Math is Good:

I just read that Candidate Edwards has gotten all the other Democratic Candidates to agree to a $9.50 minimum wage by 2012. I am dumbstruck by the disconnect that they have with the causal nature this will have with another of their war chants of jobs being sent overseas.

Point 1: If the minimum wage is raised so will the baseline index of what is required to qualify for public assistance. The average person working 40 hours per week will have an income of $19,780 per annum. In 2006, according to US Census definition, a family of 4 was considered to be living in poverty if they had household income of $20,614 and this is with a minimum wage of $6.75. So using simple extrapolation a 40-hour workweek in 2006 generated $14,040 or 68% of what was needed to reach the baseline of poverty. So if the relationship holds in 2012, poverty baseline will be $29,088. If public assistance is meant to meet the shortfall between earnings and the poverty baseline then that will mean a real dollar increase from 2006’s $6,574 to 2012’s $9308 for a family of four.

Point 2: If US companies cannot compete globally at current wage rates how will they expect to do so with wage hike pressure. The relationship of minimum wage and incentivised wages is real. A person who has been with a company for a period of time has a rational expectation for the employer to value their work at a rate greater that of a minimum wage. So the introduction of a higher minimum wage is inflationary on all wages from middle management down and will result in a cascade of solutions that are not favorable to general employment.

Point 3: Businesses will have to hire less people or raise prices, as fewer people are employed more will require public assistance, as more people are on public assistance taxes will have to be raised making businesses less profitable and so on and so on.

Point 4: As costs rise due to inflation, businesses will be forced accelerate the search for the low cost providers and more jobs will go overseas. Less employment in the US means fewer contributions to Social Security and Income Tax. Less Income Tax and no way to pay back the Social Security Trust Fund for unfunded benefits.

Not a single member in the MM has brought this up to my knowledge. Be careful of gift horses, especially this one……it has hoof and mouth disease.