POLITICAL     OUTCOMES

MODIFICATION OF THE PRESENT-DAY MINIMUM-WAGE SYSTEM

Is it fair for an employer to pay fourteen dollars an hour to a young person with little or no work experience? Is it fair to force companies to pay wages causing a loss of income from what an unskilled worker brings in? What about those employees who do have experience but are paid only $7.25 per hour?

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Part 1: A new minimum wage plan

In many states, it is the government that makes up for wage deficiencies typically found for example in the fast-food industry. There are other factors affecting minimum wages as well. Some states use the federal minimum wages of $7.25 per hour and some metropolitan areas use a minimum wage of $15 per hour. These extremes of pay are symptomatic of large differences between urban and rural economics. 

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California State Senator Patricia Bates, argues that a new law requiring a large increase of the minimum wage “is a short-term ‘fix’.’’ She says it will create “long-term negative impacts” and “it is a false promise to those who are struggling to get ahead.”

That’s what we’ve been hearing forever. It’s just the old creed for business interests to keep wages as low as possible. Actually, she does have a point. There could be some reduced hiring as the minimum wage increases over the next four years. But, at a pay rate of $10 per hour, a person working full time makes about $20,000 a year, well below the poverty level. That person will likely have a government subsidy for an effective wage of about $30,000 a year -- a subsidy of 50% of the wage.

It’s quite likely that a pay rate of $15 per hour would cut down on poverty, but is it fair for an employer to pay that much to a young person with little or no work experience? Is it fair to force companies to pay wages causing a loss of income from what an unskilled worker brings in? On the other end of the minimum wage issue is the question: What about those employees who do have experience but are paid only $7.25 per hour?

So we ask, is it good policy to raise the minimum wage or should we leave it alone? Either one of these choices has problems. Some have argued the minimum wage should be removed altogether and let the market determine the wage. That would certainly lead to more poverty and more government assistance. To find a good answer to what is a fair minimum wage, we need new thinking and new solutions.

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We propose a graduated minimum wage according to the number of years in full-time or equivalent part-time employment. In this way young people without experience could work at wages employers could afford.

As the worker gains experience (and responsibilities) the minimum wage gradually increases. It is emphasized that this is a minimum wage, not the actual wage. For example, in San Francisco, the minimum wage during the first full year of work would be $8/hour, the 2nd year $9.50/hour, the 3rd year $11/hour, the 4th year 12.50/ hour and the 5th year 14/hour. Subsequently, the minimum wage would be tied to the cost of living index as it scheduled now.

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Before implementing a new proposal for minimum wage, recognition of the cost of living in various localities is needed. For example, the cost of living in San Francisco is about 80% more than Boise Idaho.* It would not be appropriate to require the same minimum wage for both cities. Therefore, our proposal should be applied after the minimum wage is set for established workers.

As for Boise and other similar locations in rural areas, the minimum wage rate may be far different than in high cost metropolitan areas. If the relative cost of living were used as a basis, then the minimum wage in Boise would reach about $7.70 per hour for experienced workers. There would be little room for a beginning worker to start at a substantially reduced salary.

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A more worker friendly view would be to have even higher minimum wages than planned for San Francisco and other high-cost metropolitan areas. In San Francisco, the median rent for a one-bedroom apartment is $2390/month.** At $14/hour wage over 8 hours per day for 22 days per month, the total income is $2464. All but $74 is used for rent. Maybe that’s why our highways are clogged with commuters. A justifiable minimum wage for San Francisco, as an example of a high-cost urban location, could easily be as high as $20/hour. 

With Boise’s cost of living at 55% of San Francisco’s, the corresponding minimum wage for Boise would be $11/hour. At that rate there is room for a graduated minimum wage for beginning workers, starting at the federal rate. Would such a rate of pay as proposed affect business? Probably it would. But first is the need to make sure everyone who works can afford to continue with some measure of economic security. If companies and corporations decide to relocate so be it. As the saying goes, let the market decide. People’s lives come first.

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* https://www.expatistan.com/cost-of-living/index/north-america accessed 18 Feb. 2018

** https://www.apartmentlist.com/rentonomics/national-rent-data/ accessed 18 Feb. 2018

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Part 2: Impact of education on workers' qualifications

Many of the problems encountered in any minimum-wage proposal stem from the existing educational system. Decades ago it was common in high schools to offer two tracks, one for college preparation and another for development of trade skills. In the college track, a student was expected to learn trigonometry, physics, chemistry, English and a foreign language. As for the trade path, students learned practical skills, especially woodworking.

Now, high school courses are generally set in accordance with College and University entrance requirements. To prepare for a career in a trade, some schools offer courses in computers, robotics, welding, electrical, plumbing, and others, yet the college route is generally looked upon as superior. On the other hand, a student in the Trade path could look forward to an entry-level position with pay that would make most minimum-wage laws unnecessary. 

If students had such courses available in middle school, many of them could envision success and take pride in learning trade skills instead of discouragement when facing STEM courses they don’t want or are ill-equipped to follow. This track might well significantly reduce dropout rates and drug use.

Another thing to consider is that part way through their choice of track, some students might like to change from vocational to college courses or vice versa. A program for such a transfer should be in place, probably after ninth or tenth grade. The program could include summer courses to help the transition.

Local, State and Federal agencies could provide funding for redesigning grade-school education. The Federal government could assist by providing funds for trade-school facilities, including laboratories, workshops and equipment. Local and State governments could provide the teachers and develop the curricula for the trade-school programs.  

Part 3: How to deal with minimally qualified workers

There is a problem employing disabled or semi-disabled workers such as those with a poor education, a low IQ, a mental health problem, a limiting physical condition, a drug problem, or a police record.

Should an employer be required to pay a full livable wage to people with such limitations? A two-tiered minimum wage may be needed. The less qualified workers would be “exempt” from the regular minimum-wage program. In such cases the question becomes who would determine the worker's exempt status? The job applicant might well resist the designation so as to remain eligible for the regular wage rate. The employer might hire only if the applicant was exempt. 

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A possible solution for exempt workers is that the minimum wage could vary in accordance with the skill level as determined by independent labor boards. The boards would have to be created in such a way as to minimize political biases – if that is ever possible in today’s divided America. Government subsidies as presently available would be utilized for this group.

The idea of a minimum wage for specific industries is not new. In 1936, FDR attempted to address the lack of fair labor laws by creating minimum-wage boards. There would be public hearings and, with consideration of cost-of-living by the Bureau of Labor Statistics, the Boards would determine whether wages in particular industries were below subsistence levels. The plan was defeated mainly by Southern textile interests. Two years later, a fixed minimum wage of 40 cents an hour was passed. That is the model followed ever since.

However, with modern analysis tools, considering both skill levels and social factors, it would be possible to establish minimum wages according to industry and worker qualifications. It would seem that after 82 years, minimum wages could accommodate disabled or semi-disabled workers appropriately.

To this end we welcome serious, thoughtful ideas. You are encouraged to use the comment form to address this issue or any other factor relating to minimum wage.