mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
The Great Inequality Debate
One Wage to Rule Them All

American advocates of a federally mandated minimum wage might want to take a page from their Canadian counterparts. In MacLean’s, Tamsin McMahon makes the case that pegging a federal minimum to a national average cost of living doesn’t make much sense because costs vary so widely across the country:

The average price of a house in Toronto hit $546,000 this month. A typical monthly payment on a 25-year mortgage at 3.5 per cent interest is north of $2,500. Meanwhile, you can buy what looks like a pretty nice house in Opasatika, Ontario, north of Timmins, for less than $50,000. That works out to a typical monthly payment of little more than $200. Yet businesses in both communities are both required to pay their workers a minimum of $11 an hour (the equivalent of $21,450 a year for a full-time job.)

The Canadian Centre for Policy Alternativesamong others, has argued that an appropriate minimum wage is one that’s between 50-60 per cent of the average hourly wage in that area. By that measure, the provincial minimum wage is actually too low for many Canadian cities. But it’s also too high for others.

As McMahon points out, this is problematic because where the minimum wage is too high, it puts unnecessary burdens on business owners. Even if you think job loss due to a higher minimum wage will be negligible or at least an acceptable cost, it still makes sense to put the wage no higher than it needs to be to guarantee a decent standard of living.

McMahon’s data matches the U.S. situation well. Here too we have wide variation in costs of living, as the following graph shows. This data is taken from the Center for Regional Economic Competitiveness’ 2014 Cost of Living Index:

McMahon’s conclusion is apt for America as much as Canada: Whether or not a higher state or even local minimum wage is a good idea, a federal one isn’t. Instead of one-size-fits-all federal regulations, we should look closer at crafting policy actually attentive to America’s regional and local differences.

Features Icon
show comments
  • mogden

    The correct value for the minimum wage is the same across the entire United States. It is zero. The minimum wage amounts to a tax on employing low skill workers. Those are the very people who are most in need of work experience.

  • Finntann

    So you’re saying what we need is a Federal Republic? 😉

  • Fat_Man

    The true minimum wage is and will be the same as it always has been — $0.00.

    If you aren’t worth the statutory minimum wage to your employer, you will be unemployed and your wage will be $0.00/hr.

    So go ahead raise the minimum wage to $50/hr. Make my day.

    • FriendlyGoat

      “Your” day?

      • Fat_Man

        I would find it so amusing. It would make my day.

        • FriendlyGoat

          That’s because you have more mouth than sense.

    • Corlyss

      “If you aren’t worth the statutory minimum wage to your employer, you will be unemployed and your wage will be $0.00/hr.”

      Not exactly. If you’re too dumb and too inept to be worthy of the statutory minimum (courtesy of Dim welfare programs designed to keep minorities loyal Dim voters) you’ll go on disability! LOLOLOL

  • FriendlyGoat

    When you get every locale in America operating with a real and enforced minimum wage that is 50-60% of the average wage for the area, you will be a true liberal.

    Bear in mind, we expect the “average” wage calculation to include the hourly people in fast food, retail, construction, auto service, manufacturing, etc. AND
    the salaried people in police, fire, teaching, government offices, supervision, etc, with their salaries converted back to an hourly equivalent.

    Trust me, a true “50% of average” ANYWHERE is going to be a whale of a lot more than $7.25/hr.

    • dwick_OR

      Nowhere is a ‘decent standard of living’ defined to include housing for each person to live alone. People earning minimum wage comprise only 2.6% of all workers – and half of those are aged 16-24 (24% are teenagers aged 16-19) Most (64%) minimum wage workers are part-time. So you’re boo-hooing about probably less than 1% of all workers… many of those, who if they have any initiative at all, shouldn’t be stuck at minimum wage for that long. People just starting out their working lives or otherwise out of financial necessity have been taking roommates to share/reduce living expenses for centuries. People here in the US can do it also.

      • FriendlyGoat

        Dishwashers should be packed in like sardines, OF COURSE.

        • dwick_OR

          So, your being some sort of ‘true liberal’, then I guess your contention is that everybody should be paid at least such that 30% of their earnings will cover the average cost of a one bedroom apartment wherever they happen to choose to live, yes? Furnished or unfurnished? Utilities included? Secured, covered, off-street parking? Did you want that to include access to a swimming pool, gym, spa, and open bar happy hour every evening?

          And by the way, the federal government disperses literally hundreds of billions of dollars every year through various HUD rental assistance programs (privately-owned subsidized housing, public housing, and Sec 8 Housing Choice Vouchers) Many if not most states also have rental assistance programs. This in addition to the well over $500B in federal dollars spent on programs providing cash, food, medical care, social services, training, and targeted education aid to poor and low-income people.
          So there’s all sorts of help out there for dishwashers that feel themselves packed in like sardines. And you and I both know there are a fair number of people who maintain at least ‘a decent standard of living’ almost solely by milking the system for everything they can get.

          • FriendlyGoat

            I was astonished that TAI even ran this article (given its normal slant), arguing for localized minimum wages at perhaps 50-60% of average hourly earnings. When we get there, if we ever do, we will be “true liberals” in that regard.

            As for making fun of poor peoples’ opportunities for housing, you’re sick, dude.

            And, as for defending the status quo, where the Chambers of Commerce lobby to hold the wages down and then draw their workers from those making ends meet via the public assistance programs, that’s intellectually sick.

            You may think it’s cool that the general public subsidizes retail, hospitality and many other industries in this way.
            I think it’s mega-stupid. OF COURSE a full time job in a dish pit should support the person doing the work. No, not the smart-ass “spa and happy hour” stuff you throw out, but an honest and modest living.

          • dwick_OR

            I was not at all making fun of poor people’s opportunities for housing – merely stating facts, dude…

            And why would you and all the liberals out there brandishing your INCOME INEQUALITY election campaign whipping sticks now think subsidized housing and other public assistance programs are MEGA-STUPID? Subsidized housing and welfare programs have been around in the US since the New Deal and you had no problems with them back then or all the subsequent years up until the mid-90s when Democrats lost their perpetual death-grip on the House. They have public or ‘social housing’ along with generous social welfare benefits in Europe and you liberal types are always lecturing on endlessly about about how great life in the US would be if we’d all just be more like Europe. Yet you seem to want to squeeze the toothpaste out of both ends of the tube – you want businesses to pay both higher wages AND higher taxes.

            And no right-thinking business person believes that their paying higher wages will reduce the amount of money government thinks it needs to spend on anti-poverty/welfare/etc programs – the entrenched bureaucrats will just find new ‘urgent’ problems to spend money on… after all, the very survival of numerous government bureaucracies with hundreds of thousands of non-productive jobs are at stake!
            Some of us may be stupid in your eyes but we’re not MEGA-STUPID.

          • FriendlyGoat

            Income inequality in America is not a whipping stick. It is a social error made much worse by several decades of high-end tax cuts. People are told that low taxes will raise the number of jobs and raise the wages in those jobs. The exact opposite has occurred.

            Meanwhile, the McDonalds and Walmarts of the world get cheap labor while many, many of their employees qualify for various ;pw-income public assistance programs. How does that make any sense as public policy? We, the taxpayers, shall insist on low minimum wages for the benefit of corporations and then make up the slack in their workers lives with all kinds of taxpayer-funded programs. It’s nuts.

          • dwick_OR

            A ‘social error’?… now that’s a new one. Let’s completely ignore that there is a global redistribution of wealth going on – and the resulting out-sourcing of US manufacturing jobs is largely in order to remain competitive with lower-priced products from developing economies. Those companies also need to show the stock market growth in order to raise capital. The increases in the number of women and illegal immigrants in the labor market. The Fed’s record-low Treasury rates prompting a stampede into the stock market and driving up the prices of commodities. There are numerous contributing causes. I won’t deny that tax policy plays a role (capital gains particularly for the 1%) but it’s not the ONLY cause of income inequality nor even the major cause. If you’re one of those that subscribes to the simplistic idea that all we have to do to fix things is go back to the 90% top marginal income tax rates of the early 1950s – you best go back and look at the poverty rates in the early 1950s (and that’s when US manufacturing strength in the immediate post-WWII world was virtually uncontested…)

            The average profit margin of a typical fast-food restaurant is less than 3% – those evil greedy fast-food business owners are just swimming in profits. To give you an idea how cost-sensitive the fast-food business is: since the minimum wage increased to $9.10 here in Oregon, the price of a Big Mac here on the outskirts of the Portland metro area has jumped nearly 20% – a regular-size ‘meal’ is now priced in excess of $7. For that price, one can get the lunch special at a number of competing sit-down restaurants in the area. If the minimum-wage was raised to $15, do you really think US consumers are ready to shell out $6 to $7+ for a Big Mac?

    • Corlyss

      “By the way, there is virtually no place in America where the current minimum wage will “guarantee a decent standard of living”. ”
      It wasn’t supposed to. It’s a nice stipend for an unskilled entry level job for teenagers living at home. It was never meant to “guarantee a decent standard of living.” But then, this is a scam by the same criminal crowd that told everyone Social Security was NOT NOT NOT NOT a pension.

      • FriendlyGoat

        That phrase, “guarantee a decent standard of living”, comes from the last sentence of the fourth paragraph of the article.

        McMahon and TAI are implying that a decent standard of living is precisely the purpose of a minimum wage when they fret that some minimum wage might be set somewhere in excess of that needed for for “a decent standard of living”.

  • Corlyss

    If I didn’t know how slimy and duplicitous Dims are, I’d say they seem to operate under a delusion that the minimum wage is supposed to be the floor for a middle class family wage earner. It was never intended to be that, and it never has been. It’s an entry unskilled level pay grade, not a destination.

    • Thirdsyphon

      I’m not sure how a minimum wage increase can be reasonably characterized as a “taking”, let alone as an attempt to abolish private property.

      To call a minimum wage hike a “taking”, one would have to assume that low-wage employers have an ownership stake in the cheap labor of their employees. . .a notion which I think was put to rest by the Thirteenth Amendment.

      It’s even more of a stretch to call it an attempt to abolish private property. Telling me that I can’t use the money in my checking account to hire assassins or purchase vials of Anthrax is not an imposition on my property rights; it’s an imposition (I think you’ll agree a justified one) on my right to freely engage in commerce, which is an entirely different thing. The state’s refusal to let me hire workers for $1.50 an hour falls into this category as well.

      Also, as long as we’re on the subject of property, it really is a concept that evolves. The Framers were, as a group, fairly comfortable with the concept of owning human beings. . . but they would have all, to a man, roared with laughter at any musician daft enough to claim that he “owned” his tunes. (To say nothing of the intricacies of property rights involved in software licensing, trademarks and copyrights, electromagnetic frequencies, engineered organisms and genomes, personal likenesses, cell phone numbers, and web domains, which developed in the 20th Century; or the right to “own” one’s personal data, which may or may not develop in the 21st).

      • Corlyss

        “I’m not sure how a minimum wage increase can be reasonably characterized as a “taking”,”

        Federal law directs employers-who-are-private-entities-and-not-the-federal-government to pay employee at a specific rate. The delta between what the marketplace would pay an untrained unskilled person for his work and what the gov’t directs the employer to pay is a taking under the Constitution. If the damn government wanted kids to be paid that specific wage, they should supply the employers with the difference. But, no, under the Prog/Lib/Dim view, private property is a fluid concept subject only to the whims of the party in charge. It’s all part of the Prog/Lib/Dim concept of “let’s you and him share.” Under the Constitution, the federal government can order only its own employees to do anything. But ever since Theodore Roosevelt, private property has been an endangered species and under FDR, state ownership of everything has been a creeping fact. There’s no domain sacred from government intrusion and seizure.

        “Also, as long as we’re on the subject of property, it really is a concept that evolves.”
        No, it doesn’t. “Evolution” is a Prog/Lib/Dim code word for “changes the fundamental definitions the way I want them to read so I can do anything I think is appropriate.” It’s tyrant’s concept in social and public policy.

        • Thirdsyphon

          “The delta between what the marketplace would pay an untrained unskilled person for his work and what the gov’t directs the employer to pay is a taking under the Constitution.”

          No, it’s not. Under the Constitution, a “taking” is the government’s seizure of private property that belongs to an individual. Alice might wish to hire Bill to perform 10 hours of work at $5.00 an hour, and Bill might wish to accept; but if Congress bursts in and proclaims that the minimum wage for Bill’s services is $7.50 an hour and no less, Congress hasn’t actually taken anything from either of them. Alice still has full ownership of the 50 bucks she would have spent, and Bill still has full ownership of the right to sell his labor. Alice is under no obligation to hire Bill for $7.50 an hour, just as she was under no obligation to hire him for $5.00. If Alice doesn’t value Bill’s help enough to pay him $7.50 an hour for it, she’s under no obligation to strike that bargain; she can do the work herself. If, on the other hand, Alice decides of her own free will that Bill’s assistance actually is worth $7.50 an hour to her, and so she hires him at the new rate, then it’s self-evident that there is no delta between what Alice thinks Bill’s labor is worth and what she’s willing to pay for it; if there had been, she never would have hired him in the first place.

          As for property, you’re 100% correct; it’s a concept whose definition has been fundamentally altered, time and time again, to fit the ever-changing needs of human societies. Who owns the right to use your cell phone number? Today, it’s you; 10 years ago, it was the phone company; 100 years ago it was nobody, because cell phones didn’t exist. Who owns the airspace 10,000 feet over your house? Today, it’s the Federal Government; 150 years ago it would have been you (for all that was worth).

          Patents, copyrights, software licenses, corporate ownership, EM spectrum auctions. . . every one of them a venomous affront to the concept of “property rights” as an Elizabethan yeoman might have understood the term. . .but the same yeoman might have considered it “tyrrany” to break up the village commons into private plots of land (and thought it entirely just and fair that any buried Roman gold found under his land was to be considered the property of the Crown).

          • FriendlyGoat

            You’re doing a good job here. But most of the regular TAI readers are not swayed by sensible thoughts about ordinary people long ago taking control of the “constitution” thing and managing a society of the people, by the people and for the people.

          • Corlyss

            “No, it’s not. Under the Constitution, a “taking” is the government’s seizure of private property that belongs to an individual.”

            You got that part right. You don’t seem to want to acknowledge that private property is the money a business makes. Workers have no “right” to any of that money that the firm does not agree to pay them. You can bafflegab your way into thinking that what the government does in ordering private entities to benefit 3rd parties, but your reading is simply the kind of wrong one customarily sees in ideologues laboring mightily to change the meanings of commonly understood words. The analog in Our Federalism is the odious “unfunded mandate” that the federal government routinely imposes on states, which IMO is unconstitutional but to the best of my knowledge has never been ruled such by a court. I could be wrong about that. But the whole damn Prog/Lib/Dem system in effect since FDR if not TR would fall apart if the feds couldn’t impose such burdens on people while SCOTUS remains in cowed silence, fearful of its status in the system which has already been reduced to cheerleader for a rapacious executive and congress.

            “If, on the other hand, Alice decides of her own free will that Bill’s assistance actually is worth $7.50 an hour to her, and so she hires him at the new rate, then it’s self-evident that there is no delta between what Alice thinks Bill’s labor is worth and what she’s willing to pay for it; if there had been, she never would have hired him in the first place.”
            Regrettably, your logic is flawed. If the employer has no choice but to hire at the federal minimum wage under threat of penalty of law, that’s not voluntary; that’s coercion by any definition of the word. The employer is not in a free market; it is in a centrally planned economy, or at least one that thinks it is centrally planned. This is obvious to anyone who looks at it without preconceived notions of government’s role as helper of the helpless. The Prog/Lib/Dem view for 175 years is that workers are helpless victims of vulture capitalism incapable of bargaining for their own benefit. So government puts its thumb on the scales since the late 19th century with all those “helpful” labor laws.
            You want to restrict the definition of “private property” to something it hasn’t been since the Elizabethan era and the first patents were granted by the crown. You’ll have no better luck with such a notion than we libertarians do with trying to redirect the rapaciously greedy middle class back to first principles which don’t require all that much tweaking to be useable in the 21st century. /g/ At least we have to try to get people to stop thinking of the government as Uncle Sugar and its main purpose as “helping people” in the obnoxiously direct way it has for the last 100 years or so.

          • Thirdsyphon

            “You want to restrict the definition of ‘private property’ to something it hasn’t been since the Elizabethan era and the first patents were granted by the crown.”

            Aha! I do not, in fact, want to do that; but you’re admitting that the definition of private property has changed over time, largely (though not entirely) in the direction of becoming more expansive; and you’re implying that resetting those rights to what they were a few centuries ago would on balance be a bad idea. I couldn’t agree with you more.

            I actually think libertarians are going to have a lot of political successes in the decades to come, but first they’ll have to break the spell of “natural law” that conservatives have cast on them.

            Property rights don’t come from heaven, and they’re not a preexisting condition that societies and governments detract from. You have it exactly backwards. In nature, no right to property (or to anything else) exists. If you’re in doubt about that point, just ask a bear. Property rights are the creation of societies and governments. Absent government, people might have possessions that they consider to be their property, but that’s only true to the extent that other people choose to agree with them; and, absent that, to the extent that they can defend those claims with raw force. If you possess anything beyond that (a checking account, a stock portfolio, a time share in boca, a car you parked and left more than a block or so away), thank a government.

            The right to own property, like the right to enter into contracts, the right to bear arms, the right to a trial by jury and the right to free speech is a right (like all other rights) that human governments (in this case ours) have affirmatively called into being to suit human purposes and needs.

            I think that libertarians are actually in for a productive century. Libertarianism may even come to define it; but not until it breaks the enchantment that causes it to privilege the freedom of a relative handful of people to own surreal amounts of property above all the other kinds of freedom that could ever potentially be enjoyed by everyone else. . . and in doing so, you’ve overlooked the fact that unconstrained private actors can be just as oppressive as unconstrained governments. The greatest possible freedom for the greatest number of people should be libertarianism’s goal.

            This might just be libertarianism’s century. The Flynn effect and centuries of mass literacy and education have created a populace that’s ready to productively take advantage of more freedom. But it’s going to be a philosophy stuck on the fringes until this one basic lesson sinks in. As long as libertarianism has nothing to offer the much derided “99%” beyond hectoring lectures about their alleged immorality and greed, it’s not going to be a dominant influence in politics or culture.

  • lukelea

    Much better to let the market decide what the employer should pay and then supplement that market wage with an expanded and improved version of the earned-income tax credit, taxing the spending of the wealthy to finance it.

    • rheddles

      There is tremendous social value in just having a job. I would much rather subsidize low marginal productivity workers through EITC than unemployment and disability.

      • Corlyss

        Yes, there is tremendous social value in every one, even the low-IQ people currently on carefully cultivated welfare, having a job. Unfortunately if society will trick itself into paying people not to work, it’s in their interest to take advantage of society’s stupidity. If society will pay a living “wage” to such folks, there are shockingly few who would prefer the wholesomeness and self-respect of a decent job to the guarantee of all the free time you could want AND a paycheck too. For millions of middle class folk, that situation is called “retirement.” It was my primary goal since I was 17, and I can testify that I’ve never been happier. There’s a popular fiction abroad in what remains of our Protestant ethic base that people would prefer to have the secondary payoffs that come from honest employment, but to the nation’s great regret and endless damage, that had proven to be essentially a Romantic delusion, one borne of ignorance of human nature. Human nature has to be forced by necessity or adversity to labor. When neither exists, human nature won’t toil. You’d have thought years of observing trust fund babies’ behavior would have give responsible policy-makers just a li’l bitty clue. Inattention to details or falling for Dim propaganda about “helping the incapable, the poor, the disadvantaged” explains why Republicans voted for such legislation, but guaranteeing permanent governing majorities is the Dim motivation for creating those policies in the first place. They have succeeded admirably, to great national damage.

  • Rick Johnson

    Why have a minimum wage law at all?

    Minimum wage laws make it illegal for an employer to hire someone, usually young or low skilled, at a wage that person is prepared to work for.

    Minimum wage laws hurt the poor and the young and do nothing to help them. Just get rid of them.

© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service