The perception of many is that raising minimum wage is a genie that magically raises working people's standard of living. At best, raising the MW is a small inflationary bump in the economic road to prosperity for the masses, at worst it is a pot hole on the roadway of recovery from the next economic downturn. Either way, so long as economic illeracy reigns, it is pragmatically impossible to put the minimum wage genie back in the bottle. What is wrong with the current system of determining the Minimum Wage (MW) is not so much that it is being set by politicians rather than as an agreement between employer and employee for services to be rendered by the employee, but that there are no reasonable checks or balances between the resulting MW and marketplace. A mimimum wage raised today is next years wage that is too low and needs to be raised again -- regardless of any increase (or decrease) in unemployment. Rather than continue to waste time trying to stuff the genie back into oblivion, I would suggest that we look towards shaking up the pedestal upon which the MW genie has been raised.
The proper fix will rely upon implementing a fair process of checks and balances. For example, one might float the MW up or down depending upon an area's unemployment (set annually).
If unemployment goes down by .1 tenth, the MW would go up by $.10. And if unemployment goes up by .1 tenth, the MW goes down by $.10.
Assume that wages for existing workers would not drop if unemployment goes up due to their experience at performing their current job.
One could start with $5 as the current MW fixed to unemployment of 5%. This way employers in areas with high unemployment could offer jobs for less and as unemployment is reduced by natural market forces, the MW would naturally rise.
Theoretically, if zero unemployment were reached, the MW would be $10/hr.
Alternately, if unemployment reached 10%, there would be no MW and most anyone or industry could move in and offer employment to kick start that area's economy and provide needed economic opportunities for the unemployed. Why promote industry to send MW jobs out of the country when there are pockets of high unemployment in the US?
Yes this floating MW is perhaps not as 'good' of a policy as eliminating the MW and letting the market set wages, but it is better than the one size fits all MW mandates. A floating MW policy has a natural check and balance that would promote, not hurt economic activity in depressed areas. It is surely a better system than promoted by MW advocates who desire to fix the MW to inflation.
The real point that the MW debate skirts, but is perhaps the core issue this all revolves around, is line in the sand that liberals have created between Bubba and Widgets in the tax code. There has been a purposeful intent to not make Bubba aware of the tax advantages of being an employer to hire people to do things around the house and for the family. If the average homeowner were allowed to consider themselves as an employer and subject to the advantages and disadvantages of being an employer, much of our society's economic illiteracy would quickly be abated. As an employer, Bubba would quickly figure out the fallacies of the minimum wage.
For example, if Widgets paints its office for $3000, that is fully tax deductible and basically costs me $3000 of my income. If Bubba hires Bobo to paint his house for $3000, that cost is not tax deductible -- it costs Bubba about $4200 (or more) of pre-tax income to be able to come up with the $3000 to pay Bobo, the painter. Bubba has to work a couple extra days, weeks or even a month just to pay the taxes on hiring Bobo. The same could be said for basically any personal/home employment be it yard work, hiring a tutor/nanny for the kids, whatever. This gets to the heart of what is wrong with our current society -- the failed social engineering of the tax code.
Liberal politicians have used the tax code to successfully isolate employers as some sort of special class of society to the point that this seperation is rarely if ever challenged or discussed. The social cost of this separation is that the average working Bubba is isolated from feeling any incentive to hire people to work around his home or family. Furthermore Bubba unaware how many people go unemployed and how the job market is underinflated (i.e. wages are low) because the Bubbas of the world are not a significant part of the employer/employee marketplace. Raise the MW to $6, $7, .. $10.. $20 per hour and what will happen to Bubba? He will have to spend more and more time puttering around his house as the weekend warrior trying to save what is left of his precious income after paying higher prices for goods and services. Of course this assumes Bubba has something left after he pays the taxes necessary to support welfare programs for the Bobos and Bubbets that could otherwise be mowing Bubba's lawn or cleaning his house.
As noted above, the full cause and effect of implementing marxist employer/employee class warfare via the minimum wage and tax code is both complex and convoluted. Many of our social ills are intimately related to these policies. Fortunately, guiding (not mandating) our society forward is not unachievable. For example, if Bubba were allowed to deduct the cost of employing someone to maintain their home and family from his tax bill via pragmatic reform of the tax code, several significant trends would result.
On the top the list of positive effects of equalizing the tax code between personal and business deductibility, the MW debate would become much more balanced as many more homeowners would directly feel the impact of changing the MW. The primary reason the MW is debated at all is because Bubba has limited experience looking at life through the eyes of an employer. Liberal Politicians have defined the tax code so that the current debate is all about those wicked capitalists and their sweat shops when it should be about people and communities helping each other...
Beyond the MW, bringing Bubba into the wide wonderful world of an employer of sorts would cause a strong movement to deal with and to reform the complex MESS (Mandated Employer Subsidized Socialism) that is at the core of many social problems. The average Bubba would soon be hounding their politicians to evolve the MESS (FICA, WH, Unemployment Ins, L&I, etc) into a vibrant and affordable social marketplace that promotes individual over collective responsibility.
Under such a system, Bubba (or Widgets) might give an employee their full paycheck (including 'vouchers' for HC, pensions, unemployment, etc) and when this paycheck is cashed, all of the cost of employment would be credited to Bubba's or Widgets tax bill. Best of all, such a tax system can be largely automated utilizing technologies that are currently available. This would also be greatly simplified and promote creation of a flat tax and the numerous advantages of a fairer tax code. It is just a matter of resolving to deal with these issues directly and with a goal in mind.
The goal is to get government out of the business of providing (or mandating) the general welfare and to promote government to adopt systems that promote the general welfare through appropriate individual action and incentives.
Anyway, that is my two cents worth on the minimum wage...