A Minimum Wage That Will Work

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Wall Street Journal
By: Robert G. Strayton
February 9, 2014

The president's call for a $10.10 minimum wage applies the worn-out notion that higher wages create more jobs. Despite repeated minimum-wage increases over the years, we have seen a continued flight to the sidelines by people who are unable to find jobs because they don't exist. Many jobs don't exist because employers refuse to hire people at such wages. Isn't it obvious that, with a higher wage, McDonald's $1 menu, for example, would cost $3, few would buy it, and Mickey D would have less revenue and far fewer jobs?

As a volunteer interviewer of the poor at a religious charitable organization in southwest Florida, I have come to believe that the most effective step we can take to ameliorate poverty, kick-start job growth and invigorate hope in every social stratum is to experiment with a $5 minimum wage.

A $5 wage will put money and hope into the lives of our poor in immediate, powerful and enduring ways. For all its $4 trillion stimulus, mere nickels of quantitative-easing funding "trickled down" to where the poor reside. But a $5 minimum wage will "trickle up," directly from employer to employed--creating millions of jobs rapidly and putting them within reach of huge numbers of the poor.

Three enormous labor pools of can benefit immediately. The most dramatic change among the poor that our charity serves right now is in the demographic sector of hardworking lower-middle-class families who are being squeezed into poverty by ever-increasing food, housing, transport, medical, drug, insurance and other costs they are unable to pay. These include:

• Intact low-income families, where three or four persons have the capacity and desire to work, but only one has a job, often at a near-minimum wage that typically generates about $15,000 a year. A $5 wage that opens full- or part-time jobs for the remaining three can change that single survival income into a $30,000-plus income stream to help produce a life of reasonable comfort and dignity.

• Single-parent families, often headed by an educated young woman with one or two infants who supports a live-in partner on an entry-level job income. He cannot find a job and her hours are reduced: As wage-earner, mother and caregiver, she is in extreme stress and they are in crisis. A job-fostering program that helps the partner find work can bring immediate and potentially long-term relief to these folks.

• Teenagers, whose unemployment rates range from 15% to 45%, can obtain life-altering benefits from a $5 wage. Jobs will finally become available. The skill-set required for most will be minimal, encouraging them to apply and rejoice at being hired. They move out of corrosive stasis into workplace communities in which effort, cooperation and accomplishment are acknowledged and rewarded.

There are other poverty levels which can benefit from a $5 wage, but these three are important because they comprise motivated poor who wish to work now. The $5 program is a wage, not a benefit, that will appeal to them--the first responders if you will.

How would such a program operate? At the government level, with as little red-tape as possible, although government must protect current workers by guaranteeing they will not be subject to any wage lower than the one they now earn.

At the employer level, hiring $5-per-hour personnel must be balanced against the risk inherent in the often-inexperienced people such a wage attracts. As an incentive, the IRS can allow a 50% tax deduction on all wages paid at the $5 level during a test period. Facing workforce mobility issues (prospective employees without cars, bikes or gas money), employers can offer transportation, water, food and necessary material services for which they may also claim tax deductions. As for the workers, they will receive gross-equals-net fully spendable pay at the end of each work period.

You'd think no one can value making $5 an hour. But for those in poverty, a primal need is immediate and reliable access to an income of one's own. When one has nothing, anything becomes priceless. Watch the expression on the face of a poor person when you provide him or her with $2, $3 or $5 to put gas in a neighbor's borrowed car so he can bring free groceries, clothing, linens, housewares or furnishings from our organization back home. You'll see then the value of such a "trivial" wage.

When more Americans are able to take a first step into the workforce, some for the first time, we will also see tradesmen expanding, entrepreneurs taking more risk, better staffed social services, and a citizenry proud of the peace and dignity that many new working residents are able to achieve. With such peace and dignity, poverty ceases to exist.

http://online.wsj.com/news/articles/SB10001424052702303947904579341204119537852?mod=ITP_opinion_0

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This page contains a single entry by CFED published on February 10, 2014 8:13 PM.

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Income inequality: The other side of the gap is the next entry in this blog.

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