- Posted by TheArmoTrader on December 6th, 2013 at 12:13 am
Yesterday, fast food workers went on strike nationally (for the 2nd time this year), demanding higher wages. Specifically, they were demanding a higher minimum wage of at least $15/hour, which they were calling a “livable wage”. Now, I don’t plan on making an argument in this post for either side (letting the market dictate wages vs setting a minimum/raising it).
There have been a lot of studies out on this topic as each side has compelling research and economists to prove their point. CNBC’s Steve Leisman did a good job showing how much compelling and conflicting research there actually is in his “Minimum Wage, Maximum Controversy” report.
What I plan on doing is offering a modest proposal for all those taking part of the minimum wage debate.
STOP PROPOSING EXTREME CHANGES
You have one side, saying get rid of the whole minimum wage, while the other side wants a 100% raise. Do you see something wrong here? They want to completely revamp the way the labor market has been treated for many years. And as much as you believe in your side, that IS going to bring unintended, negative consequences.
Personally, this is how I think both sides should approach this debate.
There should be a steady, laid out, communicated plan in which the minimum wage would be lowered/raised. If you believe the minimum wage should be raised to keep up with inflation, then the law to raise it shouldn’t promote extreme changes. Here’s the chart (Via Heritage) of the level they would be if you adjusted the minimum wage with different inflation measures.
So for example, to go from the current $7.25 to the $9.25 (or $8.25 or $10.50), the law should lay out a specific time, in which there will be small, but steady raises in the minimum wage. So to go from $7.25 to $9.25, the law will require the minimum wage to rise – let’s say 25 cents (I don’t know what figure would be ideal….but 25 cents seems rational) – every 6 months. Employers will still be forced to pay more for minimum wage workers, but they will be ready for the changes as the effect won’t be as sudden and it will give them time to adjust to the higher costs.
Similarly, for those advocating for no minimum wage, you probably want a law that would decrease the level in a steady fashion to a more lower level (probably not down to ‘nothing’, because that will never pass – just like doubling the minimum wage will never either). This steady but ultimately-reaching-their-goal method is kind of like (to bring an analogy into this) “boiling a frog“.
And to minimize adverse long-term policy if they do fail, a law should be written for the reversal of the minimum wage hike/decrease if X, Y, & Z are not successfully accomplished within a specific time. Now I’m making it very simple but of course great detailed work would (should?) go into figuring out the parameters, requisites and goals. We don’t want to be stuck with a law that might be hurting us. Basically, we want a “reset” button if it fails.
One other thing that gets lost in the minimum wage debate is that different parts of the United States might have different effects. The US is huge. Even some states are huge and can differ a lot in different regions. That’s why I don’t think cross-country comparisons are that wise when it comes to minimum wage laws because labor markets, cultures, fiscal/monetary policies, and just plain luck can produce different results in different places.
So maybe we might want to adopt different types of laws in different places in different fashions. Maybe in California, raising the minimum wage would have net positive results, while raising it in Texas would have net negative results. Or getting rid of the minimum wage would have net positive results in Texas while net negative in California. I don’t know. I’m just saying this is something we must consider.
So let’s stop advocating extreme changes in minimum wage policies and start advocating for moderate, planned ones!
What Exactly Is Economic Growth?
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Posted by TheArmoTrader on December 3rd, 2013 at 1:29 am
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Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
- A Modest Proposal For The Minimum Wage Debate
- What Exactly Is Economic Growth?
- Bonds Are Hanging On For Dear Life
- Should Bill Ackman Buy Back Into JCPenney?
- Silver Is Looking To Crash
- Was Good News Really Bad News?
- Is The US Headed Towards a Recession?
- Enjoying The Low Energy Prices?
- Is The Dollar Setting Up For a Massive Run?
- Don’t Buy This Market Breakout!
- Is Macy’s A Buy?
- One Undeniably Bullish Fact Of This Bull Market
- Why The Level Of Public Debt Doesn’t Matter
- No, Don’t Freak Over Treasury Bill Market
- If The Market Sells Off, Should You Blame D.C. Or This Trendline?