TODD L BAUERLE.com

Raising the Minimum Wage:

A band-aid on a gushing head wound

24 April 2006

By: Todd Bauerle

Here is a platform plank the Democrats love to stand on together. Is raising the federal minimum wage a board that is wide enough to elevate the entire party as they stand together on this issue united? Sadly, no. This plank may be strong enough to get resolutions past and give some momentum to the party, but there isn't nearly enough wood to to plug the bursting damn.

So let's recap what we know. In 1997, the Federal minimum wage was raised to $5.15/hr...except in the strange land of Kansas that currently has a normal work week of 46 hours (Minnesota is at 48 hours) with a minimum wage of $2.63. Apparently they don't need five buck an hour there...glad I'm not in Kansas. Oddly enough, I guess they have some strange state law that makes it exempt from Federal law. Can't wait for State laws that override Federal taxes.

There are, however, quite a number of states that have varying minimum wage rates much higher than the Federal wage. The highest in the nation is Washington state, with a minimum wage of $7.63, which increases every year as needed adjusting to inflation. In October of this year, the minimum wage high will be taken by Connecticut as they raise the wage to $7.65.

Several other states also have or are pushing the minimum wage past seven dollars, or are hoping to have a measure added to the ballot within the year. For some states who have no additional State Law regarding the minimum wage, efforts like this would result the first state legislation creating a State Minimum Wage. Such an effort is much harder than increasing a current limit.

With that being said, there seems to be quite a bit of work being done on trying to increase the Federal Minimum Wage. This is always an on going effort, but there seems to be more strength to the argument this year.

So what's the deal? Isn't paying more people a good thing? The idea certainly has its opposition.

Opponents to minimum wage increases often state it will result in increase inflation. If you pay bottom rung workers more money, those who have received raises above the old minimum will have their rates increased, all the way up to the top. This added cost to employers will then result in increased cost of products, making any proportionate wage increase vanish quickly.

Does it happen? Sometimes. Most likely employers who have just given raises to employees above the current minimum will not give an additional increase after the minimum goes up, regardless of tenure or position.

I have experienced this myself, where I have worked hard, dedicated myself, and received a raise or promotion. The minimum wage increases and now, proportionately, I don't make much more than those I supervise. Is it fair? No. Do I try to get a raise? Yes...to no avail. The response is usually along the lines of insinuating I can take the lower paying job if I would rather. This is most likely the rule rather than the exception for most employers.

So first off, I don't buy the line about having to give everyone raises. It hasn't worked like that for me in the past, and I'm pretty sure I'm not alone.

Secondly, what about inflation? Does a higher minimum wage result in inflation? Let's take a look at Arizona, where I currently live...and not even the last nine years. Note we have had the same Federal minimum wage of $5.15 since 1997.

When I started attending Arizona State University in the spring of 2003, tuition was $126 per credit hour for residents; $428 per credit hour for non-residents. Tuition reached a cap for residents at $1,206 for 7 hours and above; $5,139 for 12 hours and above for non-residents. (If you aren't familiar with the reasons for lower state residence rates, it is due to the idea that residents pay state taxes, which fund public universities and should be entitled to lower rates).

Three years later, the tuition costs have greatly increased, due to elimination of much of the university's state support. Resident tuition is now $249 per credit hour, with a cap at $2,204 for 7 hours and above. Non-resident tuition is now $649 per credit hour, with a cap at $7,548 for 12 hours and above.

This tuition increase is a 100% increase for residents (83% increase for full-time students), and a 52% increase to non-residents (47% increase for full-time non-resident students). Notice who receives the shaft, Arizona residents.

One of the other most important indicators of inflation are housing costs. My apartment cost us $742.12 per month back in March 2003. It's a nice spacious two bedroom, two bath with 1150 square feet of leg room. Now, on June 1st our rent will increase to $944.80 for exactly the same services we enjoy now (Currently we pay $788). At least its not as bad as the month to month price of $994.80. Regardless, the increase in our rent represents a 28% increase in our housing over three years. But that's just an apartment. What have housing rates done?

My brother in-law purchased his first home back in March 2004. This simple starter-home featured three bedrooms and a single car port...and needed quite a bit of work. They bought the home for $130k. Sure they dumped a bunch of money into the home improving the cabinets, new carpet, and a heck of a lot of tile. I'm not sure how much was put into the home, but let's just guess at about $6k. Their house is currently on the market now for $235k. Without the additions that is a 76% jump in property value in 25 months.

Just to hammer the point away, in December 2001, I was filling up for gas at $.87 per gallon. Now all I see on the road are signs for $2.99 per gallon, the highest I have EVER seen in my lifetime, and probably anyone else's barring gas shortages and real crises. This alone is a 244% increase in our fuel costs.

Does anyone else here see a problem? Inflation IS happening, and is getting worse. In Arizona, I can vouch that inflation increases are not in result of ANY minimum wage increases, and certainly these increases in later years are not on par from the 18% increase for the minimum wage we saw in 1997.

So what's the bottom line here on the minimum wage? Will increasing it be a solution to the problem. Of course not. Quite obviously, raising the minimum wage is putting a Band-Aid on a gushing head wound. Inflation is the problem, and always has been.

Company profits have increased exponentially while the working public receives pitiful wage raises. Higher paying factory jobs have vanished overseas leaving John Q. Public to work at McDonalds for $5.15 an hour.

With education increasing at such a fast rate, it is now impossible for people to say the best way to lift yourself out of poverty is education. It is almost too expensive to become educated. Besides, the majority of jobs after getting an education are minimum wage type jobs. Careers are becoming more and more difficult to find.

But will people demand a cap on fuel? No, that's against capitalism. Will people want the government to regulate housing? Of course not, it would hurt the people who are profiting. Will the people ask for increased funding for education. Nope, that mean's more taxes.

So the solution we have is increasing wages. That only helps in the short term.

Who it will help is the Democratic party. This allows the Democratic party to have its candidates look you in the eye, reach out and take your hand and say, "I know you are struggling in your life. I'll make your life easier by raising your wages." Instantly, they'll have the support they need from constituents.

However...wouldn't it be nice if we looked them in the eye, and after thanking them for the pay raise asked them directly: "So what are you going to do about increasing fuel costs? Increasing housing costs? Increasing education costs?"

Answer those questions, and you've got my vote.

-Todd.