"$12 By '20": Democrats Seek 70% Increase In Minimum Wage

Tyler Durden's picture

As regular readers are no doubt aware, wage growth in America has never been higher — for your boss. If however, you belong to the 83% of the US workforce that falls under the BLS’ “non-supervisory” category, you haven’t been so fortunate and in fact, your wages are now growing at a measly pace of 1.5%, down from more than 4% before some folks on Wall Street — who, statistically speaking, make between five and six times as much as you do on average — built a financial Frankenstein which promptly murdered most of its creators before escaping the lab and running amok through global capital markets until it was finally brought down by central banker monetary bazooka fire.

In a happy coincidence for the 17% of Americans who are “supervisors,” the policies which (temporarily) kept the Wall Street-borne crisis from destroying the entire global financial system have also served to inflate the assets most likely to be held by those who make more money, which helps to explain why, as the St. Louis Fed recently pointed out, the Middle Class is rapidly disappearing in the post-crisis era. 

 

And while Hillary Clinton’s “everyday Americans” wait not-so-patiently for Ben Bernanke’s “wealth effect” to slowly trickle down to them, economic growth is being choked off because when three quarters of GDP depends on consumer spending and consumer spending is almost perfectly correlated with wage growth, policies that work to exacerbate the gap between the haves and the have nots are counterproductive when it comes to economic output. 

Against this backdrop, Democrats are moving on a “$12 by ‘20” pitch, whereby they hope to have the minimum wage hiked to $12 within the next five years. The rationale is simple: restore the purchasing power Americans once had and you will restore robust economic growth. Republicans contend a $12 minimum wage would cause employers to cut jobs. Here’s The Washington Post

Top Democrats laid down their minimum-wage marker on Capitol Hill on Thursday, setting up their party's middle-class-focused economic message heading into the 2016 elections campaigns.

 

Their pitch: "$12 by '20" — a $12 per hour federal minimum wage by 2020, which they say will give a pay raise to nearly 38 million Americans.

 

"This is a key piece of our effort to grow the economy from the middle out not from the top down," said Sen. Patty Murray (D-Wash.), a lead sponsor of new legislation to reset the minimum wage. "It would help the economy grow in a sustainable way, and it’s an important step toward expanding economic security and making sure more families can make ends meet”...

 

But Republicans, with a few exceptions, have grown consistently move opposed to minimum wage increases in recent years, arguing that any hike would tamp down economic growth…

 

Last year, for instance, House Speaker John Boehner (R-Ohio) said he considered any minimum wage hike to be "bad policy" that would hurt minorities and others holding low-wage jobs by eliminating some of those jobs. "When you raise the cost of something you get less of it," he said after President Obama announced an executive order raising the minimum wage for federal contractors…

 

The $12 an hour wage, supporters say, will restore the purchasing power that the federal minimum wage had in the late 1960s, when the American manufacturing economy was at its height, and provide enough income to keep a family of three out of poverty.

Note the latter point there about keeping families out of poverty. Even if Boehner is correct (i.e. if raising the minimum wage causes companies to fire existing employees and/or hire fewer workers), some will likely argue that because more than half of welfare spending goes to working families, many of those who would be subject to layoffs in the event lifting the minimum wage prompts job cuts are already impoverished and dependent upon the government to make ends meet in the first place, so if there’s even a small chance that a $12/hour minimum doesn’t lead to mass layoffs it’s a risk worth taking. Still, overcoming the notion that a near 70% hike in the country’s pay floor won’t cost the country jobs is likely to be difficult.

Here’s more color from WSJ:

Democratic lawmakers are upping the ante on the minimum wage Thursday, pitching a plan to lift the federal pay floor by 66% to $12 an hour by 2020.

 

The proposal appears to be a long-shot—a plan to raise the minimum wage to $10.10 an hour failed last year. But the new legislation helps frame the wider debate around income inequality just as the 2016 presidential campaign gets under way…

 

Republican lawmakers have said a large increase in the minimum wage will cost the country jobs. A report from the Congressional Budget Office published last year showed an increase to $10.10 an hour would cost the economy about 500,000. A smaller increase to $9 an hour was projected to cost 100,000 jobs.

 

Ms. Murray and Mr. Scott’s proposal would also gradually eliminate the lower minimum wage received by workers who earn tips, something not in last year’s measure. Currently, waiters and similar workers are only required to be paid $2.13 an hour, so long as they receive tips to bring their hourly rate in line with the minimum wage (ZH: does this mean the “bartender recovery” is about to become a viable economic concept?) 

 

Thursday’s proposal ties future wage increases to changes in the median wage paid to workers. A specific ratio has yet to be released. The federal minimum wage has not previously been indexed for automatic raises. Congress must vote for the pay increase...

 

Connecting the minimum wage to the median wage of all workers more directly addresses concerns about income inequality. It assures the lowest paid workers don’t fall too far behind the middle...

 

Economic Policy Institute economists said their initial read of the new proposal would bring minimum-wage workers back in line with the 1968 level by 2020.

The proposal “would raise the purchasing power of the minimum wage modestly relative to where it was five decades ago,” they said in a paper released Thursday. It would also restore the relationship between the minimum wage and the wage of workers in the middle.”

In the end, it's difficult to argue with the notion that raising the standard of living for Americans making minimum wage would be a good thing. The problem is that as with all attempts to centrally plan something that would normally be dictated by market forces, there will invariably be unintended consequences and if the extra money earned by those who keep their low-paying jobs after a minimum wage hike is completely offset by the lost income of those who are fired because their employers can no longer afford to keep them employed, then the net result of the entire enterprise will be negative.

*  *  *

Finally - if that's not clear enough...

 

h/t @DavidJamesJr

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This is it's picture

Unemployment FTW.

TruxtonSpangler's picture

If you base the real inflation off the price of a common automobile, in order for wages to track inflation the minimum wage should be $25-$40. YMMV

TruxtonSpangler's picture

In a capitalist economy, the actual minimum wage is $0.00

Beam Me Up Scotty's picture

Wage and price controls failed in the 1970's.  Now we have stealthy wage and price controls.  And the printing press.

Beam Me Up Scotty's picture

Yes it does.  Why do you think we have this huge assanine tax code?  Its nothing more than a vote buying scheme.  Both parties LOVE it.

Laowei Gweilo's picture

lol at min. wage increases....

 

only way US would ever fix the income disparity is through income and business tax, and we know just how much Americans looooove taxes haha

A Nanny Moose's picture

I support all attempts to bring about a totalitarian utopia.

https://exit.liberty.me/2015/04/18/want-to-win-vote-socialism/

Give the State the rope with which it will hang itself.

Harbanger's picture

Socialism is collapsing on it's own, it's bankrupt.  Then we can lose our marxist central planners and their manipulation of society.

Buzz Fuzzel's picture

Why $12?  Why not $100 or even $500?  Hell, if this is how it works why don't we make everyone rich.

 

rbgnr111's picture

why not???

if everybody is rich... nobody is rich

McMolotov's picture

Buying politicians works, too. In our current system, the people who do best are those with the ability to do the buying and those with a sufficient lack of morals such that they can be bought.

Ham-bone's picture

Add to this the hype of manufacturing returning to America...and the propaganda is in full force.

FROM MARKET WATCH _ Record number of manufacturing jobs returning to America

So, just to make it clear what is happening...and a portion of why Baltimore and other cities are likely to continue burning...A report card on Manufacturing in America.

http://econimica.blogspot.com/2015/05/manufacturing-recovery-or-manufactured.html

MonetaryApostate's picture

Next month, Inflation Soars & QE comes to an end as Fed signals rate hikes, markets begin to tank in response...?

Harbanger's picture

In this world of QE, if the Repubs were smart, they'd promise to double the offer.  We're in a grinding deflation in part because the working folks have no liquidity.  You can't have hyperinflation without $$ velocity.

TeamDepends's picture

The current batch of politicians should be making minimum wage so they'd have to have a "real job" on the side to make ends meet.

Milestones's picture

Morals is too broad. How's integrity instead? Just a comment, not a critique.

Milestones

LawsofPhysics's picture

Yes, but in a capitalistic economy you can also lose all your wealth if you mis-manage your company/business.  So, fuck right off as such an economy has not existed for fucking generations.

seek's picture

It's still true for small businesses and people that work for themselves. So perhaps it makes the most sense for those categories to be excluded from minimum wage laws. (it also happens these are the segments least able to afford minimum wage, so an exemption would encourage them to grow to the size where the wage laws would apply.)

Of course, larger companies are more than OK with smaller more competitive ones going out of business, so they'd be dead set against this.

LawsofPhysics's picture

In any case, no one does any worthwhile work for free, period. 

Ethelred the Unready's picture

That seems to imply that you are likely to find someone willing to work for nothing.  

 

Hey, that's called an Intern!

Skateboarder's picture

+1. Was going to convey the same message. I've seen my fair share of "Wanted: Unpaid Intern" the last time I looked for a job. This is what it looks like today in SF Bay Area (few postings, surprisingly), home of unpaid interns who 'love' technology:

http://sfbay.craigslist.org/search/jjj?query=unpaid+intern

MonetaryApostate's picture

Que?  Si podemos!

 

How's that Immigration coming along Dick?  

What Immigration Reform?  

Exactly...

d4pwnage's picture

It could be negative infinity in principle.  Someone might pay $$$ to work in exchange for experience and connections.

Hey, colleges charge money and make students do (home)work...we should make that illegal!!!

seek's picture

You can also compute using silver -- if that $1 wage in the late '50s and early 60's were paid in quarters, those quarters would be worth $11.64 today, and that's with the insane level of price suppression that's taken place with silver. A few years ago it was closer to $20.

All of this stuff is just symptomatic of having a fiat-based monetary system that's being constantly inflated.

Realizing that inflation is a tax, what's really happening is we have a government that has taxed the bottom of the employment base so severely they've regressed in earning power from middle-class into poverty.

Thisson's picture

Your overall point is worth considering, but it's idiotic to assume that if prices are manipulated, it's only in one direction (as if banksters would want to make only half of the potential profits).  The reality is that silver in an industrial metal, and industry is in the toilet, so the price is low.  Same as oil, iron, and everything else these days.

quasimodo's picture

So what you are telling us is that there is no inflation. 

Brilliant 

Agstacker's picture

Ground beef and other foodstuffs don't seem so cheap to me.

Citxmech's picture

Hmmmm:  Minimum wage increase = witholding tax increase = increased revenue for the government.

Clever way to compensate for decreased tax revenue due to unemployment and rampant printing/inflation.

Skateboarder's picture

All the while paving way for inflation on basic necessities. When 1 hour of work buys you 1 gallon of milk, we will have reached a critical point.

post turtle saver's picture

I have a better idea... the minimum wage should be abolished and what you make should be what the market can bear...

people need to learn that no one owes them a living... it's that simple...

Daddio7's picture

My 1974 Ford Maverick cost $4000. Automatic and air. 2015 Ford Fiesta is about $14000. One year's income at minimum wage. About the same. Now to buy the same ammount of gas you need do $20 an hour.

rubiconsolutions's picture

What happens if my child is willing to work for $10 and hour? Or $8 an hour. Would the act of engaging in a private employment contract with an employer for less than a .gov mandated minimum make him/her (and the employer) a criminal? It is not, not about a living wage or some such nonsense. It's about a person having the right to the fruits of their labor and privacy. Everything else is subterfuge.

froze25's picture

The way to do it would be to just contract for the job per day.  For example, You need a trench dug in your back yard, you know it will take 8hrs to do it.  So the Job (digging a 10' x 2'x1') trench is a 64 dollar job.  Don't hire them, just contract with them for the specific job.  Assemble 20 widgets and I will pay you $100 dollars for it etc.  

Thisson's picture

Nice theory, but it doesn't work like that in real life, as Yogi stated:

"In theory there is no difference between theory and practice. In practice there is."

Frank N. Beans's picture

heck, that's how the illegals do it.  Stand around at home depot, wait for truck to pull up, get job, get paid.  I'm sure they're not concerned with min wage (they probably make more anyway). 

Harbanger's picture

They set their own minimum wage, which is often higher than minimum wage..  They also want to know what you expect them to do and for how long, then they'll tell you how much.

TBT or not TBT's picture

You don't pay them for the work, you pay them to leave.  

booboo's picture

Republicans should double it and throw in a free spiderman towl.

orangegeek's picture

just brings in more automation and fewer jobs - stupid fucking politicians, stupid fucking gubbamint

Beam Me Up Scotty's picture

Automation is going to come, whether the wage is raised or not.  Isn't that the Utopia everyone dreams of?  The machines do all the work, and we have all the fun??

McMolotov's picture

In this shiny new Utopia, the machines, which will be owned by some filthy rich SOBs, will do all the work and the rest of us will be deemed inconvenient and expendable.

froze25's picture

ehh, open source robotic software is availible and growing.  The education to do it is already on youtube.  They will not have a monoply till they outlaw it for our safety.

Thisson's picture

It's not that they have a monopoly on the robots, it's that they have a monopoly on the other inputs of production (land and capital, with the robots contributing the labor).

McMolotov's picture

I, for one, welcome our new robot overlords.

Beam Me Up Scotty's picture

Brown-noser....Have to come up with a new term when the robot overlords take over. 

AIIB's picture
AIIB (not verified) May 1, 2015 2:13 PM

"A nickle ain't worth a dime anymore"

- Yogi Berra