Here's my latest brainstorm: we should set the federal minimum wage at half the average local wage, rounded up to the nearest dollar. Here it is for a random selection of places:
This would take care of inflation and geography all at once. And of course states and cities would be free to set higher floors if they wanted to.
NOTE: I'm using the mean local wage instead of the median because it does a better job of capturing high housing prices due to a concentration of rich people.
I like it. As long as it has an automatic annual adjustment built in. Upside only, though, even though it's been a long time (the Great Depression?) since we've had a sustained period of deflation.
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Sounds good, but there's positive feedback in your specification, so a naïve implementation would likely oscillate in response to step changes of input.
It would take some modeling to figure out the best phase shift and attenuation factor to alleviate that, but perhaps something like a twice-per-year adjustment, with the mean computed using the period from 6-12 months prior, would work.
Back when I had a mortgage, the insurance/tax escrow computation was done only once per year, but it oscillated nevertheless. In one year, it would have me pay too much, then overcompensate the next year so that I paid too little, and so on ad infinitum (at least until the mortgage was paid off).
Minimum wage is a baseline for both children and head of households. Do you create separate minimum wage classes based on age?
No.
No. Wages should be based on the job, not the circumstances of the worker. If you need to support a family you should probably not be working the same job that a teenager has.
Who would want to hire a person with dependents, or who is older, since they cost more?
May I suggest your concept is too broad.
For example, you show $24 for Silicon Valley. That wage level is low, perhaps, for affluent communities such as Atherton or Woodside (as an aside, neither of these two cities really have many minimum wage jobs). In contrast, $24 per hour is likely too high for Watsonville (is Watsonville considered Silicon Valley?).
I think the wage floor need to be at a smaller units, such as by zip code.
Separate point, do you distinguish between an adult wage and a teenager wage? How about for folks who are special needs? etc
No, Watsonville is not part of Silicon Valley.
rick_jones - you are probably right, but the definition of silicon valley is subjective and malleable. If I recall, several years ago, Cisco Systems considered buying a lot of land in Watsonville for a new campus.
https://www.hcn.org/issues/48.6/in-the-shadow-of-silicon-valley-a-new-crop-of-tech-savvy-farmers
https://www.sfgate.com/bayarea/article/Cisco-unplugs-Coyote-Valley-development-2867164.php
The broader point, leave Watsonville aside, within a city or region (silicon valley) a single minimum wage is likely too inflexible.
If not Zipcodes, then by Census designated whatchamacallits I suspect would have to be used.
My mother taught school in Coralitos. She called it Watsonovich.
I would go for larger units, such as the whole country. It seems to me that it would be a good thing to push wages up in the poverty pockets. Any unit in which a large proportion of jobs are already near minimum wage, tourist towns for instance, would see a minimum set at half-average falling, not rising.
You are forgetting that small businesses in poorer states have to pay these wages. Part of the point in what Kevin is proposing is for the min wage to match the local cost of living and economic environment.
Minimum and near minimum wage jobs tend to mostly occur in businesses whose competition is localized; a cafe in the backwoods of Kentucky doesn't have to compete with a cafe in Idaho. Setting the minimum wage high would mean that all the local cafes would have to raise their prices a bit, which would reduce their business a bit, but would leave the workers better off, which would mean that they would have more money to spend in other local businesses, which would permit them to pay their workers more, which would permit them to go back to the cafe even though its prices have risen. It's called a virtuous cycle.
If the teenager and the adult are doing the same jobs with the same responsibilities they should be paid the same. I think that's pretty much common sense but, also, age is a protected status so you can't explicitly pay employees different wages based on age. If you're an adult and need to support a family you probably shouldn't be working the same job as a teenager.
Yeah, I don't like the dismissive idea of letting people underpay teenagers just because they're teenagers. That risks age discrimination against anyone not a teenager.
Start of a good idea, but I think that the correct approach is to set it to 3x the median local (for some definition of "local') rent for a 1 (or maybe 2) bedroom apartment.
Yeah, rents in rural TN aren't really within affordable reach of a $10/hr job. On Zillow, there are listings away from the cities for $600-700/mo. When you're making, at the very most, $400 in gross pay per week that's $1600 before taxes. $600 is 37.5% of gross, which is very much housing burdened. And that's for just a 1-bedroom.
But it would work for a young couple, if both worked. But if they want to raise a family...
Optimality vs. simplicity...
KD's suggestion and several of the comments focus on a flexible rule for the optimal value of the minimum wage (by some definition of optimal). Like most laws & regulations, unless there is a high level of Asabiyyah, enforcement will be an important component of achieving any desired consequences. For the minimum wage, enforcement usually depends on the employees anonymously alerting the relevant authorities to violations. This in turn requires that employees know the applicable minimum wage so they can tell whether or not their employer is stealing from them. With a national or state-wide minimum wage, this is relatively easy. Once it gets much more local than that, it can be difficult for people to keep track, particularly for those working in minimum wage jobs who like have more than the typical number of stressors in their lives.
If you are thinking of zip-code level minimum wages or different minimum wages for individuals with different skills or in different jobs (common until recent decades in other countries with minimum wages), keep enforcement issues in mind.
KISS is an important factor to keep in mind when designing social policies. A 2nd best solution that largely works is much better than one that is (near) optimal but costly to implement.
Sounds like it's leaving a loophole for the local Republican politicians to monkey around with making sure people get underpaid though, if you leave that local angle in there.
Great one. Simple and easy to understand idea that would be an excellent addition to the Democratic platform.
Quick, easy and flawed, as most quick and easy solutions are. If the minimum wage is based on half the average wage, then it's easy for employers to collectivelygame the system by making most wages close to the minimum. That would drive the average wage near the actual minimum wage and thereby halve the minimum wage. That process could repeat, halving the wage again, indefinitely.
If you could exclude wages already at the minimum from the computation, that might help. But it would be better to use a separate scale (like rent, as someone else suggested).
Doesn't this maintain poor communities poverty?
I second Kevin's proposal.
Very interesting idea! Kevin should elaborate on the Pros and Cons in a new post.
OK but there's a problem here. If you raise the minimum wage you mechanically raise the average local wage. The same effect would not necessarily occur for the median local wage.