The Weiner Component #25 – Muddling Through: The Minimum Wage

Raise the Minimum Wage

The term commonly used in Great Britain for getting through uncomfortable political, military, and social problems was called “muddling through.”  This was a euphemism for working uncomfortable and complicated situations.  Somehow they beat man’s capability for logically and sensibly solving them.  These situations were just worked through and supposedly came out “all right” at their conclusion.

We have, in a manner of speaking, been “muddling through” the minimum wage for years.  As it exists now, an individual working full time at its current rate of seven dollars and twenty-five cents an hour will find himself at or below he poverty line.   This amount became the official Federal minimum wage on July 24 2009 when it was raised from a lower level and signed into law by President George W. Bush.

The official poverty level for 2013 is $11,170 for a single individual.  For two people the rate increases by $3,960 to $15,130, and for every additional individual it goes up by another $3,960.

At $7.25 an hour, working all 52 weeks of the year and taking no days off, the rate is  $15,080 before Social Security, Medicare, and assorted other taxes, both Federal and state.  Social Security is 6.2% of the gross income and Medicare is an addition 1.45%.  Altogether, the government withholds no less than fifteen percent of the $15,080 earned during an entire year’s labor that is no less than $2,269, with nothing withheld for income tax.  It is probably higher; leaving the minimum wage worker with less than $12,861 to live on for the year, this amount keeps him at or just above the poverty line.  If he/she were married or taking care of one other child or adult the individual would then be below the poverty line.

At nine dollars and hour, the new minimum wage President Barack Obama recommended, the yearly earning for a fifty-week year would be $18,000, before any deductions.  Fifteen percent of that is $2,700, leaving $15,200 to live on.  That amount is just above the poverty line for a family of two.  If the two are married and there are any children the family will sink deeper and deeper into poverty with every additional child.

At ten dollars an hour the yearly income is $29,000.  After 15% withholding, which incidentally is more than Mitt Romney pays in his yearly income tax, the family will be below the poverty line if they have three members; that is married with one child.

We are considering here a goodly percent of the population, individuals working full time and yet not being able to earn enough to properly support his family.  These are married and responsible men fighting a losing economic battle or single responsible parents fully employed with one or more children and limited economic skills.

Henry Ford sold his Model T automobile from 1908 through 1927.  He was one of the first innovators to realize and put into practice the idea that if you paid your workers a high enough salary they could afford to buy the product they produced.  The Model T swept America.  By the year 1915 the car cost 440 dollars.  Five years later in 1920 the price had dropped to $260.  A Ford factory worker earned enough in four months to purchase a Model T.  Ford understood the principle of paying his employees enough so that they could purchase what they produced.  This allowed him to up his production and profitability multitudinously.   Incidentally I don’t think the average person earns enough to pay for a vehicle today with four months labor.

Aren’t our values today a little twisted?  Aren’t the entrepreneurs, by squeezing every ounce of labor for a poverty level of pay, limiting their own markets and their level of profits?  They could certainly take a lesson from the practices of Henry Ford

In addition the United States is the richest nation that has ever existed and yet we keep a percentage of our population at the barest level of subsistence while others live in unbelievable opulence.  What are our values?  Beliefs?   Are we that uncaring?  There has to be something dreadfully wrong with our entire system of distribution of the goods and services produced in the nation.

Can this system be rectified?  Obviously, by a fairer method of taxation and a greater provision of resources to the lower echelons in the nation the GDP will be increased and everyone could receive a greater share of the productivity.  .

There is an interesting element or irony here.  Today we seem to have gone back to the time before Henry Ford’s Model T.  By the entrepreneurs limiting what they pay their employees they also limit the amounts of goods and services these employees can buy or the amounts of goods and services they can afford to consume.  By being more generous to their workers the employers are actually being more generous to themselves.  More wealth being produced would give them an opportunity to gain more wealth for themselves.  More generous wages here would result in the potential for far greater profits for themselves.  They are by their tenuous acts actually decreasing their potential profits.

After all consumption equals production.  The more consumption the greater the production of all goods and services and, thus, the greater the amount of wealth produced within the nation.  As the scale of production goes up so does the potential for the levels of profit.  The upper elements of the society by limiting the distribution of the money supply limit their own potential for profits.

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