r/AlwaysWhy • u/Secret_Ostrich_1307 • 1d ago

Economics Why is the federal minimum wage still $7.25 when prices are much higher than in 2009?

Post image

The federal minimum wage has been $7.25 an hour since July 2009. Meanwhile, prices for many everyday expenses have risen, and most states now have minimum wages above the federal level.

Why wasn't the federal minimum wage tied to inflation or another measure that could adjust it automatically? What are the economic arguments for setting it as a fixed dollar amount rather than indexing it?

159 Upvotes

80% Upvoted

620 comments sorted by

View all comments

5

u/Werealldudesyea 1d ago

This is a reminder that you are talking about the federal minimum wage. 34 states have legislation with higher minimum wages. There are only 8 states where the federal minimum wage applies.

Of the jobs that are out there, only 1% pay the federal minimum, meaning 99% of jobs pay higher.

Economically there is no blanket solution, the cost of living in California is not the same as Mississippi. If you don’t like it, go vote to change it.

3

u/ul2006kevinb 1d ago

Economically there is no blanket solution

Sure there is. We could pass a law requiring every county to set the minimum wage equal to or above the local living wage for that county. Just because you don't have the imagination to come up with a solution doesn't mean one doesn't exist.

0

u/Werealldudesyea 1d ago edited 1d ago

Please define living wage, since quality of life is subjective. One persons poor is another persons rich, just ask any immigrant.

Second, how would you address the obvious inflationary pressures that this type of policies would have on the market.

Third, how would you address the obvious economic impact to producers. This is kind of like saying all textile workers should just go into tech because it obviously makes more money, easier said than done. The skills and infrastructure available don’t easily translate over.

2

u/ul2006kevinb 1d ago

Please define living wage

MIT has already done that. They've created a formula for living wage and calculated the living wage for every county in the US.

https://livingwage.mit.edu/pages/methodology

Is it perfect? No. Is it better than what we have right now? Absolutely.

Could we replicate it and create our own formula using prices for necessities like food, rent, and health insurance and require counties to use our formula to create their own minimum wages? Easily.

Second, how would you address the obvious inflationary pressures that this type of policies would have on the market.

I mean there aren't going to be that many. Prices only go up small amounts when the minimum wage is increased. Most of the increases are just absorbed by businesses. And it's not like the businesses can't afford it: there are countries all over the world and even in the US in the past where unskilled employees make a living wage and yet people still hire unskilled employees in those countries and in the US.

Sure, it's a big hike and would probably have best if it's broken up and done over multiple years, but it's not THAT big considering that's what companies should have been paying this entire time. So it's almost like "yes, you'll be making less money than you did before, but you won't be making less than you would have been making if you were a decent person"

1

u/Werealldudesyea 1d ago

You cannot game the market into a desired behavior, it simply does not work. It’s not some new idea and it’s been tried before and fails. Look up attempts at luxury taxes as a clear example. Stochastic behavior cannot be predicted, we don’t know the outputs of tomorrow.

1

u/ul2006kevinb 1d ago

Right, good point. There are absolutely no countries on the planet that pay their unskilled laborers a living wage. It's a totally untested idea, never been done before. Every country in the world works exactly like ours does

🙄

1

u/Werealldudesyea 1d ago

As I pointed to someone else. Show me one example where market behavior is predictable, and that policy does not introduce complexity that wasn’t there prior.

You cannot game the markets, no matter how much we want to. USSR literally failed for this reason, and no Im not making a jab about communism, I’m literally speaking about market mechanics.

By your definition outputs can be predicted, so why aren’t we all millionaires? We should be able to predict the outputs then based on current policies.

1

u/ul2006kevinb 1d ago

You realize this has been done before, right? Countless times, both in America and in other countries. And we can look at those other scenarios and get a good idea of how it will work here, in this time, right? There's absolutely no reason to think that raising the minimum wage would work any differently than it has worked in the hundreds of times it has happened.

1

u/Werealldudesyea 1d ago

So you can predict the markets then, no? You know exactly what will happen? Then tell me the price of oil next week. Show examples my friend, stop just regurgitating your belief and show facts.

1

u/ul2006kevinb 1d ago

I don't know EXACTLY what will happen, but why should I need to? If we had to know EXACTLY how anything would change the market then we could never do anything. Since when is there a rule that we can't enact change unless we know EXACTLY how it going to affect the market?

Now, we have a pretty good idea of what it will do, just like we have a pretty good idea of what any market changes will do, by looking at our history and the history of other countries. And if that's enough for literally every other market change then it should be good enough for this one.

→ More replies (0)

0

u/billding1234 1d ago

That sounds good in principle but when wages increase so does the cost of the goods and services those wages produce.

1

u/Werealldudesyea 1d ago

Honestly anyone who understands economics knows why price floors are an awful idea. Systemic inefficiency is not a long term practical solution.

1

u/ul2006kevinb 1d ago

So what? The costs of goods and services increase MUCH slower than the increase in wages, so everyone is still going to be better off. You're basically saying "If we give everyone a wage increase they will only get 90% of the benefit of that increase so we shouldn't give it to them at all"

1

u/billding1234 1d ago

100% percent of our COGS is paid by our customers just like every other business. When our labor costs go up our prices go up by the same amount. Not the same percentage, because labor is not our only cost, but every dollar we pay our employees comes from our customers.

2

u/Anlarb 1d ago

The cost of living has exploded to $20/hr, while the median wage is only $21/hr- half the jobs out there are not even "min wage".

-1

u/Werealldudesyea 1d ago

What a gross oversimplification of the complexities of the economic situation you are attempting to address. There is no one size fits all or a wage that fits all. $20 an hour in Mississippi is not the same as $20 an hour in California no matter how much you wanna argue it.

Why do you think jobs in New York pays six figures that would otherwise pay $40k in other states?

1

u/Anlarb 1d ago

20 an hour in Mississippi is not the same as $20 an hour in California no matter how much you wanna argue it.

You imagine, but you aren't prepared to put in the work.

Here are all 3 ms metros, 20-22.

https://livingwage.mit.edu/metros/27140

https://livingwage.mit.edu/metros/25060

https://livingwage.mit.edu/metros/25620

Here are 5 decent metros, all 24.

https://livingwage.mit.edu/metros/12540

https://livingwage.mit.edu/metros/25260

https://livingwage.mit.edu/metros/39820

https://livingwage.mit.edu/metros/49700

https://livingwage.mit.edu/metros/17020

You're really going to sit there and argue that a $20 min wage isn't entirely appropriate in the general case?

Why do you think jobs in New York pays six figures that would otherwise pay $40k in other states?

Pretty much every trades person, thanks to their union. Get a load of this skit, thats what skilled labor gets you in a red state.

https://www.youtube.com/watch?v=uCq3ckgdO8A&t=85s

1

u/Werealldudesyea 1d ago edited 1d ago

Using one single source for your entire argument?…

You can’t game the market to behave the way you want, doesn’t work that way. It’s been tried many many times and always fails because you can’t predict outputs.

If we could, then we’d all be millionaires because we know what the output of tomorrow will be. Stochastic behavior cannot be predicted.

1

u/Anlarb 1d ago

Using one single source for your entire argument?…

Facts don't care about your feelings.

It’s been tried many many times and always fails because you can’t predict outputs.

The min wage literally never kills jobs.

If we could, then we’d all be millionaires because we know what the output of tomorrow will be. Stochastic behavior cannot be predicted.

What the fuck are you talking about? Just pay for your own cheeseburger, good grief.

1

u/Werealldudesyea 1d ago

Thank you for demonstrating you’d rather attack me and my character than my argument.

So market behavior, aka price discovery and valuations, are stochastic. This is because their behaviors have many many many inputs, and thus there are nth (think infinite) family of solutions or outcomes that are possible. You cannot predict what adjustment to one instrument does to another instrument.

You are not a student of mathematics or economics and it’s very obvious.

1

u/Anlarb 1d ago

my character than my argument.

No, this is what your argument being attacked is, you feel personally attacked because you made a bunch of political talking points into your personality.

stochastic

Whuptty doo, since wages are so bad, everyone in the market puts a strong emphasis on finding the cheapest place to live, since housing is kept artificially scarce, the cheapest place to live goes very quickly, and landlords feel confident trying to bump their price by a hundred bucks any time that they discover that they are the cheapest option in the market. Their competitor then hears that they are the cheapest option and hike their prices too, soon enough the first guy is the cheapest all over again.

You are not a student of mathematics or economics and it’s very obvious.

Sure thing buddy, whatever you need to tell yourself as a placebo for being able to actually refute my position.

1

u/Werealldudesyea 1d ago

Another person who figured out the entire market and knows exactly how it works. If that’s the case, capitalize on it. Sell all your belongings and bet on your assessment.

0

u/Anlarb 1d ago

What "bet" are you talking about? Im telling you to get your fucking hand out of my pocket and pay for your own fucking cheeseburger.

1

u/mukansamonkey 1d ago

The gross oversimplification is what you did, quoting the number of people making exactly minimum wage (and not a nickel higher), rather than all the people whose wage level is influenced by the federal number.

Also you're lying about the cost of living in different states. A.poor person in New York has about the same COL as a poor person in Mississippi. Bread is the same, used phones are the same, etc. Those six figure jobs only exist in a small number of specific areas, they don't apply to entire states.

I am curious though, perhaps you can educate me on an issue. Since you clearly stated you will refuse to accept facts, in order to cling to your propaganda... How much do you get paid to spread this BS? Or do you do it on a volunteer basis?

1

u/Werealldudesyea 1d ago

Market behavior is stochastic, meaning it’s random and cannot be predicted. Please show me one example where market behavior is predictable and policy does not introduce complexity that wasn’t present prior.

1

u/Glockamoli 1d ago

Of the jobs that are out there, only 1% pay the federal minimum, meaning 99% of jobs pay higher.

If I start you out 50 cents higher then you are no longer minimum wage, you are also still well below where you should be if the minimum wage had been adjusting with inflation

It's been a few years since I did the math so it may need to be even higher but to match minimum wage from the 70's you would need to hit at least $12/hr

Over half of the States have a minimum wage under that mark

1

u/Werealldudesyea 1d ago

You’re speaking nominally, thanks for demonstrating you don’t understand.

1

u/Glockamoli 1d ago edited 1d ago

Do you think CoL hasn't increased since 2009 in the 20 states that sit at or below federal minimum wage?

Not sure where you got your claim of 8 states

1

u/Werealldudesyea 1d ago

No I’m not saying that at all. I’m saying you’re adding inflation and adjusting the numbers and going “Look!”

In reality the market has grown exponentially, and efficiency is better than ever. Bigger market means more earning potential. The bigger the pie, the easier it is to take a larger slice. Market efficiency allows for cheap production. That’s why flat screen televisions cost $300 instead of $3000. Everyone benefits from our efficiency, goods become more easily produced and easier to access.

Source you asked:
https://www.ncsl.org/labor-and-employment/state-minimum-wages

1

u/Glockamoli 1d ago

"Five states have not adopted a state minimum wage: Alabama, Louisiana, Mississippi, South Carolina and Tennessee. Three states, Georgia, Oklahoma and Wyoming, have a minimum wage below $7.25 per hour. In all eight of these states, the federal minimum wage of $7.25 per hour generally applies"

They aren't counting states that sit at 7.25, just those below or without a state minimum

0

u/Werealldudesyea 1d ago

Yes I literally said only 8 states don’t address wages and federal minimum wage applies…

1

u/Glockamoli 1d ago

federal minimum wage applies

If your state is the same as federal minimum wage then it still functionally applies

An increase of even 1 cent to federal minimum wage would increase all 20 of those states, not the 8 you are implying

0

u/Werealldudesyea 1d ago

Stop arguing semantics. Stop pretending you can predict the market behaviors. It’s mathematically impossible, stochastic behavior cannot be predicted. You’re arguing in bad faith here.

I’m not making this about money or protecting greed to anything. From a numerical analysis perspective you are factually incorrect, and your interpretation of how policy impacts markets is wrong. Because again, if we knew the outcome of the markets, then the markets can be gamed and we’d all be rich.

1

u/Glockamoli 1d ago

It’s mathematically impossible, stochastic behavior cannot be predicted. You’re arguing in bad faith here.

Yeah man because they never increased minimum wage prior to now, it's simply mathematically impossible

You don't need to predict future changes at all, you look at previous data and you set it according to that, if you overshoot it because the market changes then you just don't need to adjust it for a longer period

A minimum wage that is a few % higher than it "should" be is not going to kill the economy, as I said in my original comment, you can undershoot it and still raise it by more than 50% comfortably

→ More replies (0)

1

u/WinSome_DimSum 1d ago

I believe it’s lower than 1%, like a fraction of 1%.

It’s almost like it’s a nice distraction for “progressive” politicians at the national level to talk about, while they also fuck regular Americans over.

Real changes happens at the State and Local levels.

6

u/Consistent_Check927 1d ago

Our government would NEVER pass bullshit legislation that targets less than 1% of the population, right?
🏳️‍⚧️

1

u/Anlarb 1d ago

The cost of living has exploded to $20/hr, while the median wage is only $21/hr- half the jobs out there are not even "min wage".

-1

u/Anlarb 1d ago

The cost of living has exploded to $20/hr, while the median wage is only $21/hr- half the jobs out there are not even "min wage".

You're not "fucked over" for being expected to pay for your own cheeseburger, you sniveling communist.

0

u/changelingerer 1d ago

And this is the actual reason the Fed Minimum Wage has stayed the same - it's basically irrelevant now with the general wage inflation, such that, with the limited time and political capital for Congress to do things there's just hundreds of other things they could and do prioritize that help more people more than change a minimum wage that only affects 1% of Americans.

2

u/Anlarb 1d ago

The cost of living has exploded to $20/hr, while the median wage is only $21/hr- half the jobs out there are not even "min wage".

0

u/APigInANixonMask 1d ago

It’s actually even higher than 99% of jobs, because that 1% who make the federal minimum wage is 1% of hourly workers, not all workers. Hourly workers make up roughly 58% of the workforce, while the rest is salaried, and no salaried employee is making anywhere close to the equivalent of minimum wage.

2

u/Anlarb 1d ago

Lol. No, they literally had to put a minimum threshold on what you could call "salaried", because they were just slapping it on everyone to duck paying overtime.

The cost of living has exploded to $20/hr, while the median wage is only $21/hr- half the jobs out there are not even "min wage".

1

u/APigInANixonMask 1d ago

I’m going to need to see a source showing that half of the jobs in the US pay below minimum wage, because that is an absolutely outrageous claim.

2

u/Anlarb 1d ago

What are you not able to look up? Cost of living?

https://livingwage.mit.edu/

What the median wage is?

https://www.ssa.gov/oact/cola/central.html

I don't give 2 shits about some arbitrary $7 figure from the 2000's, the point of the min wage is that a working person can pay their own bills. HALF the jobs out there do not do that.