A Reasonable Proposal on the Minimum Wage

Gather ‘round, kids, time for Crazy Uncle Bob to go off on another one of his political rants. This time I’m taking aim at the “Fight For 15” Campaign, one of the apparently far-left movements that seems to be gaining some traction as a way for the Democrats to both look like they are on the far fringe of socialism and at the same time are completely ignoring the Rust Belt workers all the pundits say they lost in the last twenty years which has cost them the middle of the country.

Truth is, there’s a lot to deride in this particular movement, not the least of which is the fact that whoever came up with the idea of a $15 an hour minimum wage seems to have pulled that number out of a very large hat. There are a few other things to look at sideways in this movement, most significantly the “all or nothing” attitude that seems to have taken hold in contemporary politics. It doesn’t help that the arguments in favor of this more than doubling of the minimum wage seems to be exclusively predicated on an argument that lies somewhere between “people need it” and “people deserve it”.

On the other hand, the arguments I’ve most often heard against it tend to come down to (a) minimum wage jobs are intended for entry level workers, not people supporting families, so running it up would only hurt business and (b) raising the minimum wage would drive up inflation. Considering the last I checked “business” is doing just fine, and with a sweet little tax cut in the works crying poor mouth on behalf of businesses is a hard sell in a one-sided recovery that as of May Goldman-Sachs was predicting had a 2/3 chance of being the longest on record. As far as inflation concerns go, the current inflation rate is 2.2% for the last 12 months as of September 2017 according to the Labor Department, which is hardly something to sound an alarm about.

But as I see it, none of that is really the problem in this whole debate. The problem is that, as I mentioned before, both sides have dug in with their cherished positions and neither one is considering anything resembling actual… you know… facts. Which I am more than willing to admit included myself. Until recently.

I finally got tired of the ridiculous notion of a $15 an hour minimum wage, so I decided to get some serious ammunition to use against the proponents of this monstrous idea, something nobody had ever brought out before. I decided to do a little digging and see what the actual history of the minimum wage was. According to CNN Money, the Federal Minimum wage has been increased almost two dozen times since its inception, so increasing it is not exactly a novel idea. However, using the inflation calculator at http://www.usinflationcalculator.com/ a couple of interesting facts emerge. The first is that, in inflation adjusted 2017 dollars, the minimum wage actually topped out in 1968 at $11.35. Now granted, that’s no $15 an hour, but it’s a far cry from $7.25 an hour. Another thing that jumped out at me was the trend line. Take a look at the table below and tell me if you notice anything:

Year Minimum Wage IAD 2017
1938 $0.25 $4.38
1939 $0.30 $5.33
1945 $0.40 $5.48
1950 $0.75 $7.68
1956 $1.00 $9.07
1961 $1.15 $9.49
1963 $1.25 $10.08
1967 $1.40 $10.35
1968 $1.60 $11.35
1975 $2.10 $9.63
1976 $2.30 $9.98
1979 $2.90 $9.86
1980 $3.10 $9.29
1981 $3.35 $9.10
1990 $3.80 $7.18
1991 $4.25 $7.70
1996 $4.75 $6.69
1997 $5.15 $6.54
2007 $5.85 $6.96
2008 $6.55 $7.51
2009 $7.25 $8.34


Do you see what I see? Because I see not just the minimum wage going up, but real purchasing power going up for the first… I dunno… thirty years. Consistently. That’s across Democratic and Republican administrations (although maybe Eisenhower was just a softy). Then the slow, occasionally interrupted downward trend started, and that was bipartisan too. It wasn’t until George W. Bush’s second term that we started to see an upward trend in real purchasing power for the minimum wage again.

So with these facts in hand, I would like to steer the conversation in a new direction by posing a question nobody seems to be asking: what is the purpose of the minimum wage? It’s not enough to say the purpose of a minimum wage is to put a price floor on labor; that is the effect. The purpose is the reason we institute such a law in the first place. The only moral justification for such a price floor is to ensure that workers who cannot otherwise command a sufficient wage may do so. Such workers, though it seems impolitic to say so in this day and age, tend to be either uneducated, lack desirable skills, or lack sufficient job history. But they still need to make enough to get by, even if “getting by” doesn’t mean much.

Looking at the trends above, this certainly seems more in line with the original intent of the minimum wage, and I believe that there is a way to get there without going so far as to demand $15 an hour, which even when viewing the historical record seems excessive. Going off the average rate of increase in real purchasing power for the first thirty years of the program and looking at the adjusted peak of the minimum wage, the logical solution is to set the minimum wage at $12.85 an hour. Heck, I’d even be willing to go up to $13.00 an hour for folks who like round numbers. After that peg it to inflation and call it a day.

Both sides are missing out on an opportunity by passing up on a compromise like this. Getting the minimum wage meaningfully into the double digits would be a win for the liberals, even if it isn’t $15 an hour. And for the Republicans? With the absurd tax plan they’re trying to railroad through Congress, tacking on a meaningful minimum wage increase would not only give serious cover to blue state Republicans, it might even be enough to tempt red state Democrats. If nothing else it would be something better to point to and say “See? We really DO care about the middle class and the poor!”

But I know it’ll never happen. Because this isn’t the season for reasonable proposals.


2 Comments on “A Reasonable Proposal on the Minimum Wage”

  1. June Bonsall says:

    Interesting. I never considered why there was a minimum wage before, although it seems to me in a free market, someone who offers a salary to someone for doing a job should be able to put a value on it, without government interference.

    • Bob Bonsall says:

      Generally I would be inclined to agree, but that leads to a slippery slope argument. In countries without the same labor laws as the United States (and in the US before we established labor laws), child labor is common because it is better than the next best alternative. Employment pressure drives down wages, which in turn drives down the purchasing power of individuals.

      Assuming a truly free market, there is a strong argument to be made for not having a minimum wage, however the government interferes in the market in a variety of ways (mandated health insurance is one example, and various sin taxes are another example). So long as we are going to allow the government to distort the market, ensuring that every individual is making enough to live on is not the most egregious distortion.

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