In this series:
Part I - Living on a minimum wage
Part II: Economic arguments in favor of a Livable Wage
Proposed future topics:
* Economic arguments against a
minimum wage: the employers’ point of view; the simplistic nature of the
minimum wage debate, and the need for modifiers and adjusters
* A bigger
picture: Other factors, greater forces, cyclic, secular, evolutionary;
* Automation and the guaranteed national wage
* Social and individual
factors affecting workers' earning power
Part I: Living on a Minimum wage
May 24, 2018
A bill raising the Vermont minimum wage from the current $10.50 to $15 per hour by 2024 has been vetoed by Governor Phil Scott. The
increase would have been implemented each January 1 in six increments of $.60 to
$.90, after which the minimum wage would increase each year by the lesser of 5%
or the rate of inflation (currently 2 - 2.4%.)
From Senate Bill 40:
January 1, 2019: $11.10 .
January 1, 2020, $11.75.
January 1, 2021, $12.50.
January 1, 2022, $13.25.
January 1, 2023, $14.10.
January 1, 2024, $15.00,
Each subsequent January 1, the minimum
wage rate shall be increased by five percent
High school student must be paid the current minimum wage under the new law minus $3.00.
Businesses have argued against the proposal: It would force raises for
higher-paid workers, render them uncompetitive, and more. Politicans and
employers say “my heart says yes out of compassion for the working poor, but my
head says no [out of concern for employers]”. So let’s use our heads and look at
the numbers. How will the proposed wage increase affect families at the low end
of the wage scale? How will it affect businesses paying minimum wages (next in
this series of articles)?
For a realistic look at the effects of low
wages on workers, let’s look at the minimum liveable wage, based on actual
expenditures, rather than the politically defined minimum wage.
Department of Urban Studies and Planning defines the living wage as
minimum income standard that, if met, draws a very fine line between the
financial independence of the working poor and the need to seek out public
assistance or suffer … housing and food insecurity. ... (T)he living wage is
perhaps better defined as a minimum subsistence wage..." The numbers are based
on working 40 hrs/week, 52 weeks/year. There is no allocation for vacations,
leisure, entertainment, savings, or emergencies.
Using 2016 data, MIT calculated the
minimum hourly living wage in Vermont at $29.85 for one working adult with 2
children (a common family model in Vermont). Methodology is presented in detail.
The livable wage for a single adult is $11.26, but allows only $644/month for
housing, a doubtful number in Lamoille County.
Another source, the Vermont
state government’s "Vermont Basic Needs Budgets and Livable Wage Report" for
calculates a living wage of $32.52 for our rural Vermont family of one
parent and two children, and $17.64 for a single adult living alone.
family of three living on the wages of one person paid $15/hour would clearly
require public assistance. Do the math and see if you could live on $15/hour, if
you were the breadwinner in this family.
But let’s allow “Business A” to pay
the current minimum, $10.50. To prevent our model family from sliding into
destitution, we have created a large industry of social welfare agencies, public
We tax the general population, including businesses generous and
not, to provide the family with their services. Those of us with a conscience
also engage in private charity.
Bluntly, private charity and the Federally
assisted state budget provide the income for our hypothetical family that
employers will not (or claim they cannot) pay to their employees. Taxpayers
subsidize not only poor working families, but those businesses in the state who
don’t have the comparative market advantage or efficiency to pay a liveable
wage, or whose business models rely on masses of low skilled, quickly trained
and easily replaced workers.
What we have here is welfare for businesses.
Recall the criticisms leveled at Walmart over the years for letting Medicaid pay
for the medical care of their full-time workers.
When a dollar is paid, not
to the low-wage employee but rather to a provider of assistance, that money is
diluted as it flows through the filters of agency salaries, facility costs, and
administrator pay. A public dollar distributed in cash or other help by an
agency is much smaller when it reaches its intended poor working beneficiary. It
might be a more effective use of public money to pay the difference between
wages and needed income directly to the workers.
There is an additional cost
imposed on low-paid workers seeking public assistance. Petitioning for charity
is an occupation that has been called the “excessive bandwidth” of poverty, the
high cost of being poor. The working poor must moonlight at the unpaid job of
filling out forms, waiting in lines, making endless phone calls, sometimes only
to find there is nothing for them at the end of the process. It saps the energy
that should be used to raise children, participate fully in the community, and
just fully enjoy life.
If a wage is to be mandated by law, it ought to
provide a basic but dignified living, not correspond to some arbitrary number.
It should be paid directly to those earning it, not through the wasteful and
uncertain filters of the state apparatus.
And, of course, there are many
among us who are not able to work or who produce at best a reduced output, and
who will always require social assistance. This is the population for whom the
network of social agencies has a necessary and irreducable role. Those who work
steadily and reliably at jobs with real economic value should not be among them.