Maximum Wages – Is it another issue we should address?

I’m switching gears a little bit and writing about a maximum wage or wage ceiling policy.  Switzerland is considering a maximum wage law that will limit how much a CEO of a company can make, set to 12 times what the lowest paid worker makes.  There is talk that the U.S. should consider this type of policy.

According to those backing the policy in Switzerland, it isn’t an economic or political stance, it’s an ethical one.  When the pay gap is so wide, it becomes fundamentally unfair, allowing the rich to wield undue influence over society, economics, and politics according to Swiss politician Cedric Wermuth.  Once this slide occurs, democracy can begin to unravel.

In a study from Economic Policy Institute that Lynn Stout from Cornell Law School references, CEO pay including options jumped 875% between 1980 and 2012.  Minimum wage workers have seen an increase of only about 5% over that same period of time.

One suggestion to look into is enforcing a limit of 100 times the minimum wage.  It would still allow top executives to be millionaires.  With the current federal minimum wage at 40 hours per week, their maximum wage would be about $1.5 million per year.

Does this have the potential to go into effect?  It depends on where you look.  Debate.org has a few open polls on the matter that are completely opposite in ranking.  When looking for actual political surveys or polls, none could be found.  It’s not a hot topic in politics.  I think there would need to be a huge push from third parties or special interests groups in order to make it so and I have a few reasons for believing as such.

Political Contributions

  • Businesses and Individuals can donate to a particular party or candidate for upcoming elections. Talking about limiting income will affect the ability to raise the funds needed to run for office. Not only could financial support be pulled but it also could decrease the said support’s ability to contribute to the campaign.
  • This might not be a bad thing though. There is some belief among citizens that way too much money is spent on campaigning and that individuals and companies have too much influence on government as it is, emphasizing one of the concerns the Swiss have of their government.

Constitutional Rights

  • I mentioned in my first post the core value of individualism and economic independence. In the Declaration of Independence there is that all-famous line, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” Many people feel that limiting one’s income is a definite limitation of one’s pursuit of happiness.
  • But another question is since the government can regulate minimum wage, does that also give them the right to regulate maximum wage? Since it can affect national business and economy, I believe the national government already has the power if they choose to enforce it.

Lack of Information

  • Other than suggestions and theories, I had a difficult time finding any solid information on the benefits and disadvantages of creating a maximum wage.

How would this affect minimum wage?  If a maximum wage policy was put into effect, and was correctly tied to minimum wage, it could put more backing behind increasing minimum wage, if only to allow a larger income for those on the top of the food chain.

Minimum Wage – The True Issue?

On February 24, 2015, it was announced that Iowa’s Senate had approved a bill that would increase the state minimum wage from $7.25, the current federal minimum, to $8.75 by July 1, 2016.  All 26 Democrats in the Senate voted yes along with 1 Republican.  The other 22 Republicans voted against the bill.  There was no debate.

The bill was then passed on to the State House of Representatives, where it wasn’t expected to pass or even debated.  In fact, it didn’t even make it out of committee.  Republicans within the House explained their feelings as not being naïve enough to think that raising the minimum wage would solve problems for Iowa’s low-income workers.  They want to focus on building businesses.  In the House Republicans opinion, the best way to help Iowans is to create an environment where they can get the skills they need (education) and to have the opportunity to get a job that pays them a wage where they can live their live, raise their family, and accomplish their goals.  Some of the bills still alive in legislature that support these claims include a spending increase for K-12 schools, property tax breaks for incentives for expanding broadband networks, and allowing sales of certain fireworks such as firecrackers and Roman candles.  They aren’t fully passed yet, but have not died like the minimum wage bill.

According to the National Low Income Housing Coalition, most of the nation with minimum/low wage jobs are unable to afford a 2-bedroom apartment.  The organization calculated the hourly wage a resident would need to afford a moderate, 2-bedroom apartment in each state, assuming they are working 40 hours a week, 52 weeks a year, without paying more the 30% of their income.  On average for the entire U.S., the average hourly wage to rent a $1,006 unit (the average rent throughout the U.S.) is $19.35.  Iowa is on the lower end of the scale with minimum wage needing to be $13.46 in order to meet that criteria on average.  Washington D.C and California top the list at $28.04 and $26.65, respectively, as the required minimum wage.

In the complete report released in May, the National Low Income Housing Coalition goes on to calculate how many hours someone making the current minimum wage would need to work a week in order to afford a one-bedroom apartment without paying more than 30% of their income.  Not a single state meets this criteria with under 40 hours a week.  Puerto Rico comes the closest at 48 hours per week.  Iowa sits at 58 hours per week.  There are six states (California, Washington D.C., Maryland, Virginia, New York, and New Jersey) who all hover around 100 hours per week.  Hawaii packs in the most with a whopping 125 hours per week.  There are only 168 total hours in a week, and you still need to include time to sleep, eat, and commute.  This leaves maybe an hour a day to spend with family depending on how much sleep a person needs and how long their commute is.  The report goes on to break down each state by cities and counties to get complete details.

Maybe the problem isn’t just with minimum wage.  Maybe it’s also with the cost of everything else.

Victory or Defeat? – Unions and Minimum Wage

The big news this past week in the minimum wage debate comes out of Los Angeles, California.  Unions have helped fight for an increase in minimum wage.  The new law is to be voted on (and expected to be passed) by the city council on Wednesday, June 3rd, and would gradually increase the minimum wage for the city to $15 by July 2020.  Pay hikes won’t begin for another year, though, which means changes to the proposed law could be made before the increases begin.

Unions, however, even though pushing for the increased minimum wage, are asking for an exemption in the law.  They wish to be able to have the flexibility to negotiate pay wages for other benefits such as more sick days that may be more important to them, according to Rusty Hicks, a part of the county labor federation.

The city, however, is not prepared to include the exclusions for unions.  They feel it would encourage businesses to “unionize” in order to bypass the law, and the city is unwilling to unintentionally prod businesses in that direction.

While the request of the unions for a waiver is not all that unusual (there are several cities that have allowed the exception), the issue is the hypocrisy of the request.  Apparently while pushing for the new law guidelines, unions had criticized all other organizations who had asked for exemptions, such as non-profit organizations, restaurants, and business with a low number of employees, telling them they were looking for a “loop-hole” in order not paying workers what they were worth.  With the request for a waiver of their own, all of their previous words are now being flung back at them.

Unions help organize individuals, and help them fight for their equal rights.  Equal rights in this case are the right to a pay equal to their work, equal treatment, and equal work conditions.  A group of people tend to have better luck in making changes than individuals, as the group’s voice is louder and its actions can make a bigger impact.  Pushing for the higher minimum wage, unions can hope to bring in more members as portraying themselves as a powerful force in order to make change happen.

Unfortunately with this recent development, unions in Los Angeles may have hurt the shining opportunity they have been working so hard for.  Asking for an exemption may just show workers that a unions believe that workers deserve a higher minimum wage, just not their own members, and that sick and vacation days can be more important than keeping your home warm in the winter or feeding your children supper for the night.

One success for the” Fight for $15”, but also a huge blow.  Will future pressure to increase the minimum wage be scrutinized and condemned because of the groups fighting for the change?  Will the groups’ ulterior motives (if any) come to light?  The voice of the majority may prevail in the end, and has already seen outstanding success.  It will be interesting to look in on future debates and see if any backlash from this event has occurred.

Introduction to the Minimum Wage Debate

 

Minimum wage is the lowest hourly rate an employer can legally pay their workers.   There is a federal policy which currently defines minimum wage at $7.25 which was put in place July 24, 2009.  States are also able to define their own minimum wages, although not all do.  An employee is subject to both laws if in place, and although the supremacy clause in Article VI of the Constitution grants dominance to national laws, in this instance the employee is entitled to the higher minimum wage of the two policies.  As of February 24, 2015, there are 29 states that have higher minimum wages limits than the federal government.  Initially, these laws were put in place in order to reduce poverty, and to protect younger workers and minorities from being paid less than others.  Increasing the minimum wage is currently in debate, although to a lesser scale than other issues currently on the table.

Those in favor of increasing the minimum wage feel that a higher minimum wage would ensure that workers in those positions would not be underpaid and given a fair wage.  They also feel that it would put more money into the economy, thus stimulating it since lower-paid workers are able to spend more.  Another benefit is to encourage a better work ethic since the pay is better, and to encourage those that are unemployed to search for now more-desirable minimum wage jobs.

Those opposed to the minimum wage increase believe that it would actually cause more poverty, since business would then have to pay more in wages, they may have to let employees go in order to afford the new wages.  There are also studies available that show that minimum-wage workers are typically high-school kids in their first job rather than impoverished families living off of the minimum wage income.  Others believe that it would cause inflation which would cancel out the increased amount of money in the economy, providing no benefit.  There is also some concern that it would discourage further education of the poor.

One of the core values of the United States’ political culture is individualism, which is a commitment to personal initiative and self-sufficiency.  Self-sufficiency is tied to a desire for economic independence.  I believe that Americans wanting a higher minimum wage are in part holding to the belief of their economic independence as so not to feel like they have to rely on the national or state government for aid in just trying to provide basic needs such as food, shelter, and heat.

The concept of majoritarianism occurs when political leaders respond to the policy desires of the majority.  In 2014, Alaska, Arkansas, Nebraska, and South Dakota approved minimum wage increases through ballot measures, which relied on voters making the decision to change the policy.  This is a very good example of majoritarianism since it directly relied on the voters themselves to change the policy.  It is also an example of a democratic change since it came from the people.  Other states that have recently made changes to their minimum wage laws were made by the elected lawmakers in office to make the decision, using the representative government in place.