Much of this election focuses on your money. The candidates have debated issues ranging everywhere from how much you make to how much of it you can retain. For the most part, Obama and McCain have focused on and debated about tax cuts. However, both candidates have ideas about another topic that affects your income--the level of the minimum wage. Although no candidate emphasizes this issue, it is very likely that it will come up again within the next four years.
Barack Obama is a strong advocate of raising the minimum wage. In fact, his plan to fight poverty includes raising the minimum wage to $9.50 an hour by 2011. He believes this will insure that full-time workers are able to earn a "living wage" that allows them to pay for basic needs such as food, transportation, and shelter. He also claims that because families will have more money to spend, they will be able to boost the economy. The economy would then be able to produce even more jobs for even more workers. Thus, the number of people on welfare would be drastically reduced.
John McCain, on the other hand, is strongly opposed to a high minimum wage. In fact, he has voted against raising the minimum wage nineteen times. McCain's reason for voting against an increase in the minimum wage is that there is no evidence that such an act would help the economy.
So who is right? The answer may surprise some, but it is indeed McCain. Barack Obama's "sweet talk" make it appear as if raising the minimum wage would give parents more money to spend on raising their children. However, data shows that most minimum wage workers aren't parents working to provide for their children, but in fact teenagers still living with their parents who work to buy personal wants. In the entire United States last year, only 3.9% of all minimum wage workers were parents or guardians of children. Also, if you think about it, raising the minimum wage could be a disaster for the welfare program. Instead of taking people off of it, it is very likely that more and more adults would go on welfare. Most minimum wage jobs are physical demanding jobs. Because they would have to pay so much more every hour, employers would be tempted to hire more energetic/physically fit individuals such as teenagers. This would reduce the amount of jobs available for older adults trying to get off of welfare. Also, there is a strong possibility that it would also increase the drop-out rate for teens. Why go to school if you can make good money without sitting through boring lectures or taking hundreds of tests?
Finally and most importantly, the minimum wage should not be raised because raising it does absolutely nothing. Why have food prices soared over the past two years? The answer is simple, it costs more to produce them. Farmers must now pay workers the increased minimum wage to plant, tend to, and harvest crops. So instead of paying $0.99 for a pound of tomatoes, you must now pay at least $1.99. The only thing increasing the minimum wage does is increase inflation--and reduce the use of the penny. A six figure salary working a minimum wage job sounds great, but what good is it if you have to spend $100 on a gallon of milk?
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4 comments:
I would agree with Jerry, and thus McCain on the issue of minimum wage. Just in terms of economics, a high minimum wage does not make sense.
Although at first it seems like a good, benevolent thing to do, raising the minimum wage is like putting a price floor on labor. When you have a price floor, you have a surplus of workers and a shortage of job openings. This is because employers are less willing to hire more than a few workers because each one is so costly. If follows then, that a higher minimum wage would put many people out of work.
Instead, by raising the minimum wage, you increase the likeliness that companies will outsource jobs to other countries where labor is cheaper.
Finally, in today's global market an increased minimum wage would increase costs for American companies. Therefore, these companies would have to set their prices higher than foreign companies to cover their high costs of labor (as opposed to companies in countries with no or low minimum wages) which makes it difficult to compete with these foreign companies.
A higher minimum wage, as Obama suggests, would be terrible for our already weakened economy for these reasons.
I agree with both Jerry and Peter on the topic of minimum wage and the 2008 election. If Barack Obama does plan to raise the minimum wage over the course of the upcoming years, our current weak economy will eventually become weaker; the amount of jobs available will not be able to keep up with our growing population.
John McCain, on the other hand, believes that what has happened to our economy isn’t just a temporary problem and the government must step in to help millions of Americans: "And calling these serious problems a "correction" in the market, or a "cycle" of the economy, doesn't make their situation any better, their jobs and homes any safer, their lives any easier"(McCain). At a recent speech that John McCain made at Carnegie Mellon University he expresses his views about money and politics. McCain's priority is to put the economy back to where it was and that does not include a rise in the minimum wage. Rather he plans to reform health care and work with Americans to increase the number of available jobs and our relations with foreign competition.
Like Jerry said, the people who are voting are not necessarily the same people who are affected by minimum wage. Many sixteen and seventeen year olds would favor a rise in minimum wage but young people working aren’t eligible to vote. The changes being made in the economy will only make a difference if they are affecting voters and the parents who are supporting their homes and families. It is time for a change but which candidate will be able to do it?
Here is the speech that McCain made at Carnegie Mellon University...
http://www.johnmccain.com/informing/news/Speeches/9bb4e69a-36cc-4ca3-b40d-0cdd41a1b812.htm
I do not understand why Obama criticizes McCain for not understanding the economy when he believes in raising the minimum wage will help people who are in poverty. From basic economics, raising the minimum wage is equivalent to raising the price floor on labor. When a price floor is imposed, the supply of labor will be greater than the demand, therefore causing shortages in minimum wage jobs. Also, raising minimum wages means increasing the cost of production for suppliers. When suppliers have a higher price to deal with to obtain resources, it is inevitable that they will have to raise prices on their products or outsource labor so that they are not operating with lower revenues than costs. Since Obama also wants to raise taxes on business, it will further exacerbate the situation. If Obama plans to implement these policies, the result will be cost-push inflation, and that is not something the U.S. needs when the price of both food and gasoline have increased dramatically over the last few years.
Obama also says that more money in circulation will be beneficial to the current state of the economy but that is not necessarily true. It is more important to build consumer confidence in the economy than it is to just put money in the hands of the consumer. With more money in their hands and no confidence in the economy, rational people are more likely to put the extra money they earn in the bank where it will collect interest rather than to spend it all on more expensive products that are beyond their necessities.
Jerry makes a good argument as to why McCain's policy is more valid than Obama's. I must admit that I was not aware of the demographics that constitute the minimum wage working pool. However, after acknowledging that only 3.4% of minimum wage workers are parents who are supporting children, Obama's plan to raise the rate to $9.50 by 2011 will surely have no positive effect. Also, with the associated consequences of inflation and high prices, such a plan would ultimately set the economy further back than it already is. To think that simply meddling with the minimum wage rate can help turn around the economy is naive. How can Obama criticize McCain for his lack of economic aptitude when Obama himself needs to catch up on some basic macroeconomic principles?
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