Saturday, March 11, 2017
Posted in
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Politics
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Today I read a comment on an article about the minimum wage in the Washington Post; it was posted by a Republican who pointed out that if the minimum wage goes up, prices for goods and services go up too. And then he dryly said, "that's Economics 101, folks."
But no, that isn't Economics 101. The reality goes much deeper.
The national minimum wage is now so low that many people who are working full-time do not make enough money to support themselves. In order to get by, they must collect food stamps. Furthermore, for those states that expanded Medicaid to the poor under the Affordable Care Act, people making minimum wage can get entirely free medical care at the expense of the government. So paying a poor minimum wage raises taxes. However, Republicans are not only against increasing the minimum wage, they are against the Affordable Care Act and food stamps. Their solution is to keep the minimum wage low, but to also cut off food stamps for poor people and cut off free health care. In other words, they get you coming and going. "You're on your own" -- that should be the motto of the Republican party. "Good luck, you'll need it" -- that's another possible motto.
But the economics of the minimum wage go deeper than that.
Statistics show that poor people invariably spend whatever money they make, unlike the rich who have large amounts of money sitting in the bank that they don't use (that money usually goes to their heirs). Sometimes the bank accounts that the rich use are foreign, which means that they've taken the money they earned out of the U.S. economy altogether, which does this country no good at all. Spending money boosts the economy, so poor people boost the economy better than the rich do. Indeed, one of the reasons that the U.S. has had "jobless recoveries" from recessions in recents years is that so much money has become concentrated at the top, and those people at the top just hoard their money. So a higher minimum wage would boost the U.S. economy. Since the rich control most manufacturing in this country, that should help the rich too -- but the truth is that a great deal of the wealth of the super-rich is now made from carried interest and such, and that doesn't boost the economy at all.
It seems to me that it is worth it to have higher wages in order to have fewer people on the dole and more people with money to spend. But raising the minimum wage shouldn't necessarily raise all prices. At your typical big business, the executives make hundreds of thousands of dollars a year, or even millions of dollars. Lowering the salaries of the owners and executives would balance out the wage increases of the people at the bottom. The executives of a big company can generally afford to give up some income so that the people at the bottom make a little more. Indeed, if big companies valued their employees, they would pay their workers well anyway.
Several years ago, I read an article in the Washington Post by a man who owned (or had invested money in) a pillow-manufacturing business. Sales were down because the poor and the middle-class didn't have enough money to buy new pillows. He made the very valid point that the rich are a small class of people, and they can only buy so many pillows. Even if they buy new pillows every year, the rich alone can't support the entire pillow-manufacturing business. (I am relatively poor, and I haven't bought a new pillow in 15-20 years.) In other words, the super-rich are not a big enough group of people to support a robust economy, especially since they don't spend everything that they earn.
So an increase in the minimum wage benefits everyone: It gives the poor more money to spend, so that the economy is boosted (and that helps at least some rich people), and it takes minimum-wage workers off the dole, which reduces taxes (including the taxes on the rich). It's a win-win situation, but the Republicans just don't get it. They would rather hoard their own wealth, and the rest of us be damned.
But no, that isn't Economics 101. The reality goes much deeper.
The national minimum wage is now so low that many people who are working full-time do not make enough money to support themselves. In order to get by, they must collect food stamps. Furthermore, for those states that expanded Medicaid to the poor under the Affordable Care Act, people making minimum wage can get entirely free medical care at the expense of the government. So paying a poor minimum wage raises taxes. However, Republicans are not only against increasing the minimum wage, they are against the Affordable Care Act and food stamps. Their solution is to keep the minimum wage low, but to also cut off food stamps for poor people and cut off free health care. In other words, they get you coming and going. "You're on your own" -- that should be the motto of the Republican party. "Good luck, you'll need it" -- that's another possible motto.
But the economics of the minimum wage go deeper than that.
Statistics show that poor people invariably spend whatever money they make, unlike the rich who have large amounts of money sitting in the bank that they don't use (that money usually goes to their heirs). Sometimes the bank accounts that the rich use are foreign, which means that they've taken the money they earned out of the U.S. economy altogether, which does this country no good at all. Spending money boosts the economy, so poor people boost the economy better than the rich do. Indeed, one of the reasons that the U.S. has had "jobless recoveries" from recessions in recents years is that so much money has become concentrated at the top, and those people at the top just hoard their money. So a higher minimum wage would boost the U.S. economy. Since the rich control most manufacturing in this country, that should help the rich too -- but the truth is that a great deal of the wealth of the super-rich is now made from carried interest and such, and that doesn't boost the economy at all.
It seems to me that it is worth it to have higher wages in order to have fewer people on the dole and more people with money to spend. But raising the minimum wage shouldn't necessarily raise all prices. At your typical big business, the executives make hundreds of thousands of dollars a year, or even millions of dollars. Lowering the salaries of the owners and executives would balance out the wage increases of the people at the bottom. The executives of a big company can generally afford to give up some income so that the people at the bottom make a little more. Indeed, if big companies valued their employees, they would pay their workers well anyway.
Several years ago, I read an article in the Washington Post by a man who owned (or had invested money in) a pillow-manufacturing business. Sales were down because the poor and the middle-class didn't have enough money to buy new pillows. He made the very valid point that the rich are a small class of people, and they can only buy so many pillows. Even if they buy new pillows every year, the rich alone can't support the entire pillow-manufacturing business. (I am relatively poor, and I haven't bought a new pillow in 15-20 years.) In other words, the super-rich are not a big enough group of people to support a robust economy, especially since they don't spend everything that they earn.
So an increase in the minimum wage benefits everyone: It gives the poor more money to spend, so that the economy is boosted (and that helps at least some rich people), and it takes minimum-wage workers off the dole, which reduces taxes (including the taxes on the rich). It's a win-win situation, but the Republicans just don't get it. They would rather hoard their own wealth, and the rest of us be damned.
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