judybarrettblog

The Minimum Wage Fallacy (And A Possible Solution)

FB rumor has McDonald’s in NYC considering raising their minimum wage to $15/hour and the young adults on my FB feed are excited and are posting about how they should move there. Bad idea. Why? NYC is an expensive place to live and, the truth about wealth is that it is not about how much you make, but about how much you can buy with it. Let me explain.

If you make $500/week and an apartment rents for $300/ month in your area you are doing okay. But, if you make $500/week and an apartment in your area rents for $1,000/month you have a lot less money for extras, and chances are the ‘extras’ in your area cost more too. So in one part of the country $500/week is a living wage, while in another part you may need a second job to make ends meet. This is the problem with living in NYC versus upstate NY; everything costs more in NYC.

Now let’s look at raising minimum wage in general. Here’s what typically happens:

1. Minimum wage goes up.

2. The price of everything you buy goes up as businesses need to make more money to pay their employees. People are often laid off as well to cut expenses.

3. Taxes on goods increase, since sale tax is a percentage of what you pay for an item.

The result:

1. Less people have jobs and the things you buy now cost more.

2. The people who were making slightly more than minimum wage typically do not get raises, so they are busted down to living a minimum wage lifestyle again.

How to tell how much you truly make:

Bread is a great indicator of wealth, since it represents how much it takes to feed your family. If you make $7/hour and bread in your area costs $3.50/loaf then you make 2 loaves/hour. If minimum wage increases to $10/hour, but the price of bread goes up to $7/loaf you can no longer buy two loaves of bread for an hours worth of work, so even though you have more money in your pocket, it is worth less and you are poorer. This is typically what happens when minimum wage is raised, and the poor now have to work harder for less spending power even though they technically make more than they did before.

So how do we actually help the poor?

1. Encourage job growth. More jobs means more demand for employees. Employers will therefore be motivated to pay higher salaries to get the workers they need. In areas where there are a lot of workers and few jobs wages tend to be low and working conditions less desirable.

2. Educate people from a young age about the importance of a good work ethic. Employers will pay more to keep a good worker. Further, when your place of employment is known for its quality more people buy there and they will often pay more money for the service. More money for the company means there is more money for employees’ salaries and benefits, and since every company wants to keep their good reputation, being the best means they will pay more to retain your services as well. Doing things well pays off in the end.

3. Mentoring. Encourage job shadowing early in high school and mentoring later, even through the adult years. People need to be in contact with people who have ‘made it’ to where they want to be in the world. Why? Because there are skills and habits successful people have that some people need to learn in order to succeed. They will not learn business manners unless they are exposed to them. We can all think of someone who did something really inappropriate on the job (and was subsequently fired.). The sad fact is that they probably did it out of ignorance. Mentoring also lessens the feeling of ‘why bother/ it’s impossible/ I’ll never make it’ by showing the person that there is a real person (flaws and all) who did what they want to do, and who can show them how to do it too. Many people do not want to bother others, or do not feel they are good enough to be a more successful person’s friend, so the mentor needs to be pro-active in continuing the relationship.

4. Aggressively counter the victim mentality whenever possible. My adopted son tried pulling the race card once (and only once). He had not been discriminated against (half of the police force here looks like him…), but he did not want to accept that he got what he deserved because of his own actions. Whenever possible the principle of cause and effect needs to be clearly defined so that whatever ‘stinkin’ thinkin’ exists that causes people to feel that it is not worth trying is eliminated, or at least minimized. Any real discrimination needs to be dealt with as well, harshly so others will not do the same. Being made to feel like you cannot succeed (learned helplessness) is a serious crime. (Ironically, my son-in-law (white) grew up in a situation where he felt it was useless to finish high school. My daughter (dark skinned) passed his level of education despite multiple issues that affected her ability to learn. Expectations matter.)

5. Do everything you can to discourage single motherhood. Single motherhood is a big factor in children not doing well. Fathers, even if they do not marry mom, need to be encouraged to be productive, helpful, ever-present parts of their children’s lives. If there are single mothers, support is needed. Not hand-outs, but help. Families who come up beside the mother and help her learn how to handle the terrible twos, or the sulky teen will do much to improve the child’s future. But you must come up along side the mom. Trying to replace mom and subtly implying that their mother is less-than typically undermines her authority and makes the situation worse long-term. Mom is the authority figure in this situation and, unless she is completely neglectful (in which case social services may be needed) she is the one who must ultimately be in charge of the child.

6. Encourage small business start-ups. Many poor people have skills, and do not realize that they do not need an employer to profit from them. (Heck, my cleaning lady runs two crews of young girls and probably makes more than I do!) House cleaning, yard work, repair jobs etc can result in large profits and the eventual employment of others when organized well. Paintings, jewelry and other items can also be sold on-line, so even though there are not buyers who appreciate or have extra money for these things in your community, you can reach those who are interested anywhere in the world.

Things that hurt the poor (that we think help):

1. College. College is great- if you have a career goal and know what to do with your degree when you are through. College just for the sake of going loads young adults down with debt and does not result in a job. Without a clear knowledge of where to apply with said degree and how to interview well enough to be wanted in that field many twenty-somethings return home with large loans and no way to pay them off. Some degrees require a masters, MBA or PhD to be marketable. It is good to know this before you start down that path. Others require great inter-personal skills. Introverts may not find they are a good fit if they did not understand what the job really entailed, and may not get hired because the employer was looking for a ‘people-person.’ Again, college is great if you are obtaining a skill you need to achieve your goal. College is wasted if you choose something you are ill-suited to do, or if you do not complete all the education typically required in your field. Guidance is needed for children of all socio-economic levels so they understand this point.

2. Government programs. Do you know how many times I have been working with someone who is starting to succeed and then they quit because they now qualify for a ‘program?’ Programs without mentoring are useless. Money is needed when you are poor, but so is education. Local help works so much better than a check. One of my favorite charities pays the participants for learning in credits that can be used in their store. The classes involve homework to be done before class, a video, then a session with a volunteer where the video is discussed. Most of the classes are on life-skills such as parenting, and it works. The participants improve their situation, develop relationships with the volunteers so they have someone to ask questions of when life gets tough and they have access to clothing and other everyday items they need for their family.

3. Subsidized housing. It is not the subsidy that is the problem, but the fact that it tends to put the poor in one place. Poor people need access to people who have succeeded, or they will not likely learn how to succeed. There are many ways to de-segregate the poor (and it should not be forced, or there will be resentment). Churches are a great place for people to inter-mingle, as are sports and other community activities. For self-destructive behavior not to be reinforced there must be access to role models who live differently. Placing the poor in one area does minimize crime in other areas, but exponentially increases its likelihood in the places where life is seen as ‘futile’ and trying hard is ‘useless.’

We need to be pro-active when it comes to the poverty problem.

Schools in poor neighborhoods would do well to invite professionals who came out of the neighborhood to speak to the children often so they know it can be done. (And these people know how the children think so they will be more effective in reaching them than you or I would.)

Less traditional teaching methods and out-of-the box thinking must be used to encourage the children to achieve. Anything that is not working must be replaced. Children from environments that do not emphasize the need for school require different approaches than schools that are full of children whose parents reinforce the need to do well. Home school resources have addressed every type of learning style (and then some) in order to make learning fun and effective. Let’s allow the teachers access to what is already available as well. Let’s also allow volunteers from the surrounding communities to help. One-on-one attention for a struggling student is priceless.

Schools also need to keep the teachers excited and motivated. Burned out teachers do not teach well, and children who are not sure why they are even in school are tough to work with. Teacher rotation, encouragement and training by teachers who have been successful with children like theirs may be necessary. (Listening to Mrs. So and So who taught at the prestigious private school may not result in knowledge that applies to this population of children.) (School choice may also help with this.)

Another idea is to capitalize on what the students do know. In our area many of the less-successful-in-school children know two languages poorly. We need translators, and they have a head start having spoken both languages from birth. Offering classes that clean up their grammar and spelling and lead to a job translating in the courts, hospitals, tourist areas or even the UN would be helpful. (I was astonished that, in a largely Hispanic area, the federal court translators we saw on a field trip were not Hispanic. This is likely because, while we have many, many bilingual citizens there were likely not many that could pass the required test.) In other areas children grow up loving cars (mechanic, engineer, design classes), art (typically graffiti) could lead to graphic design courses etc. We need to get creative and real before these children’s talents are lost and they do not know what to do with their lives.

These are all just ideas. It is up to you to decide what will work in your community and make it happen.