Two proposals which would raise the federal minimum wage were defeated in the US Senate yesterday. The first sponsored by Democrats including Teddy Kennedy would have raised the minimum wage to $7.25 over a period of about 2 years. The second sponsored by Republican Mike Enzi would have raised the minimum wage to $6.25 over 18 months coupled with regulatory reform and exemptions.

During the debate Senator Kennedy invoked the famous family of three living on $10,700 a year, which is $6,000 below the federal poverty limit, and Senator Christopher Dodd (D-CT ) called for sympathy for the single mother of three trying to make ends meet on a minimum wage job. Inquiring minds have a couple of questions:

The family of three surviving on the minimum wage; is that a traditional family of two adults and one child? If so why aren’t both adults working? That would raise the family income to $21, 400 or $5,000 above the poverty level. It is also one of the main reasons cited for federal and state support for early morning and after-school programs (latch key kids) and for federal and state supported early childhood education.

The single mother of three supporting her children on the minimum wage; is she in this situation because of divorce? If she is divorced all states require child support payments, is she receiving them? If the children were born out of wedlock was the name of the father reported to the state social services agency so child support can be collected?
In addition if the children were born out of wedlock, why? There are many options for avoiding unwanted children including;

Abstinence
Abortion
Adoption
Birth Control Pills
Condoms
Diaphragms
IUDs
Morning After Pills
Spermicide

So why does she have three kids when she is living on $10,700 a year? If it is a result of her poor choices (i.e. unprotected premarital sex) why do we have to pay the freight through the higher costs that an increase in the minimum wage will entail.

I am not an economist and my thinking on the minimum wage is slightly counter-intuitive so try and follow my twisted train of thought. I believe that to increase overall wages the minimum wage should be abolished. In effect I think that the minimum wage acts in much the same way as price fixing, setting a cost at an artificial level. If the minimum wage was abolished and employers set their wages too low employees would leave for other employers driving the wage up. This should have the effect of driving up the wages at the other employers who want to continue attracting workers until a natural equilibrium is achieved.

Another method to increase wages for minimally skilled workers is stronger workplace enforcement of immigration laws. Illegal immigrants drive wages down in industries where they are employed. Stronger enforcement would help rectify that. If the penalties to the employer were increased to one years wages at the prevailing wage plus 10% for each employee found in violation that would be a very strong disincentive to hiring illegals.

minimum wage
Politics
Poverty
Economics
Current Affairs
illegal immigration

This entry was posted on Thursday, June 22nd, 2006 at 8:47 am by Chad and is filed under Brilliant, but uncategorizable. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.