The Vicious Cycle of Minimum Wage

There have been many discussions with regard to raising the minimum wage, and that everyone is entitled to a living wage.  Tony Katz who has a show on 97.1 Talk Radio (St. Louis), asked on Saturday’s show “what is a living wage”?  He asked people to call in to the show to explain what it is, how much it is and how this should be determined. You see, as Tony Katz points out, there really are no standards to determine what a living wage is and what it isn’t.

What are the determining factors that will be used to set the living wage rate?  Who determines that, and why should I have to live to the lowest standards?  There will be so many that will fall into the category of needing a living wage, depending on what others deem as a living wage.  What if my needs require more funding than someone else’s?  How will those setting the standards deal with this?

Minimum wage had stayed at $8 per hour in British Columbia for close to a decade.  Then the provincial government decided to increase the minimum wage rate.  In May, 2011 it went to $8.75 per hour,  to $9.25 per hour November 2011, and finally to $10.25 per hour.  It doesn’t take very long for the financial advantages to disappear.  Not only that; those who may have been making $1 to $2 more than minimum wage went to making minimum wage.  Also, not everyone up the chain got a pay increase either.

Some people believe that employers should pay a living wage or the government should.  You will hear people discussing the necessity of people having a living wage that will be short on details and an understanding of unintended consequences.  Yes, those pesky unintended consequences.  When wages go up, employers lay people off, they don’t hire new staff.  Or they increase their prices to cover the new costs.

People’s spending power is decreased.  Yes, there are other factors to price increases, but wages can be a big factor.  So not only are those who make minimum wage affected; so are others making more.  It doesn’t take very long for gains to be lost, and then a person is back where they were before.  Then, once again there is a push for the government to increase the minimum wage, and the cycle continues.

Part of the problem is that many don’t look at other factors costing people more money – how much red tape is increasing costs; how much in taxes are people and businesses paying that decreases the amount of money people have to spend.  Speaking of taxes, for those who figure that the government should cover the extra to ensure that everyone has a living wage, where do they think they will get the money from?  You can only tax people so much before they move to another part of the country that is financially advantageous to them, or they cut spending on certain items to cover the necessities.  Then with those cuts, not as many jobs are required, etc.  Now, if the government is supplementing a person’s wages, there can be an issue of no incentive for a person to get a better paying job, or for a company to ensure that they are paying an appropriate wage.  Until individuals, businesses, community and government agencies start working together to look at this issue in its totality, they will just be continuing the cyclical journey to no satisfactory end.