Minimum wage, and the worth of work.

I had a discussion with a co-worker today, in regards to a local Democratic candidate's advertisement, in which he slams US Representative Henry Bonilla for not supporting another minimum wage hike. The co-worker was rather adamant in his insistance that such an increase was "a good thing," no matter what detriment it would have on the economy. Now, I can understand why he would say these things (he is not very well-to-do, and is supporting a family), but I must disagree totally with the idea of such an increase.

A little bit of explanation is in order, I believe.

Contrary to what most folks believe, the basic unit of currency in the United States (and, indeed, the world) is one hour of unskilled labor in the United States. The base value for the dollar is set upon this standard. As of right now, with the minimum wage set at $5.15 per hour, each dollar is worth 11.65 minutes of labor. Raise that minimum wage to $6 per hour, and the value per dollar is depreciated to only 10 minutes' work.

This has several key effects. Firstly, the employer must now charge his customers more, to make up for the price hike in the labor he purchases from his employees. Sure, these may be small-dollar items, but folks notice small hikes in prices. Add a buck onto your Number One Combo from McBurgerStore, and you'll likely not be terribly happy. Stores that increase prices will have a proportionate drop in clientele, who are unhappy with the increases.

Second, employers cannot hire as many people unless they do charge more. Those businesses that chose this option instead of price hikes will find themselves understaffed, and producing an inferior product. In many cases, employers will find themselves actually cutting a job or two. Those who are usually employed at minimum wage are the least advantaged among us - the poor, the uneducated, and oftentimes minorities. They will find jobs harder to find, and harder to keep; as a result of low-paying job scarcity, there will appear a surfeit of cheap labor, making each worker even more "disposable" to the employer.

Third, increasing the minimum wage devalues higher-paying jobs, hurting those workers. A job paying $12 an hour is $6.85 more valuable than a job at the current minimum wage. Raise the minimum to $6, and that $12 job is now only $6 more valuable; its worth has just been devalued by 85 cents. This really comes into play when the higher-paying job needs to purchase goods and services from lower-paying fields. Because of the higher cost of unskilled labor, those consuming the products of that labor must either pay proportionately higher prices or accept lower-quality products (which oftentimes incur their own expense, from downtime and repairs/replacements of the inferior products). These expenses too, are passed on to the workers of the higher-paying fields, in terms of lost jobs to make up for the higher costs, lost income from downtime due to shoddy products, and lost customers from the higher prices they too must now charge.
This effect ripples throughout the economy, affecting everyone.

Fourth, any increase in the minimum wage hurts fixed-income senior citizens. Their savings and retirement held a certain value when they retired; due to the higher prices from the wage increase, they must now pay more for the same amount of goods and services, depleting their budgeted funds faster than anticipated. Want to make sure Gramma has enough in her retirement fund to live on? Don't raise the minimum wage.

There are also ripples felt in the stock market. As companies suffer from higher costs and lower quality, their value on the market decreases. When all companies on the market suffer from those maladies, the value of the entire market slumps. This in turn is detrimental to more senior citizens, this time those living off of invested retirements. Once again, Gramma takes a hit in the pocketbook.

With costs rising and quality slumping, consumers will shift into a "save" mentality, rather than a "spend" one. As essential goods' costs rise, frivolities and luxuries will be cut back in compensation. Food, shelter, and transportation will delete what people spend on other, non-essential goods. Those companies who produce those non-essential goods will get hit, many needing to cut jobs so that they, too, can stay out of bankruptcy. A few companies will die, outright. These workers will join those already unemployed, creating a bigger strain on the unemployment system, as well as further straining individuals' budgets.

Now, there is one way to raise the minimum wage without causing this kind of havoc. Lower taxes in equal proportion to the wage hike, especially capital gains taxes. This allows the employers to pay more to each employee without cutting back on new hires. With less leeching from the government, each company has more to spend on its employees and on newer technology. With less taxes being bled from each company, there won't be any need to hike the prices on goods and services. While concurrent wage hikes and tax cuts might not send the economy into overdrive, it will prevent or at least slow the negative effects of the mandatory wage increase. Cut taxes enough, and the benefit realized from it will actually outpace the undesireable effects. Granted, the net benefit will still be less than from the tax cut alone, but I'll take what I can get.

Until or unless such a concurrent tax cut is proposed alongside a minimum wage increase, I will continue to oppose such increases. (And don't even think about proposing a tax increase; I'll slap you silly, I swear)