Friday, December 3, 2010

The unemployment rate is up! It is time to cut the minimum wage.

The unemployment rate edged up to 9.8 percent in November. It went up,  not down. Things are not getting better. These unemployment numbers are not acceptable and Congress needs to take bold action to put people back to work. Instead of taking action to put people back to work however, the Democrats keep trying to raise taxes. Implementing record tax hikes as unemployment rises is just dumb. To stop the unemployment rate from rising higher, Congress should extend all of the Bush era tax cuts for starters. The second thing Congress needs to do it cut the minimum wage.

The Federal minimum wage is $7.25 an hour, which for a forty-hour work week is $290, about the same as a week of unemployment benefit. Critics will argue that one cannot support a family on $290 a week, and that is true.  However if one is on unemployment benefits one cannot support a family on $290 a week either. As Congress debates extending unemployment beyond the current 99 weeks of benefits, it should consider any extension tied to a reduction in the minimum wage.

There are people who could be put to work at $5.25 an hour who cannot be put to work at $7.25 an hour. At a lower wage rate, an employer may be willing to invest in training of a low-skilled worker whereas they may not be able to afford to do so at a higher rate of pay.  An employer considering outsourcing jobs overseas may not have to so if he could hire people to do the same work at less than $7.25 an hour  here in America. An employer considering reducing labor cost by automating jobs, may choose to not invest in labor-saving technology if labor rates were lower. An employer faced with the choice of laying off some workers or keeping everyone employed but cutting wages, is limited in cutting wages when the lowest wage possible is $7.25.

A low wage does not have to be the maximum one ever earns, but a low wage is often the first rung on the latter. A minimum wage of $7.25 makes that first rung out of reach for many people. Not everyone who works for minimum wage is supporting a family on that wage. Many families have two wage earners. A second wage earner earning a modest minimum wage, may keep a family from losing their home.  Many of the people who work for minimum wage are young adults still living at home. Working for less than $7.25 is better than not working at all.

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