Minimum Wage: Two Options

From the CBO, we have it outlined like this… If we raise minimum wage to 10.10, we lose 500,000 jobs.  If we raise it to $9.00 we lose 100,000 jobs…

Is it better to work and receive more money, or is it better to have more people working for less, but at least they are working….

Great question.  There were 3.3 million people making minimum wage in 2013…. The wage will jump from $7.25 to $10.10 or jump from $7.25 to $9.00.   The first is an increase of  $2.85; the second is an increase of $1.75…  The impact of that increase on 3.3 million people are as follows.

3.3 million X  $2.85  =  $9.405 million/hour increased purchasing power

3.3 million x  $1.75  =   $5.775 million/hour increased purchasing power

3.3 million X $0 (no change)  =  $0.00   No change; same as it every was.

But wait.  Job losses are bound to occur.  If we take the CBO’s estimate, we get the first minus 500,000; the second minus 100,000.

(3.3 million  -500,000) X  $2.85  =  $ 7.98  million/hour economic benefit

(3.3 million  -100,000) X  $1.75  =   $ 5.60  million/hour economic benefit

(3.3 million- 0)  X $ 0 (no change)  =  $0.00 no change from the past

There you go… We get more economic push by going with the $10.10 number despite the possible loss of jobs.  .We got an answer.  Gee. What was so hard about that?

====

Appendix:

Someone  else brought up the idea that those people put out of work, have a negative influence upon the equation… To be honest prior to their mentioning it, at first, I really hadn’t thought about it. It never occurred to me, because mathematically they would be zeros. Interesting, huh? How the brain works?  My focus was on how much positivity a minimum wage increase would generate…  And because of my positivity I have trouble accepting that there is a negative influence for letting those people go. But just in case there is, let me put it down here as well since someone brought up the fact that those leaving the work force would be decreasing the total pool of potential earnings by their future estimated earnings with which had they been previously working.   Which in this case,  would be the minimum wage rate… applied at both the levels of 500,000 and 100,000….

((3.3 million  -500,000) X  $2.85)  – (500,000 X  $7.25)  =  $ 4.355  million/hour economic benefit

((3.3 million  -100,000) X  $1.75)  – (100,000 X  $7.25)  =   $ 4.875  million/hour economic benefit

(3.3 million- 0)  X $ 0 (no change)  =  $0.00 no change from the past….

That changes the impact. There are several problems with this last model. One, is that its total, is a theoretical rate representing everyone working per hour.  Those being laid off can’t really be a negative against this because everyone who is still working, IS making that much… This is the net increase amount which will be  reported, earned, and taxed. Secondly, if you are out of work you are making zero dollars, and not an actual negative amount which challenges whether the principle is sound to deduct a cost away from the benefit when making  this particular comparison.  One could do so, if one was expostulating a potential benefit which would have to be benchmarked against full employment, and not against the incremental amounts.  For example if we had access to the number of hours worked at minimum wage in this country over a set time period, we could actually make that comparison by plugging in these two rates..

As it stands we can already compare these totals to the status quo, and there is a definite positive bump in economic activity…  Plus, if those temporarily laid-off people get other jobs, ones that actually pay more than minimum wage, then they are off the chart, and that negative is not there at all.  The underlying assumption for there to be an existing negative, is that these people losing their jobs, immediately and forever stop contributing to the economy…

Therefore probably the best comparison to achieve that would be painted like this…

3.3 million X  $2.85  =  $9.405 million/hour increased purchasing power –  (.5 million X 7.250  =  $9.405 –  $3.625  =  $5.78)

3.3 million x  $1.75  =   $5.775 million/hour increased purchasing power  – (.1 million X 7.250  =    $5.775 –  $0.725  =  $5.05 )

3.3 million X $0 (no change)  =  $0.00   No change; same as it every was.

That probably is the best description since it contrasts against the potential possibility of earnings.

But as policy this shows Delaware’s Tom Carper to be very wrong when he was quoted as saying that the lower amount of increase would be best for this country…

..