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A suggestion for the minimum wage

May 4, 2012
By PETER CROWLEY - Managing Editor (pcrowley@adirondackdailyenterprise.com) , Adirondack Daily Enterprise

A minimum wage increase has vanished from the state Legislature's agenda, thanks to Dean Skelos. The Senate majority leader has unilaterally decided a minimum wage hike is a "job killer," without presenting evidence or letting lawmakers debate that claim, and refuses to let it cross his chamber's floor.

It didn't kill jobs the last time New York raised its minimum wage, in 2004 when it went up to the current level of $7.25 per hour. The Albany Times Union, in an editorial last week, wrote, "From 2005 to 2007, employment grew in the industries that tend to pay the minimum wage or just above - retail, restaurants and personal services, mainly - just as fast in New York as in the rest of the country."

There is a general agreement that our society should have a minimum wage and that it should go up occasionally, since the cost of living does. But increases are far apart because each one requires a political battle fueled by ideological warfare and heavy lobbying. To heck with that - we don't need it.

Of all public policy issues, this seems like one that could be resolved relatively easily and sustainably, if the warring political factions had the will to do so. Why not agree on a law that increases the minimum wage annually - perhaps by a percentage matching the prior year's Consumer Price Index, the gauge of inflation? Maybe I'm not enough of an economist to know that the idea's been tried and found wanting, but it's got to be better than the alternative - big political battles every few years, fought on ideological rather than fact-based lines, and many years in between increases when the minimum wage has fallen behind the rising cost of living. These undesirable things are unnecessary and avoidable.

This really ought to be a job for Congress - states could, if they chose, have higher minimums but not lower - but New York could be a national leader by passing such a plan for itself first.

I've tried out this hypothesis by calculating how the hourly minimum wage would increase over the next 10 years, starting with our current figure of $7.25, given two fictional scenarios: if the CPI went up exactly 2 percent a year and if it went up exactly 3 percent a year. Keep in mind that these exact wage numbers would not occur in real life, since the CPI fluctuates.

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If it went up 3% a year

2013: $7.47

2014: $7.69

2015: $7.92

2016: $8.16

2017: $8.40

2018: $8.65

2019: $8.91

2020: $9.18

2021: $9.46

2022: $9.74

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If it went up 2% a year

2013: $7.40

2014: $7.55

2015: $7.70

2016: $7.85

2017: $8.01

2018: $8.17

2019: $8.33

2020: $8.50

2021: $8.67

2022: $8.84

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(Note: I rounded to the penny in each of these calculations and based the next year's calculation on the rounded amount.)

I used 2 and 3 percent as examples because the CPI has been steady over the last three decades; it hasn't hit 4 percent since 1991 and actually went down slightly in 2009. Granted, that could change; the extremes in the last century are 18 percent in 1918 and minus 10.5 percent in 1921. But the last time it hit double digits was for three years from 1979-81, and it's only topped 5 percent twice since then.

Here are the CPI increases of the last 10 years:

2011: 3.2%

2010: 1.6%

2009: -0.4%

2008: 3.8%

2007: 2.8%

2006: 3.2%

2005: 3.4%

2004: 2.7%

2003: 2.3%

2002: 1.6%

The previous decade was about the same, ranging from 1.6 to 4.2 percent.

(CPI increases for the last 100 years, which are pretty interesting from a historic perspective, are posted on the U.S. Bureau of Labor Statistics website; since it's kind of hard to find, here's the address: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt.)

Here's a question that occurred to me: With a plan like this, if the CPI drops, should the minimum wage drop, too? I say no, but I can understand the argument that it should mirror the market.

Anyway, take another look at the calculations above. What do you think? Would increases like these be OK? I think they make more sense than raising the minimum wage to one solid figure like $8.50, which I've heard batted around, and keeping it that way until some uncertain future time when politicians agree to raise it.

For any suggestion there will be a bunch of workers saying it should be higher and a bunch of employers saying it should be lower, but I think a plan like this would strike a sustainable balance. Keep in mind, too, that whether it would go up 1 percent or 10 percent, it would follow, roughly, the cost of living. OK, I know the CPI can differ from cost increases in staples like rent, mortgages, food and clothing, but it's a much better track to follow than that of political whims, which the minimum wage follows now.

One consequence of what Mr. Skelos is doing, by fiat rather than democracy, is that the poorest workers will steadily get poorer. The reason we have a minimum wage is that without it, employers can too easily take advantage of poverty and even prey upon needy people with few options. Local job markets don't have the ideal levels of competition needed to drive up wages on their own.

But that's not to say politicians know best how that wage should gradually increase. That's why they should adopt a plan that increases it on a sustainable scale and then get out of the way.

 
 
 

 

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