Friday, August 12, 2016

Why should rural people be poor?

I live in an area that has decided, mostly via citizen initiatives, that the minimum wage is too low.  So they've raised the minimum wage in various places, to somewhere between $11 and $15 per hour.  Since the raises are being done on a city-by-city basis it varies, but the old minimum wage, which was one of the highest in the country already at $9.xx/hour is being raised.

When the issue first came up there were a lot of people who basically said the sky would fall if the minimum wage went up.  Businesses would shut down, disaster!  But the effect over time has been to increase the pay of the lowest paid people, and you know what?  That's not a bad thing.

Well, after a couple of years of this, including one city that just went straight to $15/hour, life is pretty much unchanged.  Pizzas are still being made, cars are still being rented and sold, houses are being cleaned and, in the case of seatac washington, even  your baggage is still being handled at the airport.

As the debate about minimum wage goes national, I hear a lot of people saying something like this:

"...The negative impacts could be especially big in lower-cost rural areas. Raising the minimum wage to $15 is one thing for bigger cities where the cost of living is more expensive; these are the places where the movement has flourished in recent years. But in rural areas, Washington Post columnist Catherine Rampell has written, "would likely throw many, many more people out of work... source

Rural areas are areas where it can cost you less to live, but our wage structure is basically seemingly designed to offer workers the absolute minimum wage that can possibly be offered.  that is, it is apparently a sin in the business sense to contemplate offering a wage to people that gives them the basic ability to pay their bills, pull even, or even get a little bit ahead.

It comes up over and over again, this concern about the difference in cost of living.  Folks, we have a situation where our farms and rural areas need more people, and honestly, if I had a situation where I could be poor and live in a city (where things cost more) or maybe not so poor and live in the country, well, I know where I'd go.

The basic debate we are having here is what 40 hours of hard work entitles someone to.  In my belief if you work 40 hours or more a week you should be able to afford a place to live, food on the table, a decent, reliable vehicle and have 10 to 20% extra every month so that you can do what smart people do:  Save and invest.

Poor people have all sorts of ways that they lose money.  Credit costs them more.  Credit cards charge higher rates, payday loan companies charge them horrendous fees.  They're more liable to incur bank fees for things like bounced checks, and this sort of situation means that 50% of the households in the USA can't handle a $500.00 surprise bill.

Let me restate that:  Most american households don't have $500 to their name.  Our business culture has been so successful in taking every penny from these folks that they're broke.

I want people who can afford to buy my pigs, my hay, my beef.  I want people who can afford to buy my farm when I retire.  I want people to have enough money that $500 isn't an emergency.

Rural areas, more than most, need the full $15/hour wage.  And if people who live there do better, well, that'll probably mean that more people will move there.  And that's a good thing.


Goggler said...

How’s that again? So cities put a ban on low paying jobs, how’s that good for any businesses, particularly new ones.

Generally the first thing you learn on the first day of Econ 101 is that if you raise the price of something, you’ll reduce the demand for that something. Including labor.

You work 40 hours, you should be able to leave comfortably? Such a big heart with other peoples money. And why stop at $15/hr, hell let’s give them $30, oh wait, that maybe difficult for the employer, but then, this isn’t a lesson on economics, or is it? So we drive up the price of labor which is passed along to the paying consumer so at the end of another day, more people can afford the pigs your selling. Just to spread the fairness evenly, someone in government needs to determine how much your pigs should be sold at, say $15 just so everyone can afford them that works a hard 40. Your costs aren’t germane to the cause we’re working at here. What garbage. Your post started with socialism and ended with a taste of capitalism. It was a tough and disappointing read, especially from a numbers guy.

Bruce King said...

A big angry, aren't we?

This is a situation that I'm dealing with in my own employement. The $15 wage increase is happening in my area already, and while many folks have claimed end-of-the-world status (as I've pointed out in the blog entry) it just hasn't happened.

Yes, it will affect corporate profits. But corporate profits are at an all-time high. And I think that balance needs to be shifted from solely return to the investors to a bigger share of profits going to the employees.

If we had a minimum wage that tracked employee productivity it would be in $22 to $25/hour range - not far from your hypothetical $30. And that wouldn't be bad.

More folks to buy my pigs.

Josiah Young said...

I realize it's anecdotal, but everyone I know started at minimum wage and worked their way up, switching jobs here and there, but using that experience to haul themselves up another step on the ladder. I just never understood the need for the government to mandate that someone flipping burgers needs 15/hr.

Lest there's any misconceptions, I didn't come from money, and I worked two minimum wage jobs in high school and college... So I have experienced "flipping burgers" for little pay.

I'm not sure what the answer is though, a massive increase in min wage would have destroyed the first place I worked at. You really just needed lots of people working there, there was no way around it. So the best way to do that was to hire a ton of 16 year olds for little pay, and then pay some 18 year olds a little more money to manage the 16 year olds.

There's just always unintended consequences when you dabble to that amount in the economy, I'm just a tad leery of those consequences, but I'm a pessimist by nature, perhaps they'll be good unintended consequences...

Steve said...

It's nice to hear the wage raising is working in your area. Here in Northern California two things are happening. Businesses are diversifying/ adding services to regain revenue, or they are laying off employees. I just heard of two university studies, U of Washington and Seattle Pacific I think, that studied the effect of the minimum wage increase. Both studies found that on the average employees either lost $5 a month in wages or gained $5 a month. Basically a wash.

I had a similar discussion with a relative that runs an vineyard management company. He said he pays his employees above the minimum wage and tries to find work for them in the slow parts of the year. He also pays health benefits and pays for language lessons. He said he does this to keep the employees. He lives in an expensive part of California and that is what he has to do.

Bill Gauch said...

Corporate profits will not drop from an increase of the minimum wage. Many businesses have pricing as a multiplier times costs. Other businesses factor costs of all elements and then tack on their profit and set prices based on that. All minimum wages do is lead to inflation. People have more money. Costs go up. Profits actually increase because they are directly related to costs. Standard of living stays the same. If you doubt this, look at Italy (pre-Euro). When they switched from the lira, it was nearly a 2000:1 conversion.

Anonymous said...

" So cities put a ban on low paying jobs, how’s that good for any businesses, particularly new ones.

Generally the first thing you learn on the first day of Econ 101 is that if you raise the price of something, you’ll reduce the demand for that something. Including labor."

True life has proven your Econ 101 class wrong. In fact economies with higher minimum wage are thriving.

Galeandra said...

Sensible comments, Bruce, despite the shouts of alarm from the Gogglers of this world.
What an increase in wages does is restore a tiny bit of what's been lost by wage-earners (profits based on productivity gains haven't been recycled proportionately into wages & salaries over the last forty years) and that increase lubricates the local economy and produces enhanced opportunities to work and to consume.
We need to consider how we are going to ensure that everyone has an opportunity to share the rewards of work, both material and psycho-social, as automation tips more and more workers out of employment. The age of leisure is what we were promised back in the 60's but it's looking more and more like it will be an age of poverty, based on z h contracts, slave-wages or unemployment.