What would a socially engineered minimum wage look like?
We need an assumptions to start. First I guess a minimum wage should be high enough that working a regular 40 hour week a single person would be above the poverty line. The federal government say that for the continental United States that is $12,140 per year. Lets give that person two weeks off as vacation or what ever. Divide $12,140 by 50 weeks per year and 40 hours per week and we would get $6.07 per hour for a minimum wage.
So what is all the fuss about the federal minimum wage is $7.25 per hour or 120 percent of the poverty level. Yeah, yeah, what about single moms……
The federal poverty level for two person households is $16,460 so for them to stay above the poverty level the minimum wage for a two person household with only one wage earner would be……..$8.23, yeah single moms will be poor if the only make minimum wage. They also will have child care expenses and less opportunity to work over time and will probably miss more work.
A two person household with two workers making minimum wage would make $29,000 per year or 240% of the poverty level. They also would probably have more opportunity to work over time because they could split household chores.
Of course we are talking Federal Minimum and Federal Poverty levels and we know that location matters. I would argue that the federal government should not have a role in setting minimum wages or poverty levels or at least not blanket ones that apply to the whole country.
Now for the social engineering part, how could we use the minimum wage to make society more properly distribute the people and money across the country. What would more properly mean in this sense. It is too simplistic to say just raise the minimum wage to $15 everywhere. Shouldn’t the minimum wage be higher in high cost of living areas and lower in low cost of living areas. Do we want people to migrate to high cost of living areas chasing higher wages? Of course not but we don’t want to chase hourly workers away from high cost of living areas or we get local labor shortages. Actually in areas with high cost of living and labor shortages it is impossible to set the minimum wage too low as supply and demand will force up wages to meet the demand. Everyone will be making more than minimum wage.
What about high cost of living areas with labor surplus, don’t we need a high minimum wage so that people have a living wage? Well, yes, sort of but don’t we want to stimulate some out migration to eliminate the labor surplus. Too high a minimum wage does not increase employment but it also does not seem to decrease employment. There seems to be a bit of inelasticity in the job market. People and jobs seem to be staying put. It might be counter intuitive but maybe we need to raise the minimum wage in low cost of living areas to make them attractive enough to encourage some out migration.
