The Question of What Should Minimum Wage Be?

The Question of What Should Minimum Wage Be

Recently, Senator Elizabeth Warren answered the question of what should minimum wage be... she would like it to be $10/hr. However, a report done by Economist John Schmitt at the Center for Economic and Policy Research, click here to see report, says the minimum wage really should be $22/hr... actually $21.72 to be exact. In fact to quote him... he says... "the minimum wage is too damn low."

So, how did the CEPR come up with that number? The rationale is that wages have not kept pace with productivity and that if it had, minimum wage actually would have hit a high of $33/hr in 2007 and currently it would be at the $21.72/hr rate.

Now, if you look at it purely from an employee standpoint, particularly those who are paid hourly, who could argue what minimum wage should be... let's make it $22/hr... for that matter let's make it $30/hr. I mean that would end poverty as we know it, right?

What Should Minimum Wage Be - The Unintended Consequences

But, what are the unintended consequences of raising minimum wage to that level? Well, the first thing that comes to mind is... what happens to the prices of everything. I mean does anybody really believe that if McDonald's was paying a minimum wage of $22/hr that you could still buy a #1 for $5 or $6? What about clothing, food, services, etc...

Is it realistic to believe that we could raise the minimum wage to these levels and expect businesses to just absorb the cost. Umm... that's not going to happen. Businesses never absorb cost increases, it ALL gets passed on to the consumer in the form of price increases, quality decreases, quantity decreases, staffing decreases...

Quite frankly, it's not even realistic to believe that raising the minimum wage to $10/hr is a smart thing to do. The effect that this will have on the economy will be devastating. It will put more people out of work as businesses will cut workers and expect more out of those who remain, and you better believe that prices will increase... which in effect dilutes any gains made by increasing the minimum wage. If prices go up, diluting the purchase power of the dollar... what progress have you made? What Should Minimum Wage Be - Is it the government's job to set it?

The answer is not raising minimum wage. The answer is for people who are working at this level of pay to improve their skills in the marketplace so that they can command a higher wage or salary. Education is key to people earning more, not the government dictating to business what minimum wage should be. In fact, some would argue that their shouldn't even be a minimum wage, that the free market should dictate wages... but, that's a subject for a whole other blog post.

So what are your thoughts. What should Minimum Wage Be?

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