Problem: Millions of Americans are struggling to survive on starvation wages
Wealth inequality is the elephant in the room that many of us are ignoring. Please take the six and a half minutes to watch this video, then read the "solution" I propose below.
Solution: Provide a living wage to EVERYONE who works any job.
After my fall from the heights of the American economic ladder, I’ve lived as so many of my fellow Americans do - paycheck to paycheck with nothing in savings. When I was driving trucks across America, some low mileage weeks meant that by the next Wednesday I had just a few dollars to last until payday on Friday. I learned that always having a spare jar of peanut butter in reserve is a very good thing.
Nobody working forty hours a week should be living off just peanut butter a few days a month. None of us flipping burgers, or pushing broom, or taking care of our children or seniors, or digging ditches, or doing ANY job in America should be concerned about where our next meal will come from. None of us should be concerned about how we will pay the electric bill, whether we will have enough to pay rent at the end of the month, what kind of trouble our kids got into since we last saw them, worry about getting fired if the bus is running late today, or any of the thousand other fears people struggling to survive on starvation wages face everyday.
Life is about much more than just paying bills and dying. When President Roosevelt created the minimum wage in the 1930s, his intent was exactly that - to provide a wage that people could live comfortably on no matter what the job they were doing. Somehow we’ve forgotten that goal over the past forty years. If the minimum wage had kept up with inflation, it would today be above $20/hour. Perhaps more importantly, trillions of dollars would now be in the bank accounts of the three quintiles of Americans (from the video above) who now have no "wealth" or very close to it.
The most common argument I hear from all ends of the political spectrum regarding raising the minimum wage is “if we raise wages, then prices will go up”. The reality shows that simply is not true, even if that’s what the billionaires want you to think.
I just read Warren Buffett’s letter to the shareholders of the company he heads - Berkshire Hathaway. Buffett is one of the wealthiest people on the planet but admired for his humility and the simple life he lives. His letter is an interesting read, if you like the language of money and/or want to get some insight into the minds of the investor-class of Americans. Here’s the link to the annual report. http://www.berkshirehathaway.com/2015ar/linksannual15.html
One statement in particular caught my attention, in bold below, after you get a feel for Warren Buffett’s sense of humor.
"Woody Allen once explained that the advantage of being bi-sexual is that it doubles your chance of finding a date on Saturday night. In like manner – well, not exactly like manner – our appetite for either operating businesses or passive investments doubles our chances of finding sensible uses for Berkshire’s endless gusher of cash. Beyond that, having a huge portfolio of marketable securities gives us a stockpile of funds that can be tapped when an elephant-sized acquisition is offered to us."
Despite all the public complaining by the Republican Party about the Obama administration, the investor-class of Americans (the one percent from the video above) are having the best years of their lives, the best years in American history. A continuation of the current economic policies into another eight years is exactly what most wealthy people want, (which is why Warren Buffett has endorsed Hillary Clinton for president and why a Trump presidency scares the hell out of the elites of the Republican Party who despite their objections to the contrary are only working for the 1%).
But here’s my point. If the investor-class is experiencing an “endless gusher of cash”, do you really think that by simply doubling their minimum wage employee compensation expenses, probably one of the lowest expenses they have, they would risk raising prices and lose customers? Wouldn’t it be less risky to put up with a slightly smaller “cash gusher” for awhile until market conditions re-stabilized at a new level of profitability? Especially if the entire business world is experiencing the same increase in employee compensation costs at the same time.
My experience in making business decisions tells me that’s exactly what would happen. Prices will not increase to match an increase in the minimum wage. Instead, corporate profits will slightly decrease for awhile until the market adjusted. No good corporate manager messes with a winning formula unless necessary, and no manager ever wants to adjust two variables at one time. Better to wait and see what happens with an increased minimum wage before making any changes to the formula for the “gusher of cash”. In fact there’s a very good argument that with more customers with more money to spend, (the previous poor who with a living wage would suddenly have some disposable income), competition among businesses and an increase in sales volume might lead to lower prices for many products and an increase in hiring.
It IS quite possible that the owners of some labor-intensive, marginally profitable businesses that rely on starvation wages to realize those minimal profits, will choose to close down rather than accept lower profits. But businesses shut down everyday all over America because profits don’t match expectations. That is just how business works. Other, better run competitive businesses which are able to realize a higher profit with a higher labor cost will most likely snatch up the already trained employees of the failed business. That too is how business works. The net result would be no net loss in jobs and perhaps even, as noted above, an increase in overall business as more previously poor people now have more money to spend requiring businesses to hire new people to service all the new customers. That’s how economies grow, from the bottom up. Trickle down economics is a myth.