"Taking himself seriously, so you don't have to."

A Letter Concerning Minimum Wage (with calculations)

I have a long email for you. Stick with it though, for it comes with a fair amount of very good information.

You may know me from Lawrence, as an artist, business owner, visible local, land surveyor, poet, piano guy, annoying constituent, former boyfriend of former tenant, former student, or even a friend. I have attended city commission meetings, rallies, and have been hanging around the capitol these last three years.

As a result of having been banned from further piano playing (for quite spurious reasons, mind you), I have found a political project to fill this time, and you may it find quite interesting.

This is an increase in the minimum wage. If we’d like to keep our governmental functions and stimulate the economy, simultaneously, it’s a winner. When you pay your workers enough to buy their own work, you make equity, as Henry Ford paid his employees enough to buy their own vehicles. Besides which, it necessarily creates more economic activity than tax cuts alone, by putting more money in the hands of people more likely to spend it.

From the BLS data (feel free to adjust for BEA data), we have the following conclusions:

A minimum wage increase to $10/hr would add (yearly@minimum) 40 million to state revenues.

A minimum wage increase to $12/hr would add (yearly@minimum) 130 million to state revenues.

A minimum wage increase to $15/hr would add (yearly@minimum) 340 million to state revenues.

The government would stay the same size.
Employment for those not directly affected would stay the same.
Businesses would gain the same profits, if not more.
People would have more free time.
We’re all on the same team. That much is true!

These calculations derive directly from the data.

It would benefit the people (and everyone) to have more expendable income in our pockets. Such that the dollar democratic logic expands outward. Influencing our spending, that engender the better present and future… I wax.

Attached are PDFs of the population/wage stats and the calculations. I have linked to some relevant information and explained some contentious points below.

I hope this information is useful, and that it may help fix the budget crisis within which we find ourselves, ensure a market that works “for us”, reduce poverty, and encourage a balanced symbiosis between public and private worlds. Thank you for reading! And good luck out there.

 

*******

 

P.S. Explanation of three points:

1. How Much Money Returns to the Economy:

A full 28% of Americans have no money in their savings accounts. And another 21% have no savings account at all. The total percentage of Americans (derivatively, Kansans) with no savings, and who would greatly benefit (and likely immediately return a significant portion of increased wages directly back into the economy) is at 48%.

As a general estimate, I used a figure of 50% of increased wages to return back to the economy (and thusly generate sales tax revenue), and a series of 5 transactions, a rough estimate of how far a dollar will go before finding itself effectively outside of the cyclical economy.
http://www.cnbc.com/2015/10/06

I have also included numbers from an extrapolation of Los Angeles County’s 2008 “Measure R”: a 0.5% sales tax increase. In that case, a 0.5% increase would generate 1% of total income from the entire population, per year (based on the total income of residents, this appears to be the metric by which they estimated so). Thus, a raise of Y dollars total would return Y*(2*(Sales Tax)) back to the state, or whatever governing body is concerned. Surely you all have better metrics for this, but a blurb on wikipedia was the only data I could find, short of paying for it. (Are search engines getting worse these days?)

https://en.wikipedia.org/wiki/
https://en.wikipedia.org/wiki/

Note that the relative derivation of the L.A. County sales tax matches quite closely with my estimates.

2. Average Hours Worked per Week:

I have used the conservative estimate of 30 hours per week, as many low wage employees are not “fully employed”. However, if you consider the cost of living, and the amount of money that 30 hours per week of minimum wage employment garners, you will find that in order to be so employed, one would have to have some other source of income in order to survive, solely as an individual, not even considering a family. The people I know who work for such wages are doing two or three jobs, which may likely put the figure closer to 50, and increase the ultimate revenue figures, of all increases, by a factor of 67%. The average “cost of living” in Kansas would illuminate this question.

A cursory search of the “cost of living in Kansas” results in a load of nonsense (either utterly useless comparative “indexes”, or blatantly erroneous monthly amounts: https://www.numbeo.com/cost-of

A single person for $800? That’s about as much as rent+utilities. Forget about food, car payments, gas, phone, clothing, child care, and student loans. God forbid you wanted to buy a toaster or a beer at the bar down the street, or buy baseball gear for your kids, or take a dance class. 30 hrs/week at $7.25/hr results in $942/month, which is not enough to afford life in any substantial city in our state. If anyone has better data than this, I would greatly appreciate it.

Thus considering, 30 hours per week is a very conservative estimate. 40 or even 50 may be more accurate considering. You may plug in the number you like on the attached spreadsheet to see figures that reflect an estimate you believe accurate.
3. Resultant Reduction in Employment:

Apparently, this is the biggest contention when it comes to raising the minimum wage. However, there appears to be no real consensus on this issue. I used a relatively conservative rate of a drop of 1% employment of the populace affected, per 10% increase in income, which is expressed for each increment of increase on the chart. The basics can be found here:

https://en.wikipedia.org/wiki/

This meta-study has much more information. And based on this research, the rate given above may very well be much lower:

http://cepr.net/documents/publ

To editorialize on this point, there are a few factors that we ought to be aware of:

A. Unemployment is at historic lows, partially as a result of the business tax cuts that have been advanced in Kansas these past 5 years. Thus, unemployment is not necessarily as large a problem as it has been, and the benefits from increasing the minimum wage would likely outpace the resultant unemployment negatives.

B. A point that has not been addressed in the sources mentioned, nor in any others I have seen, is the fact that (and correct me if I am wrong) paying a higher wage to one’s employees results in paying less taxes on revenue for the business in question. Thus, the business is less negatively affected, and the disproportionate change at the payout end could balance with the taxed end. This could account for the lower-than-hypothesized disemployment resulting from previous studies that examined the effects of a minimum wage increase, referenced above. An option for businesses that cannot afford to make the immediate change and keep their employees could be a temporary loan/bond program.

C. In the event that a company offsets their labor force with automation, we all stand to gain in efficiency as a result. In the early 20th century, industrial agriculture reduced the working farmers of the nation from 70% to less than 1%. Though this displacement put tremendous pressure on the working population (something to be avoided in the future), our society nonetheless benefited greatly. And we will continue to benefit from further technologically-productive increases. It lies squarely on the shoulders of us (as citizens, workers, business owners, legislators) to discover, and implement, the relevant economic and political measures to make this technological productivity work “for us” rather than “against us”. As a creative member of this very debate, utilizing the mechanism of the minimum wage (using money as a “tool”), can be seen as a step to increase efficiency, self-actualization (“buying power” equates to remaking the world through one’s own labor and subsequent consumption), reduce working hours with similar pay (freeing people to create their own businesses and products: a 1-2 punch with our business-friendly environment), ensure that large business profits are sent back into the economy (as opposed to sitting in a bank account, accruing interest that could be better spent within the economic cycle), ensure less poverty, and encourage higher quality work, satisfaction, and stronger families and community.

P.P.S

Feel free to pass this along to whomever may find it pertinent.

 

KSOccGroupsCalcs(March2017)a

KSOccGroupsCalcs(March2017)c

 

*The cover photo is not mine; found somewhere on imgur.com*

Leave a Comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>