minimum wage is roughly 21% greater than our minimum wage, yet we have 17.54% more disposable income and the ability to purchase 26.28% more goods and services. The French breakdown is even worse since their minimum wage is roughly 29% greater, yet we have 18.03% more disposable income and the ability to purchase a whopping 44.76% more goods and services.

One last comment; Of the last 17 minimum wage increases, 9 were followed by a minor increase in poverty rates and 8 were followed by a minor decrease which would tend to substantiate economists assertion that minimum wage increases neither improve or worsen poverty levels.

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100
main reply
2 votes,
Jun 16, 2015

I don't think that comparing the disposable incomes between the US and Canada and the US and France is fair. You don't take into account that while both Canada and France have higher minimum wages, they also have higher taxes and different social programs which offset that tax. When analyzing personal finances, the tax structure has a strong effect on disposable income and must be controlled for to analyze the data fairly. Ultimately, it's not fair to analyze disposable income when income is treated so differently among those countries.

A more fair comparison is between states. Individuals in different states are under exactly the same federal tax laws and individual state taxes are mostly uniform. This controls for the extreme variable of tax structure in analyzing the effect of the minimum wage on disposable income.

Looking at disposable income as a function of minimum wage laws, using per capita disposible income by state and minimum wage laws by state we see the exact opposite effect from what you describe:

Average difference in disposable income versus the national average:
States with higher minimum wage than federal: +4.5%
States with same minimum wage as federal: -0.5%
States with lower minimum wage than federal: -2%
States with no minimum wage laws: -13%

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