The minimum wage in the US is to rise by $2.10 per hour, to $7.25 from its current level of $5.15, the first time it has increased in a decade.
The US Congress voted in favour of the rise, which was attached to a bill funding the Iraq war.
Democrats promised to boost the minimum wage when they won control of Congress in elections in 2006.
The increase will be phased in over a two-year period and will accompanied by tax breaks for small businesses.
The White House negotiated a $4.84bn tax break to help employers pay for the increase in wages.
Minimum wage workers are typically young, single and female and are often black or Hispanic.
Twin benefits
Previous proposals to boost the minimum wage have regularly been scuppered by arguments between Democrats and Republicans.
Earlier this year the proposal was approved by both houses of Congress but became one casualty of President George W Bush's veto of a previous funding bill which included Democratic plans to impose a timetable for the withdrawal of troops from Iraq.
The chairman of the Ways and Means committee in the House of Representative, Democrat Charles Rangel, said the new measure would benefit employees and employers.
"This package will help millions of American workers better cope with the rising cost of living while helping our businesses expand and hire new workers to keep our local economies vibrant."
Original article at the BBC website located here.
Oh course I don't think that 7.25 is nearly enough. I would have like to have seen it set it at around a dollar more.
11 comments:
I'm ambivalent, really. Those who are able to score the lowest rung jobs will now make more, which is great. The flipside being that there will be fewer overall jobs available in the bigger picture. One can't magically make money appear without taking it away from someone else. The end result is that we're just moving the money around.
So... Yay?
I disagree with John. It's a total myth that when minimum wage goes up jobs get cut. What happens most often is that prices rise slightly across a broad spectrum of products and commodities, thus diffusing the cost throughout the system. On the other hand, there is some truth to the argument is we consider companies moving overseas so they can exploit poor(er) workers in developing countries. But the problem there is not a minimum wage increase, but with market forces and capitalism in general, or at least the notion that we don;t want to restrict the market by making it harder for US companies to outsource or move their operations to Bangladesh, the Philippines, or Nicaragua.
It's true(ish) the money must be made up somewhere--God forbid corporate profits should slip or that a CEO should make less than 7 million a year. But John forgets that when people earn more money they spend more money. So the extra two bucks that a Wal-mart employee earns goes right back into the economy, not to mention it increases the tax base and funds much needed social welfare projects...or just a big costly war in Iraq.
Lastly, I am all in favor of moving money around--from the top to the bottom. A little downward redistribution is what our economy sorely needs, and not in the failed Reaganomics, trickle down theory of the 1980s, but such that the completely unchecked explosion of wealth at the top of the scale is reined in in a serious way and re-invested in society and thus benefits everyone.
Sure, if we make more money, we spend more money... but where is the benefit if we're spending that money on the expanded cost of the goods we buy?
Remember, not all business have a CEO for whom there is a golden parachute just waiting to be deployed. Most business entities are small businesses doing their best to balance their books and make a buck. It's far easier for Wal Mart or McDonalds to diffuse the cost of extra wages through the their sheer volume of goods than, say, a local electronics chain, or a small chain of hardware stores.
Let's also not forget entities like insurence companies, for instance, that adjust their premiums according to anticipated "expendable" income. If the average American makes more, they will adjust their premiums/payments accordingly.
So, great, you're making an extra $2. Too bad the cost of food, gas, insurence, et al will go up too, and swallow whatever surplus you would be making as a result.
Inflation defeats the purpose entirely. 5 years from now, people will be saying we need another $2 hike in the minumum wage because the current level isn't enough to sustain somebody. So, in my opinion, a hike in minimum wage is just a bandaid over a deeper problem. As man with a family who has to pay for all of these expanding "necessities" like gas and health insurence, it seems to me that instead of just giving people more dollars, we need to find a way to correspondingly make a dollar go farther.
I do agree with John on the last bit, a $2 dollar hike is only a band aid solution to a larger problem. But I am not sure what John sees as the larger problem or the better solution.
I think it is problematic on a moral and economic level that the minimum wage has stayed the same for about a decade while the price of staple goods has risen exponentially. According to market -based economic theories all of these should find a happy, efficient equilibrium. If that were true, then there would be no need for a minimum wage because the market would settle on a fair price. But the market assumes relatively equal bargaining power and a range of options for both parties. The problem here is that corporations, because they have so much power relative to labor, sets the terms and the options. For example, Wal-mart can pay "extra low" wages to its workers because 1) their employees often lack skills that allow them to pursue more gainful employment, 2) are ridiculously anti-union, which prevents employees from being able to balance the scales, and 3) they have undercut and therefore eliminated the competition from the mom and pop shops John mentioned in his earlier post.
So, the free market policies that have allowed companies like Wal-mart to become the economic hegemon they are have reduced competition and thus undermined the spirit of the market that is supposed to keep wages at a respectful level, one that is adequate for people to live off of but that doesn't adversely impact the sustainability of the business .
So, to get back to the original point, minimum wage hikes are necessary , and needed more frequently I would argue, in order to counter act these problems. A better, deeper solution would be to further regulate the market before companies like Wal-mart become hegemonic, and to increase the strength of unions, which would mean creating laws that prevent companies like Wal-mart from firing employees that want to form a union. Funny that market intervention is necessary to make a market run smoothly (let alone justly), but that's how it seems to go.
Not being an economist, I can't speak directly as to what I think the larger problem is. I can only bear witness to the symptoms, and give a superficial account of my own observations.
I'm hesitant to install more artificial control and government involvement in the market place... From my own experiences building complex systems and observing emergent behaviors, you absolutely can tweak a system (in this case, and local or international marketplace) for maximum efficiency for any desired metric at a given point in time.
The problem is, the more such controls you install, the less flexible the system becomes, and the more overhead you generate by having to have other systems in place to control the controls.
Now, Reed says "A better, deeper solution would be to further regulate the market before companies like Wal-Mart become hegemonic". How so? What kind of regulation are we talking about, here? What controls can we put in place that intentionally put the breaks on the overall competitiveness of a company, but are still "fair"? And what metric of success do we look at to determine when a company is about to become a “hegemon”? Furthermore, How do we specifically define a hegemon in black & white, yes or no atomic rules that clearly say “yes, this company is becoming a hegemon according to the law of the land, thus apply rules x and y”
If you put laws in place that forbid a company to fire employees because they want to unionize, the government is effectively telling a private entity who they can or cannot choose to employ, based on an arbitrary set of rules written generally by people who’ve never been in a position to have compete in a market for their daily bread. I, personally, have a serious problem with that. I don’t mind being told I can’t hire someone because they are suspected of being involved in bombing an Embassy somewhere, or snuck into the this country illegally. If they’ve committed a serious crime, that’s one thing. But when I’m told I can’t FIRE someone because they want to be able to strong arm me into paying them whatever they feel they deserve, then that is absolutely unacceptable. Especially as a soon-to-be employer myself.
Man, where to begin? First, I find it a little offensive that you would use bombing an embassy in any kind of analogy with union building. Second, the right to free association is included in the first amendment, and while the Bill of Rights doesn't necessarily cover private industry, it seems a little, um maybe un-American for a US company to get to act directly against the spirit of the document. Third, the right to form unions and bargain collectively with an employer is international law, as specified in both the UN Declaration on Human Rights and in the International Labor Organization's core labor conventions, both of which the US has signed. Fourth, US laws already cover who you can fire and what for what reasons. It's a violation of civil rights to fire someone because or race, religion, or political ideology, and discrimination based on wanting to join a union is very much akin to firing someone because of their political beliefs. Finally, it's only because of unions and government regulation that we moved beyond the serious abuses of the industrialization period--that was the market unregulated, and it led to huge profits for companies and workers being treated awfully.
We would probably not need unions if employers all treated their employees fairly, but the fact is they don't. The market takes as much as it can, which means that if laborers can't bargain collectively they consistently are subjected to low pay, no benefits, poor working conditions, and abuse by their employers. My girlfriend is a labor attorney and deals with employers and their insurance companies daily so I hear about this relationship constantly. Not to mention the similar stories I hear from friends who grew up in union families. So don't think for a second that employers don't try every trick they can think of to get out of paying hospital bills, benefits, compensation for injuries, etc. And the sad thing is that they win more often than not because they have the resources to keep cases tied up in court for years while the claimant goes bankrupt. On the same note, they have the power, clout, and resources to lobby politicians to prevent the types of laws I am advocating from ever being implemented.
So, I guess I just can't understand it when people are anti-union. Workers need advocates and they need laws to protect them from abuses by those that employ them. Something has to balance the scales, and unions and pro-labor laws and regulation are the way to do it.
Not so fast there, Mr. Lefty McLiberalton! Not once did I ever make an analogous comparison between embassy bombers and union builders. This kind of rhetorical slight-of-hand may easily rile the average bear, but come on, I’m going to hold you to a higher standard than that! I won’t be goaded by false attribution. :)
Now, regarding this topic, there are very few right or wrong answers, because there’s a lot of subjectivity involved here…but I will try my best to respond to the points you made above.
1. Free Association: As I understand it, the right of free assembly is intended to prevent Congress from passing laws that prohibit the private citizen’s right to assemble as one chooses; i.e. to prevent government intervention in a citizens right to associate with whomever they choose; and conversely, it can’t force one to associate with anyone they don’t. Why does this not apply to the employer / employee relationship?
2. While Article 20 of the UDHR is a bit vague, Article 23 does clearly state that everyone has the right to form and join trade unions. So yes, anyone can form a trade union to bargain collectively. But this does not implicitly mean that a company cannot fire people because it doesn’t want unionized labor. i.e. yes, individuals can organize and try to bargain collectively. That doesn’t mean the company can’t fire the lot of them. In the case of Wal-Mart, the issue becomes problematic with respect to the fact that forming a union that COULD bargain effectively with the parent entity would require that the interested parties band together quickly enough and with enough numbers that the option of firing them would become economically unfeasible. Otherwise, they get picked off one at a time before they can get the union off the ground (Wal-Mart’s current strategy, which, I might add, I don’t agree with) A grass roots campaign with enough steam could, I think, get it done. Now, should the employees have to engage in an underground campaign of such skullduggery to accomplish the task? *shrug* I think most any reasonable human being would say no, they shouldn’t have to, especially if the majority of the employees want to pursue the formation of a union. But I don’t believe they have the right not to have to. i.e. “Inconvenience” (as tepid a word as that may be in this situation) is not synonymous with “breach of human rights”. While I do think Wal-Mart’s action in this particular case is shitty, I don’t necessarily agree with forcing companies to keep employees on the payroll that they see as fomenting action that could be detrimental to the way they WANT to run their business.
3. You are correct, and I do believe that such laws are important and necessary. But being an African-American communist with red hair who likes pickled herring for lunch is a very different thing than someone forming a trade union. The former has almost zilch to do with a business’s operation and productivity. The latter, however, can alter it dramatically, even run it into the ground if things get out of hand. The company’s management has an obligation to its investors, share holders, and other employees to fulfill their financial obligations, and ensure that the company is profitable and competitive in its market.
Employee salaries and benefits are already the single largest expense for almost any business out there. And when an Employee union forms without the agreement or approval of the parent company, things can get ugly quickly, especially when demands for penchant plans and expanded health coverage come to the table.
Now, I know there are plenty of companies out there that treat their employees like crap, whose executives will bail on a golden parachute while the company and its employees are left to eat a shit sandwich (Delta Airlines, anyone?). There are plenty, too, that don’t. On the flip side, there are plenty of Unions out there that have laid the groundwork for a very beneficial and productive relationship between the employer and its employees… but there are plenty that are little more than an albatross around the employers neck, because it can’t fire employees that do shitty work (GM comes to mind readily)
In an ideal situation, a labor union should always be formed in such a way that is agreeable to both the employer and the employees. That much, I think we can all agree on. But then again, necessity is the mother of invention… Employees don’t tend to form unions unless there is an existing perception of lack of fair treatment. I think part of the problem is that since many of these bottom-run retail jobs employ mostly “unskilled” labor, many of the folks working in such places don’t have the know-how or the drive (rather, the expectation that the job will be shitty) to organize in a successful fashion.
But should a company be obligated by the full force of the law to allow its employees to unionize? I’m hesitant. However, I think I could be convinced to concede to a compromise providing that a union cannot force an employer to only hire union jobs. If there are employees that do not wish to be a part of the union, then they cannot be discriminated against or otherwise disenfranchised by union members in any way. This is actually one of my largest grievances with many labor unions, actually… many have a penchant for bullying outsiders.
Ok, I think that’s all I really have to say on the matter... As is often the case, the discussion boils down to “more government vs. less government”. When in doubt, I’m inclined to go with the latter. But I will say that you’ve made your point, and I think my position is not so much anti-union as it is anti-nanny-state. But I do respect your position.
Wow. That sparked a nice spirited debated between the two of you. Excellent! The first step to mutual understanding is discussion, I applaud you both.
I can't for sure say I am exactly 100% with either of you for various reasons. All I will say is that laissez-faire economics are outdated in a industrial/post-industrial marketplace. The "invisible hand" works best on a small scale. With the advent of mechanization, factors within the complex field of economics become compounded from both sides. In my opinion, the problem lies with the fact that history tends to show if left alone the factory and corporate world tends to abuse employees. It happened with abandon in the 19th century and it still happens today in developing nations. Some of the worst cases of down right human rights abuse are from multinational powerhouses like Wal-Mart (we won't even get into Big Oil). That is what happens in a marketplace in an industrial setting without government regulation and the ability of an employer to cripple any attempt at collective bargaining.
Does this mean every company in the US needs a labor union to represent its employees or heavy regulations to safeguard rights? No. Some companies treat employees equitably, some treat their employees well. I would never say that it is impossible to carry out fair and honest business without someone to enforce labor rights and fair working conditions. That being said...
I see nothing wrong with collective bargaining. It has helped bring about amazing things in this country alone. Safer working conditions, living wages, health insurance, the list goes on. Not to mention the intangible benefits like building community and a feeling that one is being treated with some amount of dignity (mainly because you are seen are a human being rather than an easily replaced position that feeds the company's bottom line at the least amount of dollar signs at the end of the day). Labor unions work with employers more than they work against them. Unions often take pay cuts if needed. They attempt to understand the company's interests as well as those represented. Reason being, not all union employees are independent of the company. A vast majority of advocates and stewards are NOT paid by the unions. These people do not get paid if they don't work, period. Matter of fact, these people usually give up at least a day a week (unpaid) to assist their fellow employees, because they have an obligation to see that they can work and be paid in a fair way according to contracts. It's all about workers' rights to them.
Now are there corrupt union officials? I'm sure there are, but that is a represented percentage of every single occupation in the world. But as a whole, unions are overwhelmingly a good, and necessary, thing in an industrial/post-industrial society.
And for small companies, unions aren't even usually existent. In general, because of the nature of most small businesses, they treat their employees better and more fairly. And when they don't... well then usually there's a long legal battle that hurts both parties involved.
Sorry... this is about minimum wage too isn't it :-) I don't think that 7.25 is enough, which I say as my only comment after the original article in the entry. In two years, 7.25 will be just as outdated as 5.25 is today. You cannot live off that amount of money given the rising cost of living in the US, especially if you have a family. It's as simple as that. It also seems to me, if I am paid an excess in wages, then I spend more money (Americans spend money when they have it, very few say very much). If I spend more money, that creates a demand for more products and services. Higher pay = higher demand for stuff = a need for more supply = more jobs = growing economy = higher pay. But I am not an economist either, so there are most likely ways to poke holes in my logic there, but you get my point.
A lot of these problems we are discussing are also brought about by an unbalanced system of world trade. If all workers were paid fair wages without national tariffs and trading blocks, then maybe the laws of the marketplace would create some equilibrium. But that is a pipe dream and I'm pretty sure it wouldn't even work out then. That is surely a discussion for another time though.
That's my two cents.
Thanks again for a nice debate, next time I'll jump end before it's over.
… and, to be honest, I hesitate to even call it a “debate”, per se. Personally, I think the word implies a adversarial contest of wills and rhetoric in which one side wins, and another loses... which shouldn’t be the point of what we’re doing here. I for one am sick and tired of having to listen to ideologues yelling at each other, without anyone actually listening to what is being said unless it’s to pick a part the argument so as to craft a perfect retort.
Instead, I think a thoughtful, productive discussion is indeed the more appropriate description of what we want to foster here.
I've always thought that Reed was a sharp guy, and I hold his intellect in high esteem... and even though I disagree with his politics on many points, I do make a concerted effort to be cognizant of the fact that, for the most part, we all want the same things. The disagreement is usually over how to make those things come to fruition, and whose responsibility it is to see that it does.
Regarding the $2 raise in minimum wage: Like I said, it’s all fine and dandy, but it won’t mean much in the long run until we can make a dollar go further than it does now. Part of that is encouraging a culture that saves as often as it spends. Unfortunately, fiscal responsibility is a skill sorely lacking in low income, low education households. Even stashing away 10 to 20 dollars a month into a Savings Account, then a CD, then a Money Market account, etc can help put a family on track to a better standard of living. Now, I know that might mean having to forgo a trip or two to McDonalds a month, the carton of Newports, and/or the spinning rims and ground effects for your ’87 Cadillac, but in the long run, it’s the better investment. As the quote goes, “Compound Interest is the most powerful force in the universe.” :)
And while we're on the topic, I’d just like to point out that Congress has no business ever voting a pay raise for themselves without also raising minimum wage. As far as I’m concerned, it should be law that voting for one should be a corresponding vote for the other.
I agree with John. On the point of the blog, that is what makes this fun, and thought provoking. I appreciate the intellect and rational of the contributors, and enjoy their comments.
I would like to see other people on here, though. Spread the word. By divine decree the people must engage in spirited debate on issues of importance both domestic and foreign...and um, weird news reports that might interest some people, some places.
I agree as well as on the fact that two bucks is not fundamentally going to change things.
I don't really understand what he means by "making the dollar go farther." I mean, I understand that we as a society would be better off in the long run if we saved instead of spent, invested wisely and thought longterm, eschewed a culture of consumerism...But that is the problem. While on the one hand economic advisers and planners suggest that we all need to conserve and save, our economy is built on consumerism. And honestly, if we didn't all spend ridiculous sums of money on the service (now the backbone of our economy) such as cable TV, text messages, Big Macs, music downloads, etc., our economy would collapse.
Sadly, we have constructed a consumption-oriented economy, which rather demands that we give unto it every dollar earned lest it turn upon us by way of massive recession brought on by falling consumer confidence and inflation.
See; it sucks. And what is the way out of this mess? Well, yes, a little fiscal responsibility would help, but not totally solve the problem--and here is where I want to take issue with John. Fiscal irresponsibility is MOST lacking in the high income bracket. The wealthy hemorrhage more money in a day on superfluous extravagances than most "low skilled, low income" workers make in a months.
Yes, people in low income brackets should put a little aside, but that is often very hard to do. And maybe they could get farther by foregoing some of their own meager extravagances, but honestly, if any of us worked 50+ hours a week at Wal-Mart or in a textile mill, or as a manual laborer I would be willing to bet that the money spent on cable, a trip to Mickey D's, some smokes, and a case of Ice House would be money well spent. Sure, we could save it--what would that be, 25 bucks a week or so? But we all need some release when we get home--video games, tv, beer, whatever. And asking people to forgo a few simple pleasures in the hopes of one day hoping to accumulate enough wealth to build a better life is asking a lot, especially given that inflation and price increases will keep driving the cost of the goods and services they need to move themselves up the ladder out of their reach. By the time they have accumulated enough to buy a home at today's prices the house will cost 3 times as much.
So at this point, why bother. I could also launch into a more sociological explanation of the culture of poverty and its effect on perceptions of success and upward mobility, but I'll refrain because of space. This are important, but I think the most pressing are the structural factors that work so hard to keep the poor...well poor.
Solutions? Again, I think the government plays a huge role here in terms of providing access to better education, technical training (e.g. community colleges, etc.), job placement, helping people get out of debt, providing government-backed low-interest/no interest loans so people can actually buy homes, universal health coverage so medical costs don't same family budgets. Also, and this may sound dumb, but bring back home economics! Seriously, people need to be better educated consumers. The need to know how to make a budget and how to open a saving account. They also need to know how the credit card companies screw them, how interest compounds, and how to read their CC agreements. This would seemingly address at least part of John's concern.
I also think that the private sector has a role, though. Governments can't do everything, so some of this burden should be borne by non-state actors--whether it's churches or community groups, or whomever. Community-based lending programs are a good idea. So are the training programs that some churches offer. The question here is how to get these going and who funds them.
Heh, well, the reason you don't know what I mean by "make the dollar go further" is that I haven't said.... um, because I don't really know myself. :) Knowing the problem and knowing the solution to the problem are two very different things. :P
Part of the answer is knowing how to save money, and make money work for you: gaining interest on savings, low risk investments, putting money into equity instead of the financial toilet of rented properties, etc.
The other part is stopping the industries of “essentials” (Oil and insurance companies are my favorite targets) from strategically expanding the their cost to overtake surpluses in the average American’s household budget…. But doing so in a way that preserves the spirit of a free market, yet doesn’t fall into the trap of excessive government control (or send the economy into collapse) is beyond me. And it’s quite likely that we won’t be able to build an economy that isn’t founded on mindless consumerist whorism until it does collapse, and we have to rebuild it from scratch.
So on that note, I’m going to kick off my Nikes, and go play some video games while eating Doritos and drinking a Diet Pepsi.
Good discussion, guys!
Oh, a topic for future discussion: The potential for the internet to be a "Great Equalizer", allowing the seeding of small business in the virtual market place?
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