The real question about raising the minimum wage.

     As a result of house-shaking, ear-splitting thunder at 5am, we were up a little earlier than usual in our household. This unexpected early wake up call meant that our routine was a little more relaxed (heck, we had lots of time to get ready for our day). It also proved to be very insightful. 

    While my daughter spent her time getting in an extra ten minutes play time, I indulged in having a cup of French Vanilla Cappuccino and reading the news feeds on my phone before 8:30am. I don't like watching the news on TV, it tends to dwell on negative elements and sensationalism. So I read my news via my smarter than I am phone. As I perused the riots in Kiev, the latest in the Olympics, and the nun who got jail time for breaking and entering a nuclear facility, I came across an article from the Consumerist by Chris Morran titled: Walmart "Looking At" Support of Minimum Wage Increase. A big retail chain supporting a $2.85 hourly pay hike certainly caught my attention. I found the article interesting as it addresses the spending habits of consumers who generally make less money and the reasoning behind Walmart's thinking they might want to support this pay hike. Not exactly flattering picture of the giant retailer's thought process, but definitely an honest one. Something I can appreciate. What also caught my attention in the article was the pros and cons discussion on the effects of the minimum wage increase - one that I had seen noted before in other news posts.  This led to me posting the above mentioned article on my Facebook page with the comment: Take a look at the part of the article where the experts compare the loss of half a million jobs to improved pay for 16 million jobs. I get this is all estimates and fancy guess work, but really, when you weigh pros and cons in your household at what point do the pros outweigh the cons?.

     It seemed to me that an improvement in the lives of 16 million people outweighted the job loss of 500 thousand. Knowing that my math is sometimes faulty, I decided to test out the numbers on my daughter.  After all, she is the math wizard in our house and working at a level that far exceeds her parent's ability.  We are probably going to have to hire someone to check her math homework next year.  I asked my daughter, which is bigger, 16 million, or 500 thousand. She rolled her eyes and said, "Well 16 million of course."  So my math skills were sound. I decided to take the conversation a little further. 

   "Okay," I said to her. "I read an article that said that 16 million people could receive improved pay with a proposed wage increase, but that 500 thousand jobs (or more) could be lost as a result."

     She thinks about this for a minute and tells me that she thinks that more people getting pay increases outweighs the people that may lose their jobs. And she goes on to tell me that if the people who lose their jobs do get new ones, they would be making more money when they get a new job, because the wages will be higher.  They would also have more money to spend, which would be good for the economy. In my mind I am patting myself on the back for having raised a smart cookie.

     But wait, there is more.

     "Of course mom," she adds. "That also depends on how much stores have to raise their prices to pay people more. If they have to raise the prices too much, that would offset the benefits."

     

     Good thing I am sitting at this point. This just came from my 10 year old. 

   

     "If they have to raise their prices too much, then the people earning more have to spend more." she continued. "It depends on how much they have to raise their prices. But since prices seem to go up anyway, I still think that giving them better wages is an improvement and would be good for most people."

    Ummm, okay, lets get our boots and get moving so that we don't miss the bus. My limited view had only partially registered this part. I was still busy being irritated by the fact that all the articles I read spelled out the cons number 500,000 (making it look visually bigger), while shortening the pros number to 16m (making it look visually smaller). I am sure it had more to do with printing and number of characters used in the article, but if this were the case, shouldn't the 500,000 been shortened to 500k?

     Getting past the visuals in print, the more I thought about the wage increase issue, the more I wondered, where is the data the that would indicate how much retailers would have to raise their prices to offset the rise in wages in order to maintain their current profit levels? Retailers are in business to make a profit. Generally, some of the profit is made by keeping costs low. Since this cost would be going up, seems to me that they would have to balance that cost in another area, most likely by raising prices. How noticeable would the higher prices be to consumers? 

    So I Googled that very question. And the answer I found was a bit surprising. A couple of articles cite economist John Schmitt who essentially concludes that a 10 percent rise in minimum wages would probably result in a 1-4 percent raise in overall prices. 

    Further more, companies that pay the better wages will benefit from higher productivity and less employee turnover - which means less cost in recruiting and training. Sounds pretty positive.

    One negative to this pretty picture is companies may find other ways to cut their costs to offset the rise in minimum wage, such as to cuts other benefits like scholarships, free uniforms, discounts, stock purchases (really-is this a minimum wage consideration?) and insurance. Quite frankly, over the last ten years, I have found that most of these benefits have already been cut or at the very least, reduced. Not to mention that there may be a reduction of 500,000 jobs or more. Possibly.

    So basically, armed with more information than my daughter (who doesn't watch the news and is not really into reading the newspaper unless it is the comic section), I came to the same conclusion that she did. Raising the minimum wage would benefit more people and possible improve our economy.  I know this is a gamble, but neither are the numbers about job losses a guaranteed figure. 

   My husband was shocked as I was when I told him about my conversation with our daughter before heading out to the bus stop, especially in light of her limited exposure to the media. I told him that we were raising an economic analyst and didn't even know it.  He grinned and said that was not a bad career choice, but he hoped that she could keep that high thinking ability without losing touch with the realities of humanity.

    I hope so too.