The Minimum Wage Battle / by kevin murray

Most people do like the fact that a floor has been set for a minimum wage, so that at least they know when they are working  that their wages can't legally go lower than that.  There are a lot of positives to say about having a minimum wage and for fairness in general when it comes to paying a wage, but at the same time, one must consider that you cannot just legislate or dictate or demand your way to prosperity.  There are a lot of factors that help set the wage that you work for, such as age, experience, reliability, work ethic, work output, sociability, and so on, with the important caveat too that employees are free to look for employment elsewhere, so that as long as you are not essentially in a one-company town, each side has some degree of power.


In recent times, our President has requested that the federally mandated minimum wage be lifted from the current $7.25/hr to $10.10/hr but there is really no realistic hope of this passing.   The fact of the matter is that labor costs are a critical part of a company's ability to maintain an appropriate gross margin and to remain competitive in their respective industries.  Additionally, the raising of a minimum wage always has unintended consequences.  For instance, if the minimum wage was to be raised up $2.85/hr you would have all those short of the new minimum wage receiving the full additional $2.85/hr, plus all those that were in-between in pay of the old minimum wage and the new mandated minimum wage would received their respective increase, and those that were previously making $10.10/hr or a little above that wage, would be asserting their own pressure, that their wages needed to be increased in order to create a gap between their old pay scale as compared to those that were merely just making the new "minimum".  The consequence of all this, depending upon the industry, could range from a minimal impact, to something of a truly massive concern to the enterprises' bottom line, or even towards its entire business operation and continuing successful operation.    The upshot, is that these companies would take a long and careful look at their labor staffing, to which in all probability positions would be terminated, hours would be sliced and diced in such a manner as to reduce staff during slow periods and to only ramped up during busy periods, and further a careful study would be made as to determine whether additional equipment or machinery could replace human labor.  In essence, as always, this would mean that those that were least qualified for the new minimum wage mandate, would be the first to be let go or not hired in the first place, while those that received the increased wages would clearly benefit from this program.


There is another way, however, that might be able to best satisfy all parties involved.  Currently, our National Government offers an Earned Income Credit (EIC) for lower income families and while this credit as currently structured is primarily for benefit of families as opposed to just individuals, it could readily lend itself to some basic modifications.  For instance, the EIC could be restructured in such a manner, that if you worked, for example, 2000 hours at the wage of $7.25/hr, that our government would provide as an EIC credit the additional $2.85/hr for you so that you would in essence have earned $10.10/hr.  This would provide the dual benefit of raising wages for the poor, as well as providing incentives for disadvantaged people to find employment.  Additionally, this particular EIC credit could be set up quarterly, rather than annually, to provide the money to individuals in a timelier manner.  The only real fly in the ointment for this proposed plan is that there would also have to be employer penalties or respective credits set up so as to make sure that employers didn't "game" the system, meaning that steps would have to be taken so as to preclude employers from using the government EIC to make up for any shortfall that they should have provided in fair labor pay. 


This proposal seems practical, fair, sensible, and purposeful for all involved.