I was listening to the Doug Wright show on my way into work this morning (Thursday, September 4, 2014). He was talking with Melba Sign of the Utah Restaurant Association about a potential increase in the federal minimum wage, particularly as a response to protests that were happening around the country (sit-ins in quick-serve/fast-food restaurants, for instance). Doug implied that minimum wage will increase this year or next, and he was concerned that because it had been so long since the previous minimum wage increase, that the jump would be quite large (between $1-2/hour). He wondered, since because a minimum wage increase tends to happen periodically anyway, if it would be prudent to tie (index) minimum wage increases to some standard. He didn't mention a specific index, but something like the Consumer Price Index could be an example of an index. Not surprisingly, Melba did not seem very fond of any minimum wage increase, but she did say something interesting in response to Doug's idea of indexing--would tying minimum wage to an index allow the minimum wage to go down during recessions? She mentioned that many people not making minimum wage had their wages cut during the recession as businesses tried to re-group.
The discussion about the minimum wage raises a lot of questions for me. I am interested in the idea of indexing the minimum wage. I wonder, as Doug, does whether indexing minimum wage increases would make them less painful when they do go up. Is a 25-cent increase once a year better or worse than a $1.00 increase in four years--the net effect would be similar in some ways, perhaps?
Doug and Melba also discussed the difference between the minimum wage and a living wage. I often hear the two discussed together, but Doug and Melba agreed that they are different. In fact, they tended to use "minimum wage" as a synonym for "entry-level wage." This made me wonder why the terms "minimum wage" and "living wage" often appear together, how they are different, and when they might apply to the same person and when not.
I also wonder how the minimum wage affects workers and businesses, both in general and when it increases. While the perception is that it tends to positively affect workers and negatively affect businesses, I wonder if that is true more generally. What about specifically? Are some specific types of workers worse off when a minimum wage increase occurs? Are some types of businesses better off when the minimum wage increases? Again, it seems like the details could provide more richness for discussion than general trends.
Doug mentioned that the whole minimum wage issue is complex, and I definitely agree. I wonder what others think about the idea of a minimum wage. What would wages for food-industry workers be without a minimum wage? Would the market dictate a rate that is similar to the minimum wage now? What models could predict the impact of an economic system with or without a minimum wage?
I also wonder if the economic system is the kind of chaotic system that Stellan Ohlsson talks about in his book Deep Learning: How the Mind Overrides Experience. He says that it is difficult-to-impossible to make predictions about chaotic systems. (A river is a natural phenomenon that is chaotic because the way it develops over time is unpredictable.) He says that change is inevitable in chaotic systems and that the change is irreversible. So even though I am asking about a system without the minimum wage, I don't think our society could actually implement that because the system has been built with that as a core component of the system. In other words, it seems like the system would not react in the same way if the minimum wage were to be taken away as it would react had the minimum wage never been in place.
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