More on minimum wage...

A $15 Minimum Wage Would Put All Americans Into The 1%

Tom Worstall

I’ve been trying to think through a way of really getting across the point that a $15 an hour minimum wage for the US is really just too high. And I may have found it: a $15 per hour minimum wage would put all workers in the US into the global 1% by income. Well, all those workers in the US who managed to keep their jobs when there’s a $15 an hour minimum wage at least. Given that the US labour force is rather larger than merely 1% of the global labour force this isn’t really going to work, is it?

The point to understand is quite how high US wages already are compared to the rest of the world. We hear about “global poverty” but tend not to really understand what this means. The international definition of absolute poverty is $1.25 a day. And that’s not just for food or anything like that. That’s for everything: shelter, heating, clothes, food, education and so on. There’s some 500 million people who currently live below this line. That’s also after we take account of different prices around the world. So we’re not saying that because rice is 2 cents a tonne in those poor places then they’re doing OK. We really do mean $1.25 a day at what that will buy you in the US. Walk into a Walmart, buck and two bits in hand, and supply yourself with everything you need for a day. That’s absolute poverty.

OK, so, the US doesn’t have any poverty by that definition and hasn’t for decades upon decades. And the US is a rich country, so everyone should righteously be doing better than that. However, how much better should everyone in the US be doing?

Which leads us to this very interesting little online tool. The Global Rich List (not at all to be confused with the lists of the global rich compiled by this magazine). Put in the country that you come from, so we can make those adjustments for different prices in different places (this is PPP, or Purchasing Power Parity adjustments) and then put in your income and it will tell you how many people in the world have higher incomes than you do. Putting in something around the current UK minimum wage puts you in roughly the top 7% of so of all incomes globally. With the current US minimum wage ($7.25 an hour at 2,000 hours a year. And ignoring any welfare or other benefits anyone receives) you’re in the top 9% globally.

And then if we put the $15 an hour minimum wage, full time for the full year ($31,200, as several people are arguing for 2080 hours a year, 40 each week for all 52 weeks. Note that this is again ignoring any welfare anyone might be getting, and any tax they must pay.) in, we get to something really quite remarkable. That’s in the top 1.1% of all global income earners. Or, if we add in that health care that the shouting crowds are demanding, into the top 1%. Which is something of a problem.

There’s some 320 million-ish people in the US, 130 million in work. So, 40% of the population is in work (this is, note, different, from the employment to working age population). It isn’t correct that this ratio will be the same for the world but useful enough to assume it at this point. Of the 7 billion humans 2.8 billion are in work. And, by definition, only 28 million, that’s 1% of them, can be in the group that is earning top 1% incomes (again, there’s a confounding factor, but the number of people living off purely capital earnings is tiny). Yet we’re now demanding that all 130 million American workers should be in that group only 28 million strong?

That’s going to be, to use the technical jargon, somewhat difficult, isn’t it?

We can also use the same rich list to make the same point slightly differently. We’re told that the Fight for $15 is a matter of justice, of righteousness. That $15 an hour is simply the lowest amount that anyone should be paid for working in the US simply because, it’s just and righteous. But that also means that we’re saying that flipping burgers, just because you’re in America, should be putting you among the top 1% of all income earners globally. And I agree, morals differ but I don’t in fact see that as being a strong moral imperative there.

Which simply brings me back to my general take on all of this. In theory I’m against there being a minimum wage at all. After all, 96% of Americans earn more than the current one so there’s obviously something other than just that minimum wage which causes decent wages to be paid. If there is going to be one I don’t think it should be more than 45-50% of median wages as, as far as we know, that’s when the serious unemployment effects kick in. And even people like the EPI agree with me there. And finally, I’m sorry, but I really do not see the justification for low skill labour, just because of the happenstance of it being located in the United States, being justly and righteously placed in the top 1% of global income earners.

Link:
http://www.forbes.com/sites/timworstall/2015/06/10/a-15-minimum-wage-would-put-all-americans-into-the-1/