The "Living Wage" debate.
As Ontario starts reacting to a recent jump to a minimum wage of $14/hr and an impending increase to $15/hr in January of next year I sit here and listen to the rhetoric and realize... neither side has any clue what they are talking about. Or, if they do, they choose to side with the position which they think favors them.
The concept of a living wage is one of a single, basic income level at which, as a single income family they can "get by". Perhaps not in luxury. But by most accepted standards without needing to kill themselves to avoid going into debt and becoming even poorer.
Wonderful ideal! And minimum wage increases do help. But, over the long run, not nearly as much as people would like.
You see, prices of things like food, shelter and entertainment are somewhat arbitrary things. A living wage could (and at one point in time was) the equivalent of a 1 cent a month. And there is really nothing stopping from it reaching, say, $100/hr. The cost of things is driven by this thing called "the ECONOMY". A complicated thing to understand. But here is a really dumbed down version that strips out a lot of the complexity (so it isn't 100% true all of the time, but it is good enough for illustration purposes); the more money the average person has, the more money it will cost for things that the average person buys.
Now, this isn't JUST capitalism. In fact, there are a lot of more rational reasons this happens. That "MORE MONEY" people have, has to come from SOMEWHERE. And, as it turns out, one of the biggest driving forces is in fact that the average person, receives the average salary from an average employer. Which means, increasing the average salary also increases the average operating costs which in turn increases the average cost of many goods and services.
But, this is only part of the problem. This doesn't really explain why prices are such that we can't seem to make a single income family work with a minimum "living wage".
In addition to economic forces driving up prices in tandem with wage increases, the death blow is dealt by the fact that there are SOOOOOO many double or more income households.
And that means that, even if EVERYONE made the same wage, the average household wage would still be MUCH higher than any single earners salary. Wage increases have a large short term benefit, because, it takes time for the economy to catch up both in terms of pricing and in terms of pay differences. With prices, most stores will increase them by some amount shortly after and probably introduce 1 or 2 more prices increases which they wouldn't have implemented otherwise over the course of the next year or two.
The longer term benefits stem from how long the wage gap stays reduced. There will be a "trickle up" effect. Jobs which were once above minimum wage but are now much closer or even at it, may need to increase what they offer over time to attract the kind of workers they want. In theory, if the trickle up completed and was applied proportionally to all jobs, shortly after that finished, minimum wage earners would be in the EXACT same boat at they were before the wage hike.
But, I digress a bit. That rant was to explain that even without any greed whatsoever in the system, increased wages would lead to increased prices and could even lead to an identical (if scaled up situation) once the cycle completes. Back to the real problem.
Wage differential. The real problem lies in inter-household pay discrepancies. A family with 2 members making minimum wage full time will still earn for all intents and purposes roughly 100% more than a family with just one such earner. From an economics perspective that gap is simply too large and has far too immediate of an impact on the average household income. So, under current taxation laws, I really don't think there is a minimum wage which would solve this long term.
What would make it much more feasible would be a system which massively penalizes multi-income households and has much higher taxes for higher income earners. In other words, you both need to reduce the gap in individual incomes as much as reasonably possible, but then, you also need to reduce the gap caused by multiple income streams since those aren't things available to a single person.
It is unsurprising that the happiest countries in the world are the some of the ones with the highest average taxes. These places tend to be able to boast the least amount of income disparity and, with the elevated taxes, especially at the higher end, much better availability of public services. People are healthier, better educated, and thanks to that smaller pay gap, smart financial decisions even by the poorest members of society can make even bigger impacts on their lives. Not that I think these countries have the best answer either. The higher taxes are still on individuals and so it really more reduces the gap between the top and lowest income earners more than anything, but multi-income households are still much better equipped than single income ones.
Of course, if we solved all of this, we'd probably just find a new way to create wealth disparity within the new system. Not that we shouldn't try :) just musing to my myself.
The concept of a living wage is one of a single, basic income level at which, as a single income family they can "get by". Perhaps not in luxury. But by most accepted standards without needing to kill themselves to avoid going into debt and becoming even poorer.
Wonderful ideal! And minimum wage increases do help. But, over the long run, not nearly as much as people would like.
You see, prices of things like food, shelter and entertainment are somewhat arbitrary things. A living wage could (and at one point in time was) the equivalent of a 1 cent a month. And there is really nothing stopping from it reaching, say, $100/hr. The cost of things is driven by this thing called "the ECONOMY". A complicated thing to understand. But here is a really dumbed down version that strips out a lot of the complexity (so it isn't 100% true all of the time, but it is good enough for illustration purposes); the more money the average person has, the more money it will cost for things that the average person buys.
Now, this isn't JUST capitalism. In fact, there are a lot of more rational reasons this happens. That "MORE MONEY" people have, has to come from SOMEWHERE. And, as it turns out, one of the biggest driving forces is in fact that the average person, receives the average salary from an average employer. Which means, increasing the average salary also increases the average operating costs which in turn increases the average cost of many goods and services.
But, this is only part of the problem. This doesn't really explain why prices are such that we can't seem to make a single income family work with a minimum "living wage".
In addition to economic forces driving up prices in tandem with wage increases, the death blow is dealt by the fact that there are SOOOOOO many double or more income households.
And that means that, even if EVERYONE made the same wage, the average household wage would still be MUCH higher than any single earners salary. Wage increases have a large short term benefit, because, it takes time for the economy to catch up both in terms of pricing and in terms of pay differences. With prices, most stores will increase them by some amount shortly after and probably introduce 1 or 2 more prices increases which they wouldn't have implemented otherwise over the course of the next year or two.
The longer term benefits stem from how long the wage gap stays reduced. There will be a "trickle up" effect. Jobs which were once above minimum wage but are now much closer or even at it, may need to increase what they offer over time to attract the kind of workers they want. In theory, if the trickle up completed and was applied proportionally to all jobs, shortly after that finished, minimum wage earners would be in the EXACT same boat at they were before the wage hike.
But, I digress a bit. That rant was to explain that even without any greed whatsoever in the system, increased wages would lead to increased prices and could even lead to an identical (if scaled up situation) once the cycle completes. Back to the real problem.
Wage differential. The real problem lies in inter-household pay discrepancies. A family with 2 members making minimum wage full time will still earn for all intents and purposes roughly 100% more than a family with just one such earner. From an economics perspective that gap is simply too large and has far too immediate of an impact on the average household income. So, under current taxation laws, I really don't think there is a minimum wage which would solve this long term.
What would make it much more feasible would be a system which massively penalizes multi-income households and has much higher taxes for higher income earners. In other words, you both need to reduce the gap in individual incomes as much as reasonably possible, but then, you also need to reduce the gap caused by multiple income streams since those aren't things available to a single person.
It is unsurprising that the happiest countries in the world are the some of the ones with the highest average taxes. These places tend to be able to boast the least amount of income disparity and, with the elevated taxes, especially at the higher end, much better availability of public services. People are healthier, better educated, and thanks to that smaller pay gap, smart financial decisions even by the poorest members of society can make even bigger impacts on their lives. Not that I think these countries have the best answer either. The higher taxes are still on individuals and so it really more reduces the gap between the top and lowest income earners more than anything, but multi-income households are still much better equipped than single income ones.
Of course, if we solved all of this, we'd probably just find a new way to create wealth disparity within the new system. Not that we shouldn't try :) just musing to my myself.
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