Minimum Wage Part III: American Samoa, The Face of Minimum Wage, and Sound Cited Effects

Difficulty finding jobs, frustration over income inequality, annoyed with politicians, jobs going overseas, greater automation, increased difficulty maintaining former standard of living. These are all events I observe in American society.

Can minimum wage laws halt, reverse, or eliminate any or all of these? In my study of cited minimum wage effects (Part II), I am left with more questions than answers.

I need to determine which effects I believe to be sound and those I believe are unsound. After reaching a conclusion on the validity of cited effects, I may compare these effects with my original desires (Part I).

But wait there’s more! One of my pet peeves is to offer support or opposition prior to evaluating and providing alternative solutions. For even if minimum wage does not satisfy all my desires, it remains possible it is the best solution compared with plausible alternatives. Thus, only after weighing the pros and cons of viable alternatives will I make a final decision on if, and why, I support or oppose minimum wage legislation.

• Example
  
  
  

  

  Minimum wage legislation could be like flying. Sure it would be better to teleport to your desired destination rather than combat TSA agents and crowded spaces. However flying, while not as ideal as teleportation, is definitely better than many available alternative transportation methods such as riding a camel.

Disclosure #1: I am considered young, naive, and well educated with an upper middle class income. According to County Health Rankings and Roadmaps, I live in Minnesota's 3rd lowest social and economic county and work in the 2nd lowest.

Disclosure #2: As stated in Part I, I disagree an individual's value is tied to their income, wealth, or productivity.

Tldr(too long didn't read)

Cited effects I believe to be true of minimum wage legislation –

1. Wages are determined by productivity

• The more productive an individual is, the higher the wage they will attain.
• Example: Peyton Manning’s $20 million annual salary versus Christian Ponder’s $3.5 million annual salary. Even though both athletes are employed in identical positions, no one would argue Ponder should be paid the same as five time MVP Manning. This is a direct result of productivity. NFL teams will pay more for 5,000 yard, 50 TD seasons than 3000 yard, 15 TD seasons marred by injuries and inconsistency.

2. Increases consumer prices

• If you raise production costs (labor), the increased costs must be paid for by consumers via increased prices or investors/owners through decreased profits. For better or worse, prices are more likely to be increased rather than owners/investors taking a pay cut.
• This effect can seen by comparing the Consumer Price Index (CPI) of years minimum wage was increased to years when it was not. Starting with the minimum wage increase in 1974:
• CPI increased an average of 6.3% in years minimum wage was increased
• CPI increased an average of 3.0% in years minimum wage was not increased
• Additional note
  Owners can also choose to reduce other, non-wage production costs. These often include loss of employee benefits, increased automation, reduced service/production hours, and utilizing less expensive inputs (raw materials)
  

3. Increases difficulty of less productive workers gaining and retaining employment (possibly leading to unemployment)

• Laws can demand workers be paid a certain wage. However, to maintain fiscal solvency and remain competitive, employers will choose to not hire, nor retain, employees whose productivity does not cover the cost to employe them. Rather, as Peter Roth writes: 
• “Unskilled workers get laid off, replaced by machines and higher-skill workers who are more valuable. Self-checkout lines appear in grocery stores. Credit card machines take the place of the fellow who used to take the money in the parking lot.” 

Case Study: American Samoa and Commonwealth of the Northern Mariana Islands (CNMI)

Timeline -

• 2007: American Samoa’s minimum wage: $3.26/hour
• 2007: Congress enacts legislation to raise American Samoa’s minimum wage by $0.50/hour  annually until it meets the United States minimum wage ($7.25/hour)
• 2009, May: Minimum wage has risen to $4.76/hour
• 2009, 2011: U.S. Congress passes legislation to halt minimum wage increases until September 2015
• 2011: American Samoa National Emergency Grant 
• March 2011 unemployment rate: 46.9%!
• Historic unemployment rate: 7.0%
• We are now spending public funds to rebuild American Samoa
• 2011: Government Accountability Office (GAO) report found unemployment increased by 14% and inflation adjusted wages fell 11% between 2006 and 2009
• 2011: American Samoa Governor Togiola Tulafona testifying before Congress in September 2011 objected that:
• “this GAO report does not adequately, succinctly or clearly convey the magnitude of the worsening economic disaster in American Samoa that has resulted primarily from the imposition of the 2007 US minimum wage mandate.” 
• Gov. Tulafona pointed out that American Samoa’s unemployment rate jumped from 5 percent before the last minimum wage hike to over 35 percent in 2009. He begged Congress to stop increasing the islands’ minimum wage: 
• “We are watching our economy burn down. We know what to do to stop it. We need to bring the aggressive wage costs decreed by the Federal Government under control. But we are ordered not to interfere… Our job market is being torched. Our businesses are being depressed. Our hope for growth has been driven away… Our question is this: How much does our government expect us to suffer, until we have to stand up for our survival?”
• Samoan employers responded to higher labor costs the way economic theory predicts: by hiring and retaining fewer workers. Congress hurt the very workers it intended to help. Fortunately, Congress heeded the Governor’s plea and suspended the future scheduled minimum wage increases. (Source: James Sherk at the Heritage Foundation)

2014 GAO Report - Talanei.com Summary

• Both territories (American Samoa, Commonwealth of the Northern Mariana Islands - CNMI) experienced economic downturns between 2007 and 2009, including the complete exodus of the CNMI’s garment industry and the closure of one of two tuna canneries in American Samoa.
• 45% increase in unemployment in CNMI for the entire period from 2006 to 2012, with most of the overall decrease occurring from 2006 to 2009 (garmet industry closed)
• 36% decrease in CNMI's real gross domestic product (GDP) from 2006 to 2012 
• 4.5% decrease in American Samoa’s real GDP from 2006 to 2012
• 58% employment loss in American Samoa's tuna canning industry from 2007 to 2013
• 5% decrease in average inflation-adjusted earnings from 2007 to 2012
• The inflation-adjusted earnings of minimum wage cannery workers who retained their jobs and work hours also fell by ~5% from 2007 to 2012.
• CNMI: Over the entire period from 2006 to 2012, average inflation-adjusted earnings fell by about 2 percent, with an about 29 percent increase in average earnings offset by an about 31 percent increase in prices.
• 2014 GAO Report Conclusion -
• Both American Samoa and the CNMI have experienced decreases in employment, earnings, and GDP since minimum wage increases began in 2007. 
• In 2012, about 36 percent of American Samoa’s workforce worked in the government sector and about 12 percent worked for the canneries.
• In 2005 18.9% of workforce worked in the government sector (American Samoa Department of Commerce)
• CNMI employment dropped every year from 2006 to 2012 (graph on p.73)
• American Samoa response: (Governor Lolo Moliga)
• "Undergoing this exercise [GAO Report] every two or three years is meaningless and a waste of resources. A better alternative would be to have American Samoa develop its own minimum wage schedule with appropriate guidance and oversight provided by the US Department of Labor and US Department of Interior."
• "For reasons stated above, I strongly urge you and US GAO to send a clear and strong message to the Congressional Committees to postpone once more the looming minimum wage increase in 2015. Please bear in mind this federal minimum wage set for 2015 is nothing but a prescription for total economic ruin for the territory of American Samoa."

4. Inefficiently distributes income to those it is intended to help

• Given a desire to increase the standard of living of low income earners from the poorest households, I believe James Sherk and Joseph Sabia are correct in stating the minimum wage is an inefficient method of accomplishing this desire.
• The following numbers assume all of the least productive workers (as measured by income) would retain their positions. An assumption I find unreliable at best, and likely false as seen in American Samoa and CNMI.
• Sherk – Who earns the minimum wage ($7.25)?
• Valid numbers, but somewhat misleading as only accounts for those currently earning the minimum wage, not those who would be affected by increasing it. None-the-less, it does provide some insight into who earns low income wages.
• Only 23% of all workers earning the minimum wage live in poverty while 65% live in households with incomes > 150% of the poverty line
• More than 50% of minimum wage workers are less than 25 years old. Of these 50%, 62% are currently enrolled in school. Only 22% of these live at or below the poverty line.
• 67% of individuals living below the poverty line who were > 16 years old did not work in the last year. Thus, more than 2/3^rds of those in poverty are unaffected by minimum wage.

• Sabia - Will a $9.50 Federal Minimum Wage Really Help the Working Poor?
• 2010 study looking at who would be affected by a minimum wage increase to $9.50/hour. Intriguing study as uses income-to-needs ratio to allow scaling of income to needs based on household size and poverty level.
• 17.7% of all workers earn between $5.70 and $9.50 and would be affected.
• Of the 17.7% in line to be affected by a minimum wage increase to $9.50 an hour, only 11.3% of these come from the poorest households (less than the poverty line), with an additional 12.1% of workers coming from households living above the poverty line, but below 150% of the poverty line. 
• Almost twice as many workers who stand to be affected by a minimum wage increase to $9.50 live in households with incomes more than 3 times the poverty line. (42.3% of minimum wage workers)
• 1 in 9 workers from households under the poverty line would be affected. Less than 1 in 4 workers earning less than 150% of the poverty line would be affected by minimum wage increase.
• 4.4% of the general working population comes from households with incomes below the poverty line. A minimum wage increase to $9.50 will only affect 2.0% of the poorest households.
• Of the 9.5% poorest households in America, minimum wage will affect less than half of these households. (4.1% of the poorest households)
• As for helping families with children, 26.2% of workers earning minimum wage are the highest earner in their family with children under 18 years old.

• Refering back to Sherk’s article, one of the primary reasons people live in poor households is not that they are earning minimum wage, rather, it is they do not have work (67% have not worked in the last year).
• Sabia’s findings provide strong evidence minimum wage is an inefficient tool for helping households below or near the poverty line.
• Natalie Sabadish at the Economic Policy Institute 
• 2012 study which is for increasing the minimum wage. Uses similar base data, however data is presented in a way to support minimum wage increase.
• Boasts minimum wage increase to $9.80 an hour would raise the wages of ~28 million workers (20 million directly, 8 million indirectly)
• I agree with this, but as Sabia found, only ~3 million of these 28 million come from households living below the poverty line. (11.3%)
• 23.6% of workers affected by a $9.80 raise live in households that make less than $20,000 while 76.4% of affected workers have higher incomes
• For ever 1 low income earner, minimum wage is helping 3 higher income workers. Ideally a measure to increase the standard of living of low income households would affect a majority of low income households.
• Unlike Sabia, does not take into account household size.
• Cites 28.0% of affected workers live in households with children. This is similar to Sabia’s findings and does not exclude those workers who are not the highest income earners of their household.
• Boasts it would boost the economy, I find this effect unreliable as I will discuss later.
• Boasts would disproportionately help women, minorities, and workers of all ages. I would disagree with none of these.
• An interesting graph highlighting the percent of the population that earns minimum wage (Source: Antony Davies at Mercatus Research)

5. Reduces individual freedom

• I am pro-freedom in I believe individuals should be able and encouraged to make self-determined decisions in their own best interest. (exception being when one’s choices infringe upon the rights of others such as murder, theft, etc.) 
• This includes the voluntary accepting and denying of wage contracts. As Murray Rothbard writes:
• “This [minimum wage legislation] means, plainly and simply, that a large number of free and voluntary wage contracts are now outlawed…”
• I acknowledge some freedom must be surrendered to acquire certain securities (Freedom vs. Security Post). Thus, while I believe minimum wage does decrease our individual freedoms, it remains possible it provides needed income security.

6. Popular proposal across a variety of demographics (democrats and republicans, rich and poor)

• Minimum wage legislation has a broad base of support across a variety of demographics as highlighted by recent polls:
• Gallup Poll - 76% of Americans support raising the minimum wage to $9 (Nov. 2013)
• NELP Poll - 80% of Americans support raising minimum wage to $10.10 (July 2013)
• Of note, Emily Ekins at reason.com found minimum wage was significantly less popular if it was assumed to cause job losses or raise consumer prices.
• 67% support increase to $10.10 per hour given no adverse costs
• Drops to 51% support if caused businesses to raise prices
• Drops to 39% support if caused businesses to lay off or hire few workers

7. Decreases our global competitiveness

• Combining increased prices, reduced freedom, and inability to pay low wages, the United States struggles to compete in the production of low skilled and low cost goods and services. This is readily seen in the outsourcing of manufacturing to China and customer service to India.
• Whether or not this is a poor outcome remains in question.

I congratulate you on your perseverance in reading technical jargon and in surviving a metaphorical textbook being through at you. To recap and bring our tldr viewers up to speed, the list below summarizes effects of minimum wage legislation I find sound:

1. Wages are determined by productivity
1. Case Study: Peyton Manning and Christian Ponder Salary
2. Increases consumer prices
1. CPI Historical Data
3. Increases difficulty of less productive workers gaining and retaining employment (possibly leading to unemployment)
1. Case Study: American Samoa and CNMI
4. Inefficiently distributes income to those it is intended to help
5. Reduces individual freedom
6. Popular proposal across a variety of demographics (democrats and republicans, rich and poor)
7. Decreases our global competitiveness

There are many effects cited surrounding minimum wage legislation. Which effects do you believe are true? Why and how did you determine the validity of each effect? Personal experience? Logic? Study results? Other’s opinions?

Minimum wage is complex topic and one size may not fit all (American Samoa and CNMI). In the face of increased unemployment, income equality, difficulty finding jobs, and inability to maintain former standard of living, I believe we can no longer afford to remain ignorant of potential outcomes of minimum wage legislation.

Next Post Topic: Minimum Wage Part IV: Unsound Cited Effects

Minimum Wage Part II: Cited Effects

Before proceeding, please write down 3 effects you believe minimum wage laws have on individuals, businesses, and governments. (do not just think, but make yourself commit by writing)




After reviewing 26 articles, I was unable to find high quality research of what effects individuals believe minimum wage legislation will produce. Rather than reliable poll data of large populations, my findings reflect a number of individual authors with a high degree of bias.

Article List

1. Bryce Covert at ThinkProgress
2. Mike Konczal at the Boston Review
3. Congressional Budget Office Study
4. Jillian Berman at the Huffington Post
5. James Sherk from at Heritage Foundation #1
6. James Sherk at The Heritage Foundation #2
7. Samuel Herne at the Acton Institute
8. American Samoa Department of Human Resources 
9. Government Accountability Office Paper
10. Murray Rothbard at Ludwid von Mises Institute
11. Peter Roth at USNews
12. William Schmidter at Cincinnati.com
13. Rachel West and Michael Reich at Center for American Progress
14. James Sherk and Rea Hederman Jr. at The Heritage Foundation
15. Bureau of Labor Statistics 2005 Report
16. Joseph Sabia and Richard Burkhauser in Southern Economic Journal
17. David Cooper and Doug Hall at the Economic Policy Institue
18. Cameron Davis at ThinkProgress
19. The National Employment Law Project with raisetheminimumwage.com
20. Daniel Aaronson and Eric French at the Chicago Federal Reserve
21. Christina Romer at The New York Times
22. Dustin Hawkins at About.com
23. Governor Peter Shulmin and Governor Dan Malloy at CNN
24. Anthony Davis at LearnLiberty
25. Linda Gorman at Library of Economics and Liberty
26. William Dunkelberg at Forbes

Tldr (too long didn't read)

Effect: Reduces number of citizens living in poverty

• Logic concludes by raising wages, citizens will experience greater income levels leading to less poverty and higher standards of living.
• Bryce Covert at ThinkProgress cites a Restaurant Opportunities United study concluding a minimum wage increase to $10.10 an hour would lift nearly 6 million people out of poverty.
• Mike Konczal at the Boston Review cites two figures. The first a Congressional Budget Office study which found increasing the minimum wage to $10.10 an hour would raise 900,000 people out of poverty. Mike then goes on to state an estimated 4.6 million people would be lifted out of poverty. (likely referencing University of Massachusetts-Amherst economist Arindrajit Dube)

Effect: Increases unemployment

• Textbook economic theory observes as production costs go up (labor in the case of minimum wage), the price of goods and services also go up. As prices increase, demand decreases. As demand decreases, less of the product is needed. Less production means less workers producing the good or service resulting in unemployment.
• A February 2014 Congressional Budget Office study estimates 500,000 jobs would be lost by 2016 with a minimum wage increase to $10.10 an hour.
• James Sherk from The Heritage Foundation cites each 10% rise in minimum wage increases unemployment of affected workers by 2 percent.
• Another article by James Sherk summarizes a case study of American Samoa's minimum wage increases.

• Please read Sherk’s article for details, however a synopsis from American Samoa’s Governor Tulafona: Gov. Tulafona pointed out that American Samoa’s unemployment rate jumped from 5 percent before the last minimum wage hike to over 35 percent in 2009. He begged Congress to stop increasing the islands’ minimum wage:
• “We are watching our economy burn down. We know what to do to stop it. We need to bring the aggressive wage costs decreed by the Federal Government under control. But we are ordered not to interfere …Our job market is being torched. Our businesses are being depressed. Our hope for growth has been driven away…Our question is this: How much does our government expect us to suffer, until we have to stand up for our survival?”
• Other American Samoa Resources
• Acton Institute
• American Samoa Department of Human Resources
• Government Accountability Office
• Murray Rothbard at Ludwig von Mises Institute: “This [minimum wage legislation] means, plainly and simply, that a large number of free and voluntary wage contracts are now outlawed and hence that there will be a large amount of unemployment. Remember that the minimum wage law provides no jobs; it only outlaws them; and outlawed jobs are the inevitable result.”
• Peter Roth at USNews: “Unskilled workers get laid off, replaced by machines and higher-skill workers who are more valuable. Self-checkout lines appear in grocery stores. Credit card machines take the place of the fellow who used to take the money in the parking lot.”
• William Schmidter at Cincinnati.com: "According to The Bureau of labor statistics 45 percent of the working age people are unemployed. We are competing with the world for jobs making shoes, shirts, bicycles, televisions, computers, cars and many other things that we use. The world is paying $2.00, $4.00, $6.00 an hour for many of these jobs. Every time we raise the minimum wage we send more of these jobs overseas."

Effect: Reduces use of public assistance programs (food stamps, subsidized housing, etc.)

• Rationale: The majority of public assistance programs are income based. Raising individual incomes will reduce the number of public assistance recipients and therefore lower welfare expenditures.
• Rachel West and Michael Reich at Center for American Progress found a 10 percent increase in the minimum wage reduces SNAP enrollment by 2.4-3.2% and reduces program expenditures by an estimated 1.9 percent.
• “Our results imply that the effects of the Harkin-Miller proposal on wage increases ($10.10 per hour) would reduce SNAP enrollments by between 6.5 percent and 9.2 percent (3.3 million to 3.8 million persons). The total anticipated annual decrease in program expenditures is nearly $4.6 billion, or about 6 percent of current SNAP program expenditures.”

Effect: Only helps a small percentage of those who are in poverty (inefficient method for eliminating poverty)

• Economists Joseph Sabia and Richard Burkhauser concluded in their 2010 study: 
• “Assuming no negative employment effects, only 11.3% of workers who will gain live in poor households… Our results suggest that raising the federal minimum wage continues to be an inadequate way to help the working poor.”
• James Sherk and Rea Hederman Jr. at The Heritage Foundation found in 2005:
• 1.3 million Americans earn the minimum wage or less per hour, or 1.1 percent of the total working population
• 19.5% of minimum wage workers are at or below poverty line with 56.1% living in households > 2 x the poverty line
• 61.7% of minimum wage workers only work part time (or not at all)

Effect: Boosts economy

• David Cooper and Doug Hall at the Economic Policy Institue write:
• “Economists generally recognize that low-wage workers are more likely than any other income group to spend any extra earnings immediately on previously unaffordable basic needs or services. This results in an immediate economic boost as money is transferred from individuals more likely to save to individuals more likely to spend.”
• “At the same time, it [minimum wage increase] would provide a modest stimulus to the entire economy, as increased wages would lead to increased consumer spending, which would contribute to GDP growth and modest employment gains.”
• Bryce Covert at ThinkProgress, Cameron Davis at ThinkProgress, and The National Employment Law Project with raisetheminimumwage.com all cite a study by Daniel Aaronson and Eric French from the Chicago Federal Reserve estimating  raising the minimum wage to $9 an hour would create a $48 billion boost in 2012 GDP, $28 billion if account for potential job loss.
• One important caveat to note is the authors concluded:
• “Finally, it’s important to stress that the aggregate household spending response discussed in this article is relevant for only the first few quarters after a minimum wage hike. Beyond that time frame, households must pay off debt they incurred in the short run by spending less. Thus, a minimum wage hike provides stimulus for a year or so, but serves as a drag on the economy beyond that.”
• None-the-less, short-term economic boosts can get the ball rolling to continued growth.

Effect: Increases consumer costs

• Another textbook economic theory. Raising production costs (cost of labor) will require producers to increase prices which will be paid for by the end user/consumer.
• Christina Romer from the New York Times and Dustin Hawkins from About.com cite increased consumer prices as a consequence of minimum wage legislation. In addition, Romer further argues passing along production costs to consumers in the form of higher prices will disproportionately affect low income earners as they are more likely to purchase those low cost goods and services which would be most affected by a minimum wage (McDonalds, Wal-Mart, etc.).

Effect: Increases worker productivity and decreases employee turnover

• Governor Peter Shulmin and Governor Dan Malloy in a CNN article: “In fact, recent studies conclude that raising the minimum wage makes workers more productive and therefore helps businesses retain profitability.”
• Mike Konczal of the Boston Review: “The minimum wage becomes an incentive for bosses to do a better job managing their employees. Higher earnings also encourage employees to work harder. Economists call this the ‘efficiency wage’: when workers have more to lose, they do their jobs better in an effort to keep their gains.”

Effect: Increases difficulty of low skilled workers finding entry level jobs to acquire skills, experience, references, etc.

• James Sherk at The Heritage Foundation: "A higher minimum wage helps only those workers who actually wind up earning that wage and further disadvantages lower-income workers, who suffer fewer job opportunities and working hours."
• Anthony Davis at LearnLiberty: “It [minimum wage] helps the more productive workers as the expense of the less productive workers. What’s worse is the more productive workers normally don’t need the help.”
• Linda Gorman at Library of Economics and Liberty: "In practice they [minimum wage laws] often price low-skilled workers out of the labor market. Employers typically are not willing to pay a worker more than the value of the additional product that he produces. This means that an unskilled youth who produces $4.00 worth of goods in an hour will have a very difficult time finding a job if he must, by law, be paid $5.15 an hour.
• William Dunkelberg at Forbes: "Firms cannot pay a worker more than the value the worker brings to the firm.  Raising the minimum [wage] denies more low skilled workers the opportunity to get a job and receive 'on the job' training.  The impact of raising the minimum wage in 2009 on teen employment makes it very clear that this is especially harmful for young teen workers looking for their first opportunity to have a job. Raising the cost of labor raises the incentive for employers to find ways to use less labor.

Effect: Reduces gender and racial income inequality

• Mike Konczal at the Boston Review: "The minimum wage affects women disproportionally, especially women of color. According to the Center for American Progress, more than 64 percent of those earning the minimum wage or less are women. African American and Latina women are 15.8 and 16.5 percent of female minimum wage earners, respectively, though only about 12.5 percent of employed workers.
• David Cooper and Doug Hall at the Economic Policy Institute: "Women would be disproportionately affected, comprising 56 percent of those who would benefit. Although workers of all races and ethnicities would benefit from the increase, non-Hispanic white workers comprise the largest share (about 54 percent) of those who would be affected."
• Bryce Covert at ThinkProgress: 
• "It would help close the gender wage gap: Women make up two-thirds of the minimum wage earners in the country, which is why 13.1 million would be impacted by a raise. Evidence already suggests that a higher minimum wage is related to a smaller gender wage gap at the state level, pointing to a raise as a good way to help change the fact that women make 77 cents for every dollar a man earns."
• "It’s an important racial justice issue: Three and a half million people of color would be lifted out of poverty with a minimum wage raise to $10.10, representing the majority of those lifted out of poverty. People of color are much more likely to work minimum wage jobs, making up 42 percent of those workers even though they make up 32 percent of the overall."

Effect: Majority want it

Bandwagon

• Governor Peter Shulmin and Governor Dan Malloy in a CNN article: “common sense” 
• "We'll do so [raise minimum wage] with the benefit of having the American people on our side. Democrats, Republicans and independents alike overwhelmingly support raising the minimum wage. A recent Wall Street Journal/NBC poll shows 63% of Americans support it."
• Bryce Covert at ThinkProgress: "Americans support a raise: A poll released on Wednesday shows that 80 percent of Americans support a raise to $10.10 an hour, including more than 90 percent of Democrats and even two-thirds of Republicans, as well as 83 percent of low-income adults and nearly 80 percent of those who make more than $100,000."

Effect: Morally just

• Mike Konczal of the Boston Review: "Catholic doctrine provides a religious case for a minimum wage, which is all about balancing the needs of the family with those of the marketplace. As Pope John XXIII argued in a 1961 encyclical, the wage of the poor 'is not something that can be left to the laws of the marketplace,' as 'workers must be paid a wage which allows them to live a truly human life and to fulfill their family obligations in a worthy manner.” In the words of Pope John Paul II, 'A just wage is the concrete means of verifying the whole socioeconomic system.'"

Tldr:

Positive Effects: Reduces number of citizens living in poverty Reduces use of public assistance programs Boosts economy Increases worker productivity and decreases employee turnover Reduces gender and racial income inequality Majority want it Morally just

Negative Effects: Increases unemployment Only helps a small percentage of those who are in poverty Increases consumer costs Increases difficulty of low skilled workers finding entry level jobs to acquire skills, experience, references, etc.

Minimum wage legislation is a complex and highly emotionally charged issue polarizing many individuals and groups. How do the effects you wrote down compare to these? Which effects do you find valid and which do you question? Referring back to my previous post, what are you for and against? Poverty alleviation? Fair and just wages to reduce income, gender, and racial inequality? Economic stability? Based on the above cited effects, do you feel minimum wage legislation is an effective method for achieving your desired outcomes? Why or why not?

Next Post Topic: Minimum Wage Part III: My Thoughts

Minimum Wage Part I: For and Against

More than 3 out of 4 Americans support raising the minimum wage to $9 an hour. In a time when Congress has been in constant gridlock, raising the minimum wage has bipartisan support with more than 50% of republicans and democrats supporting a minimum wage increase.

• 76% of Americans support raising the minimum wage to $9 (Nov. 2013)
• Gallup Poll
• 80% of Americans support raising minimum wage to $10.10 (July 2013)
• National Employment Law Project

Historically, minimum wage was first enacted by Franklin D. Roosevelt with passage of the Fair Labor Standards Act in 1938 and has been increased 22 times. Minimum wage in 1938 was set at $0.25 an hour.

How does today’s minimum wage of $7.25 compare to 1938? At $7.25 an hour, today's minimum wage is higher than the inflation adjusted wage in 1938 ($4.08) and the 1938 - 2013 average inflation adjusted wage ($6.60) per hour respectively. Today’s minimum wage is however lower than its peak inflation adjusted wage of $8.67 realized in 1968.

Before expounding upon my beliefs on minimum wage, I want to clearly state what I am for and against. 

I support:

• Increased economic prosperity for all, especially those given the label as low income earners by the U.S. Government
• Equal treatment
• I support men and women of all races, ages, religious preference, etc. be given fair compensation for their contributions, as well as equal opportunity to maintain and improve their standard of living
• Greater local influence
• I support state, regional, and local enactment of public policies rather than a one size fits all system as our federal government prescribes. I believe the State of Minnesota has a better idea what is good for its constituents than politicians in Washington D.C. Similarly, I believe public officials in Bemidji, MN have a better idea what will best serve residents of Bemidji compared to state politicians.
• Freedom
• I support individuals having the opportunity to decide for themselves what is best for them. Similar to greater local influence, I believe individuals are in a better position to decide what is best for them rather than politicians miles away.
• Long term sustainable growth
• I support sustainable initiatives designed to create long term economic prosperity. Short term prosperity can be achieved at the expense of long term growth, however I believe this is unsustainable and foolish. 
• A good example is consumer debt. You can acquire any number of products and services on credit. Here you agree to short term gains (car, house, phones, TVs, etc.) in exchange for reduced long-term growth (any growth will be going to your debtor plus interest). This is great in the short term, but, ask anyone with large student, credit card, and housing debt their outlook on their long term growth and you will likely see this principle first hand.
• Wages linked to current and potential productivity

• I believe a worker's wage should rise and fall based on his/her productivity. For example, if George can make 20 widgets per day while Fred constructs only 5 widgets per day, I believe Joe should be given a higher wage than Fred even though they are technically doing the exact same work.
• NFL draft picks are an example of potential productivity. They are paid millions of dollars with the hope they will perform in the NFL. Thus, they are being compensated for their potential (rather than actual or current) productivity.
• The voluntary exchange of labor for wages will only be sustained while a worker’s productivity (current or potential) is equal or greater than the worker’s wage.
• If it costs Widget Workshop $10 to make a widget (excluding labor costs) it can sell for $20, Widget Workshop will not be able to pay Joe more than $200 per day (20 widgets x $10 profit = $200) nor Fred more than $50 per day. If Widget Workshop paid higher wages than these, it would operate at a loss and eventually become insolvent.

What I am against:

• A person’s value linked to their income or wealth
• I believe a person’s value is God given. I believe all people have been created in the image and likeness of God (see disclaimers) and therefore have been graced inherent value. A value or love from God that cannot be increased nor decreased. For this reason, I am against linking a person’s income, net worth, fame, etc. to their societal or individual value.
• Social engineering/Central planning
• As a general rule (some exceptions do exist such as pollution) I believe federal government involvement should be minimized in the affairs of individuals and private businesses. (See freedom above)
• Social engineering effectively tells people: “You do not know how to manage your affairs, but I do. Therefore live your life as I tell you.”
• American entitlement
• Please remember I am for increased economic prosperity for all, especially those who the U.S. Government has defined as low income earners. This being stated, I am against Americans being entitled to higher wages and standard of living on the sole basis we are an American.
• I find it ironic how passionate Americans are to remove the income inequality between men and women, yet there is little passion to remove the income inequality between Americans and citizens of other countries. Similar to supporting a woman receiving equal compensation for doing the same work as a man, should not an Eritrean receive the same cost of living adjusted wage as an American for completing the same task?
  
• Politicians in Washington D.C. believing they can successfully run a business
• From what I’ve seen they spend more time spinning issues and spending money we don’t have ($17+ trillion in national debt and rising) than promoting sustainable growth.
• Politicians acting as demagogues
• Politicians should not be acting under the influence of lobbyists, political elites, and faulty public opinion. Rather, politicians should be making well researched and informed decisions that benefit a super majority (75+% of the people).

Whether you are part of the majority who support a minimum wage increase, or the minority who does not, I encourage you to take the additional step to determine what effects you believe the minimum wage has on individuals, businesses, and society. A large body of conflicting research already exists. My next post will attempt to summarize my own findings.

Next Blog Post: Minimum Wage Part II: Individual, Business, and Societal Effects