Brits Raise Minimum Wage to $8.89 per hour
How pathetic is the US minimum wage of $5.15 per hour compared to the United Kingdom, where the minimum wage will increase to $8.89 per hour on Saturday, Oct. 1.
Predictably, business is bleating about the cost and supposed employment effects. However, the United Kingdom had no official minimum wage until 1999, but studies have shown no adverse employment effects from its introduction.
In fact, since introducing its quite high minimum wage, the United Kingdom has seen better job growth than the United States and in 2003 (according to OECD comparison), had a higher percentage of its working population employed than the United States.
So if the UK can employ more people with a minimum wage so much higher than the US, it shows that the arguments against raising our minimum wage are empty.
Excellent post. Raising the minimum wage is something every American should support. The counter arguments are discredited nonsense.
September 29, 2005 11:27 PM | Reply | Permalink
Artificially holding wages down restricts these positive outcomes and ultimately becomes a drain on the economy. A national wage structure must be tied to the national economy. There must be a connection to the cost of goods and services and the cost of government if it is to have any credibility at all. Not doing so provides the result we see in the U.S. It drives the entire nation into debt and reduces the standard of living for the entire economic unit.
We hear a lot of commentary about this from people in high places but nowhere do we ever hear a comment that government wage policy is the culprit behind the dilemma. The reason of course is Wall Street and the financial industry in general has corrupted our government. And, as they say, it isn't rocket science to look around and see the legislation that passes in Congress or look at national economic policy to know who is calling the shots and to confirm the corruption.
thepeoplechoose
September 30, 2005 1:47 AM | Reply | Permalink
5.8 percent of the workforce would benefit from an increase in the minimum wage.
See this link:
http://www.epinet.org/content.cfm/issueguides_minwage_minwagefaq
Who are minimum wage workers?
An estimated 7.3 million workers (5.8% of the workforce) would benefit from an increase in the minimum wage to $7.25 by June 2007. Of these workers, 72.1% are adults and 60.6% are women. Close to half (43.9%) work full time and another third (34.5%) work between 20 and 34 hours per week. More than one-third (35%) of the workers who would benefit from an increase to $7.25 are parents of children under age 18, including 760,000 single mothers. The average minimum wage worker brings home about half of his or her family's weekly earnings.
The majority of minimum wage workers are adults not teenagers. See this link:
http://www.seiu.org/action_center/issues_and_action/economic_secu
rity/minimum_wage.cfm
The majority of minimum wage workers are adults, not teenagers working part time for spending money.
40 percent of minimum wage workers are the sole breadwinners in their families.
72 percent of the estimated 7.4 million workers who'd benefit from an increase to $7.00 an hour by April 2006 are adults (and 60.9 percent are women). 44 percent work full time and 33.3 percent work between 20 and 34 hours a week. 5
Which Jobs Pay So Poorly?
Jobs paying poverty-level wages are concentrated in service, agricultural and sales occupations. A number of them—personal/home care aides, child-care workers, home health aides—involve substantial responsibility for providing care for our children and elderly parents. Low-paying jobs and their wages (AFL-CIO site)
Great post Nathan, I agree!!
September 30, 2005 2:04 AM | Reply | Permalink
"It provides for working class folks to keep abreast of rising costs"
A small percentage of the working class.
"It also gives a boost to the economy because you have a broad majority of people with an enhanced means to purchase goods and services"
Hmm, using west coaster's data: assuming that all 7.3 million workers see the entire $2 per hour increase, the work full time and the only tax they pay is 7.5% SS then the enhanced spending is:
7.3e6*2000*2*(1-.075) = $27 billion
Will that amount of spending really have any measurable affect on the economy bearing in mind that that money must be raised by raising prices, lowering wages of higher paid workers, or giving less returns to shareholders?
"There will be a potential reduction in consumer debt and an associated potential for people to save."
I seriously doubt that anyone earning minimum wage will save the increase.
"Revenue receipts in the form of taxes will go up and aid government provisioning of the necessary public infrastructure needed to fuel economic growth"
Assuming the new wages are taxed at 7.5% SS at the federal level and 6% (guessing) sales tax at the state level, the new tax revenue is 3.9 billion. Sounds like "pissing in the ocean" even before subtracting lost taxes from lower waged to higher paid workers and shareholders.
September 30, 2005 7:53 AM | Reply | Permalink
Since that $27 billion would be going directly into the poorest communities in our country, it would be the largest economic development program of the national government for those communities.
Putting money in the hands of the working poor instantly helps boost employment in all the stores and local businesses where they shop-- a virtuous cycle of economic development more effective than any other anti-poverty program.
September 30, 2005 8:08 AM | Reply | Permalink
"Putting money in the hands of the working poor instantly helps boost employment in all the stores and local businesses where they shop-- a virtuous cycle of economic development more effective than any other anti-poverty program."
At the macro level the cycle is inflationary. Sure there will be local hot spots that look like prosperity, but we must realize that government cannot mandate economic prosperity
September 30, 2005 11:08 AM | Reply | Permalink
How do the minimum wages here and in the UK compare in terms of the relative cost of living in each country? I am not familiar with UK statistics but have always had the impression that the cost of living is more expensive there than here.
September 30, 2005 12:46 PM | Reply | Permalink
What a lot of supply side BS. Do you actually believe that nonsense?
According to your theories:
1) $27B isn't a signifigant enough amount of money anyways, that's why it certainly shouldn't go to the working poor, because that insignifigant amount would really hurt small business. Right. Makes perect sense.
2) Any money that goes to the working poor is "inflationary." Right. A poor working mom having more money for her child's nutrition and education, that's "inflationary" while I suppose a business owner having more profits to buy a luxury automobile makes far more sense.
People like you are just sick. There is no nice phrase for it.
September 30, 2005 11:13 PM | Reply | Permalink
"1) $27B isn't a signifigant enough amount of money anyways, that's why it certainly shouldn't go to the working poor, because that insignifigant amount would really hurt small business. Right. Makes perect sense."
Um, no. Thepeoplechoose made some rather exaggerated claims about the effect of raising the minimum wage on the economy. My point is that the $27 billion is not large enough to have an noticeable effect on the economy especially since a large portion of it would ultimately be a transfer from the middle class to the working poor.
"2) Any money that goes to the working poor is "inflationary." Right. A poor working mom having more money for her child's nutrition and education, that's "inflationary" while I suppose a business owner having more profits to buy a luxury automobile makes far more sense."
Anytime someone is paid more than the value of what they produce, that will produce demand inflation since there will be more demand for the available supply. In the case of the $27 billion in question, the amount will not be significant enough to notice.
"People like you are just sick. There is no nice phrase for it. "
Those of us who live in the reality-based-community realize that we must keep our emotions in check and analyze the way the world really works. That doesn't mean we oppose giving money to poor people, but we are not going to delude ourselves that that is a boon to the economy.
October 1, 2005 7:19 AM | Reply | Permalink
Also, it is important to not just do an immediate after comparison as it usually takes 3 months or so for the employers to respond.
The real issue for the evaluation of minimum wages is not whether they affect employment in lower-paying jobs in the covered sector but whether the net income distributional effect reduces poverty.
The best studies focus now on income, not employment in the evaluation of the minimum wages. As I understand it, the relative importance of minimum wages and their effectiveness in reducing poverty varies with the level of benefits/welfare available to workers to give them a sufficient exit threat or voice in the labor market to command "naturally" decent wages.
As it is, minimum wages are a very blunt anti-poverty device since so many who receive it are not poor. They are probably more effective say in the under-developed world with its poorly developed labor institutions and excessive supply of low-skilled workers.
dlw
October 1, 2005 12:57 PM | Reply | Permalink
And who are you to judge the value or worth of a person and their labor?
thepeoplechoose
October 2, 2005 1:46 AM | Reply | Permalink
And who are you to judge the value or worth of a person and their labor?
Indeed, and who are a bunch of bloviating political hacks in Washington to judge the value or worth of a person and their labor?
October 2, 2005 4:42 AM | Reply | Permalink
Good point.
Political hacks in DC have been blocking a raise in the minimum wage foreight years now.
Let's put it to a vote of the people.
Florida voted by 72% to raise the minimum wage and I would bet similar totals across the country.
So yes, let's stop the political hacks from blocking an increase!
October 2, 2005 9:25 AM | Reply | Permalink
"Florida voted by 72% to raise the minimum wage and I would bet similar totals across the country."
You are probably right. I suspect that a majority of the electorate thinks that we could eradicate poverty in the US by setting the minimum wage at $15 per hour.
One thing worst than bloviating political hacks is raw democracy. Remember that a majority of the electorate once thought Iraq was involved in the 9/11 attack.
October 2, 2005 10:03 AM | Reply | Permalink
Not quite. That majority was misled into thinking that. The people of this country are very capable of arriving at a proper conclusion if they are told the truth.
thepeoplechoose
October 2, 2005 11:21 AM | Reply | Permalink
"Not quite. That majority was misled into thinking that. The people of this country are very capable of arriving at a proper conclusion if they are told the truth."
Do you think that the "truth" is always self-evident? Could not the majority be easily mislead on economic issues where even honest academics disagree?
October 2, 2005 11:44 AM | Reply | Permalink
However, while academics and/or economists may disagree their commentary doesn't carry the same weight as the president. So, yes, the public could certainly be misled on that or any other issue. Bottom line is if we can't trust our president we are so screwed. And with the resources avaliable to the federal government and the president, they/he are not allowed to screw up. And certainly not in any way that is of serious consequence.
thepeoplechoose
October 2, 2005 12:54 PM | Reply | Permalink
"I was referring to your Iraq statement."
And my point is that if the electorate could be so easily misled on an easy issue like the involement of Iraq in 9/11 then they will be easily misled in the more complicated issue of eradicating poverty via the minimum wage.
"Bottom line is if we can't trust our president we are so screwed. And with the resources avaliable to the federal government and the president, they/he are not allowed to screw up. And certainly not in any way that is of serious consequence."
Which argues against having a central arbiter of wage and prices.
October 2, 2005 1:19 PM | Reply | Permalink
Just to be clear that those who oppose the minimum wage also oppose democracy.
Thanks for clarifying that.
October 2, 2005 4:24 PM | Reply | Permalink
Just to be clear that those who oppose the minimum wage also oppose democracy.
Most definitely.
And not just on minimum wage issues. Better to have bloviating elected representatives than mob rule. How is California's I&R working out for them?
October 2, 2005 4:35 PM | Reply | Permalink
State's still there, apparently. I might even agree that elected representatives are better at negotiating different interests in our society than strict referendums, but you seem to oppose both.
Who do you want deciding what's legal? Unelected judges, as we had in the early 20th century?
October 2, 2005 5:05 PM | Reply | Permalink
State's still there, apparently. I might even agree that elected representatives are better at negotiating different interests in our society than strict referendums, but you seem to oppose both.
Who do you want deciding what's legal? Unelected judges, as we had in the early 20th century?
October 2, 2005 5:41 PM | Reply | Permalink
This is not a recipe that allows to sustain a robust economy. How this is resolved isn't the central question. To what degree Congress has been co-opted into ignoring this is the real question. You can't continue to legislatively chip away at the middle class without suffering an undesirable outcome.
thepeoplechoose
October 3, 2005 2:09 AM | Reply | Permalink
"but you seem to oppose both"
I oppose both on issues that are not amenable to political control.
"Who do you want deciding what's legal? Unelected judges"
Most definitely, I want unelected, unbiased judges deciding what's legal in constitutional matters to protect the minority from the mob.
October 3, 2005 4:26 AM | Reply | Permalink
"A central arbiter isn't really the issue. What is at issue is an ability to act in a non-partisan way and establish wages in a methodical fashion that honestly accommodates all the factors that influence real incomes."
How these goals do not lead to a central arbiter of wages and, trust me, prices, completely escapes me.
Nixon imposed wage and price controls, how'd it work out for him?
October 3, 2005 5:06 AM | Reply | Permalink
7.3e6*2000*2*(1-.075) = $27 billion
Mr. Brown, $27 billion per year is a very significant amount of money. It's ridiculous to say it wouldn't have a noticeable effect on the economy. As for it being a transfer to the working poor, that's really kind of the point, isn't it?
October 7, 2005 10:20 PM | Reply | Permalink