Tuesday, October 20, 2015

Bernie Sanders: Reading Past the Campaign Slogans (Part 2)

1. Minimum Wage: "Wednesday, July 22, 2015, Sanders introduced a bill to increase the minimum wage to $15 an hour over a period of five years, called the "Pay Workers a Living Wage Act." You can view the press release here, the summary here, and the full bill here.

This bill proposes the follow wage adjustments:

+ Minimum wage - $9 in 2016, $10.50 in 2017, $12.00 in 2018, $13.50 in 2019, and $15 in 2020.
+ Tipped min wage - $3.15 in 2016, then increased $1.50 each year until matching standard minimum.
+ Youth min wage - can be no less than $3.00 less the standard minimum.
Business are expected to adjust their finances to cover this cost." (Source)

Question: Why does no one mention the elephant in the room? Inflation. 

1972: Dollar removed from gold standard
Average costs:
Car: $4,500
Home: $40,000
Gallon of gas: $.36
Visit to the doctors: $25.00
Average nominal salary: $8,424

Today: [price || percentage increase]
Car: $32,495[5] || 722%
Home: $208,000[7] || 520%
Gallon of gas: $3.48[8] || 966%
Visit to the doctors: $220[9] || 880%
Average nominal salary: $49,486[10] || 587%


"So let's take this claim apart. Suppose some menial job is now offering $15 dollars an hour. That does increase the employment pool because more people will want to apply for it. But what that really means is that some people who would have never dreamed of doing that job, because they were too overqualified for it, now don't really care about that, they just want the $15/hr. So, now the low-skilled people who would normally be competing among themselves, are now competing with much more educated high-skilled people for the same job. And so the people who are the most vunerable, who have the least skills are even LESS likely to find entry jobs. How does this help the people at the bottom of the socioeconomic ladder?" -Tom Woods

Inflation Calculator

So, if the buying power of the dollar has decreased, yet the Federal Government wants to mandate a higher minimum wage without taking into consideration how inflation affects the economy (a hidden tax), this will force businesses to raise the cost to produce goods and provide services.  These cost increases affect the lower-income and middle-class the most.  Higher Minimum Wage + Higher Costs for Goods = No Significant Net Benefit.  As well, mandating a minimum wage increase will deter many companies that hire those employees to cut back on hiring new employees who have little skills and need those jobs the most.

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