Stephen Taub, CFO.com | US
January 11, 2007

What do we understand minimum wage to be?

It is appalling to see the level that the minimum wage is at before and after the increase being $5.15 per hour to $7.25 per hour. Minimum wage, in this sense, is the minimum amount that organizations are required to pay by law. However, to what extent are employees earning this wage capable of enjoying a reasonable standard of living if they earn an insufficient living wage? Consider an analogy. In Canada, the criminal code defines that it is criminal conduct for credit granting facilities to charge interest rates that exceed a rate of 60%. As such, there is regulation to ensure that there is an equilibrium point of credit interest earnings that are reasonable to the grantor and both spending accountability and reasonable incurrence of "old money" interest repayment by the end consumer. In the case of the minimum wage, there is no such equilibrium. On one side of the equation, the organizations paying out minimum wage benefit from maximized profits for the labour employed given the tasks assigned such that they can pay these incremental profits from a low minimum wage and proposed tax cuts for small businesses promulgated by GW Bush to managers who then enjoy a very reasonable standard of living. On the other side of the unbalanced equation, the labourer does not earn a sufficient living wage to support even the basic necessities of life. This, in turn, transforms from merely a case of legal distributions of resources to the element of distributive justice in terms of the fair and equitable distribution of scarce economic resources. If there were a fair and equitable minimum wage such that the labourer were afforded a reasonable standard of living and an associated increase in purchasing power, there would be a greater impact on the economy insofar as the multitude of labourers would have a greater ability to engage in consumption to benefit the said standard of living and also to benefit various organizations, in the economy, by their derivation of higher incremental revenues than those generated by paying an excessively low legalized minimum wage. By doing so, we may also decrease the incidence rate of unhealthy individuals as the impoverished have a higher likelihood of having poor health and consuming health care services, in addition to reducing the likelihood of having homeless individuals who go hungry and who live unsheltered in the cold of winter while the economic elite managers are compensated at a luxury goods capacity purchasing power level. This is also coupled with the psychological frame of mind of the wage earner, who if trapped in a low minimum wage job, will spend less and also the class consciousness frame that places said worker within the impoverished class that necessarily stimulates a negative cognitive view of the higher earning management class, and the consequent pessimistic and cynical view of business entities insofar as the impoverished minimum wage earner is less likely to purchase goods and services due to both the psychological cynicism and to the legal economic under capacity of purchasing power afforded to said labourer.

Posted by David Newman | Jan 13, 2007 12:33 PM ET