Raising the minimum wage lifts 1.3 million out of poverty but makes 1.3 million unemployed?
Living wage is popular. I think it morally wrong for a person to work forty hours a week and be short for rent. Something about that simple concept says it’s unethical. Another question comes to my mind after reading a Congressional Budget Office Report…
Is it unethical to impoverish an equal amount of people for sake of conscious morality?
CONGRESSIONAL BUDGET OFFICE FINDINGS
The Congressional Budget Office (CBO) analyzed a bill that mandates a federal wage increase to $15 by 2024. The results are in. The implications are not as great as everyone hoped. The CBO Report attempts to address “Purchasing Power”. The need for federal wage increases is not because people deserve “more”. The need for federal wage increase is because our money is worth “less”. Cost of living is going up. Food is more expensive. Car prices are climbing. Everything cost more. The increase in cost is due to devaluation in money and other factors.
Numerically we are still programmed to think 100,000 a year is a lot of money. I will show you it is not.
The CBO estimates the range of job losses for a $15 minimum wage could be anywhere from 4 million job losses to zero. The median estimate is 1.3 million job losses.
There are a total of three figure suggestions in the CBO Report. The $15 option would have the largest effects on employment and family income (see the CBO figure below).
The $15 option increases wages for most workers. A $15 option would impose the largest increases in wages. Employment is more responsive to large increases. The legislation also mandates future wage growth to keep up with purchasing power. The $12 option has smaller effects. The effects of the $10 option would be minimal.
After reviewing the implications the $10 looks to be safest for everyone. What good is raising wages if an equal amount of people lose jobs as a result? There must be balance on morality of pay and reality of employment. If a minimum wage of $15 has unemployment rates soar the calls for change actually help no one.
The only people who don’t worry are people who get paid significantly more than the minimum wage. The legislation doesn’t affect people at the high end of the spectrum. It could affect people with jobs that are right around $15–20 per hour. I guarantee Assistant Managers, Managers, and Book Keepers don’t want to be making minimum wage to do professional jobs.
The responsibility is to those that make less not the conscious of those who earn the most. Right now people who make the most are manipulating those that don’t understand to ultimately fire a lot of people.
VALUE OF MONEY
In order to have a valid argument on pay we have to understand what things cost. Bread in 1913 cost $0.06. Today bread costs $1.37. A dozen eggs in 1913 cost $0.30 and today a dozen eggs cost $2.16 on average.
The average wage in 1913 was $1,296. Today the average wage is $37,388. Converting the average wage today to 1913 wages reveals something interesting. Today’s average wage is worth $1,445.34. That means people are on average earning more than people did about a 100 years ago. So pay seems to be about the same (on average not minimum wage).
The 2009 current minimum wage of $7.25 is worth $0.28 in 1913 dollars. Ironically wages are on par with what people a hundred years ago were making.
The issue is costs of goods, not pay.
SINGLE DIGIT MILLIONAIRE THE NEW UPPER MIDDLE CLASS
I have news for you folks. I manage a 1.4mm family estate. You would swear I make just as much as a top accountant. Millionaires have held notoriety since the early days of America. To say you’re a “millionaire” should mean a lot. I tell you, I sure don’t feel rich. I have an excellent standard of living. I am well above my peers but I am nowhere near some of my friends. I have one friend worth an astounding 140mm USD. Another good buddy of mine is worth about 8mm when everything is considered. He lives very well but has to budget. Chew on that one for a bit.
Unfortunately becoming a millionaire has evolved to upper middle class not rich. Do I sound crazy? I am not. Come over to my house and inspect my belongings. I live nice but no where near what you think a millionaire estate is suppose to produce.
Despite this dynamic fact my average generation is worth way less than my parents’ generations (Baby Boomers). According to the Washington Post the average net worth of my peers is $8,000. People I grew up with (that went on to be successful) have an average net worth of about $140,000. All the fast cars, flashy clothes and on average my peers have barely 10% of my family estate net worth. They look cosmetically better than me but are actually worth way less. I have firsthand experience.
The millennial generation has come to be known as the high earning poor.
What a generation to be part of right? The generation analyzed is aged 18 to 35.
I discussed the value of money in “Sliver Certificates, Fiat Currency, New Crypto Currency & the Search for Real Value”. I point out a single dollar bill exchanged for 1:20.04 in January 2014 (roughly five years ago). Today the exchange value of the 2019 fiat currency dollar is 1:14.55 (Effective 5/23/2019 NY Close).
What this means is the dollar you carry is worth 6.6% of a dollar in 1968. The dollar you carry today is worth approximately 67.24% of a dollar in 2000.
John D Rockefeller was the oil magnate who achieved a net worth of $900 million in 1913. This same 1913 money would be worth approximately $22,827,893,939.39 according to CPI Inflation Calculator.
A single digit millionaire in 1913 ($1,000,000) is worth $25,364,326.60 in 2019 dollars. Another way of putting the value of a million is, “$1,000,000 today is equivalent to having $38,657.98 in 1913”.
A more relatable phrase is “$1,000,000 today is equivalent to $672,414.60 in 2000.” At this rate a $1,000,000 in 2019 will be worth 37.76% lower in twenty years. Basically a single digit millionaire will have less than $400,000 of 2000 buying power in 2039.
BRINGING THINGS BACK TO REALITY
The real question is how costs of goods and devaluation affects people who simply want to earn a living. Wages need to be higher based on our current cost of living. There is no question about that. The real answer to the problem is companies need to reduce their profit margins.
Companies need to stop charging 10x whole sale in order to meet numbers for an inflated stock market.
In Houston alone housing cost has about doubled in 5 years. A $100,000 house is basically $200,000. The chart below is taken from Zillow and shows median house price in Houston since 2015.
The cost is higher despite no wage increase. Traditional material costs have gone up but technology exists to make a house for less than half traditional cost. I know true construction prices because I am going to build a house. The issue confronting Americans is corporate greed. Greed is the reason for inefficient technology. Inefficient technology justifies higher consumer prices.
Higher costs are the issue not the wages.
If I can build a house for $45,000 in materials plus land cost; I am looking at about $80,000-$95,000 for a property. My property will have 3 bed rooms, and one and a half bath. The square foot space will be about 1500 square feet. I will not be in the ghetto. I will be in a nice suburb outside Houston. This is perfect for a family of three. The same run down house ten miles down the street will sell for $275,000 when it is appraised. Do you see the issue here? There is no reason for it to be that much higher. Everything is worth more when it is complete. A twenty five percent (25%) premium is reasonable. A one hundred twenty five percent (125%) premium is greedy.
To your knowledge success!
About Christopher: Christopher Knight Lopez is a Professional Entrepreneur. Christopher has opened over 7 businesses in his 14-year career. Christopher’s purpose is to take advantage of various market-driven opportunities. Christopher is a certified Master Project Manager (MPM) and Accredited Financial Analyst (AFA). Christopher previously held his Series 65 securities license. Christopher also has his General Lines — Life, Accident, Health & HMO. Christopher has managed a combined 286mm USD in reported Assets Under Management & Assets Under Advisement. Christopher has work experience in 29 countries, raised over 50mm USD for various businesses, and grossed over 7.5mm in his personal career. Christopher worked in the highly technical industries of: biotechnology, finance, securities, manufacturing, real estate, and residential mortgages. Christopher is a United States Air Force Veteran. Christopher has a passion for family, competitive sports, fishing, martial arts and advocacy for entrepreneurs. Christopher provides self-help classes for up-and-coming entrepreneurs. Christopher’s passion to mentor comes from belief that entrepreneurs need guidance. The world is full of conflicting information about entrepreneur identity. See more at www.christopherklopez.com