It is that time of year again when we turn on festive lights, join family and friends for parties and attend various church functions. We also turn on the stress. Did everyone make it on the list? Have we bought something for all of those people? Did we get a meat-tray for the company party?
I hope that I am relatively normal about this time of year. I like the well wishes, food, frivolity and the extra opportunity to reflect on concepts larger than myself, like forgiveness, sacrifice and blessings.
No matter how hard I try I cannot ignore all of the stressors I just can’t seem to avoid at least a bit of stress. The unfortunate nature of holiday stress, the reindeer’s share of that stress, is money related. This is where I hope I am normal, if not, I am handling Christmas all wrong. But, sticking with the idea I am like most people, we worry about how to afford all of the gifts, the travel and extra food along with the normal monthly expenses of rent/mortgage, utilities and so on.
This is not the first Christmas I have felt this way. In the past few weeks I have watched with some interest the debate over raising the minimum wage. Currently at $7.25 per hour, President Obama pushed for an increase to $9 almost a year ago in his State of the Union speech. Since that time members of congress have moved that number to $10.10 per hour.
This debate has caused me to reflect on a time when I was a minimum wage worker. At that time in my life I still worried about how to make a contribution to the holiday mirth while meeting my standard obligations.
On first blush I would have welcomed an increase in my hourly rate. In fact I did. I was working for minimum when the last round of phased-in increases of the minimum wage happened. I went from $5.35 to the current $7.25.
But did the extra income help?
The answer is: no.
There are two reasons the extra money did not help. The first is also a good illustration of theory versus fact.
In the current debate to raise the minimum wage to over $10, proponents trumpet the fact that a raise in pay would lift that worker farther from the federally established poverty level, presently set at $11,490 per year, pre tax, for a single wage-earner. At the present minimum wage a full-time employee makes $15,443 per year before taxes, a difference of $3,956 between poverty and the minimum wage worker.
If the purposed increase passes that same worker would earn $21,513 per year.
While the digits are different the size of the change is about the same as what I received so many years ago. In 1996, when I entered the workforce at $5.35, the federal poverty level was $7,740 per year. A full-time employee was making $11,396 per year. That is a difference of $3,656.
Despite massive changes in the numerals written on their paycheck minimum wage earners are barely $30 per month better off today than 17 years ago in terms of distance from the poverty line.
So the minimum wage worker is making slightly more than $10,000 over the poverty line increasing the gap by just under $7,000. This is great! Who wouldn’t like this idea?
But, just as it did in the late 1990s prices are sure to increase to compensate for the lost revenue. Why? Because your earnings are someone else’s expense. The only way for your employer to recapture the differential in income versus expenditures is to increase prices. Raising the minimum wage for workers in the grocery industry is especially damaging.
If I work for minimum wage at the Ferrari factory an increase in the price of a Ferrari won’t affect me too much because I am spending my money elsewhere, like the grocery store. If I am the courtesy clerk at my local supermarket and I have to buy food, the increased prices my employer has to charge will directly affect me.
Raising the minimum wage will only widen the gap between working Americans and the poverty line if prices stay the same. However, placing that type of artificial control on a market has never really worked out that well.
The second reason raising the minimum wage did not and will not help is it cheapens the efforts of those working those jobs.
During the last three-year-phase-in of the minimum wage I didn’t just receive pay increases because the government ordered my pay to increase. I received raises based on the merits of my work. My employer increased my pay of their own accord based on my time with the company, performance and attitude toward the job. These were not always large jumps in wage, but they were meaningful indications of the value my employer placed on me.
Then another phase would come and I would be lifted to the requisite level, but the new employee hired just yesterday starts at the same pay rate I worked hard to earn. Eventually those new employees would earn merit raises only to be eclipsed by the mandate.
Now I am in a career that provides me a wage higher than minimum, but that is because I have talent and experience that has come from hard work and sacrifice.
Bringing minimum wage workers closer to my wage doesn’t take them farther away from the poverty line but it will bring the poverty line closer to me. My buying power will be diminished.
The purpose of raising the minimum wage now is moot because the federal government has added an extra expense larger than the $30 per month gain seen during the last increase. The Affordable Care Act or Obamacare is adding approximately $250 dollars per month to the burden a minimum wage worker must shoulder.
Fans of health insurance reform will argue there are subsidies, but the hitch is those subsidies are actually refunds that are issued at tax time. In order to comply with The Affordable Care Act that minimum wage worker has to write a check every month then wait for reimbursement, but what happens when there is no money in November?
Raising the minimum wage will not make the holidays any easier. It just means Santa has less buying power.