My ‘Minimum Wage’ Observation (Economics Not Business)

So you think economics and business are the same, right? It isn’t for the matter of ‘common goods’. That is, utilities and national assets we share in common and pay (through taxes) as a group (like infrastructure, military and the justice system) in order to uphold our constitution (the US Constitution and the Canadian Charter of Rights and Freedom). So economics and business are not the same.

So what is the right decision in the ‘minimum wage’ debate? It depends on the state (based on the census data) where you live. Which explains why some states will readily raise the minimum wage (above the Federal floor of $7.25) where others will not. The key fact in the minimum wage debate is the ‘household size’ and it varies by large margins from state to state.

In states where the government has raised the local minimum wage to $10, and where there is pressure to raise it to $15..household size is larger than 4 person per household (related by blood, not just a ‘boarding house’). And businesses in such states have little resistance to offset the rise in the minimum wage, because business owners also have similarly large households. In this kind of climate, it might be self evident to businesses, that more income goes toward supporting the family well-being.

In states, where there is staunch opposition to raising the minimum wage, household sizes are predominantly smaller (singles and couples) – including the business owners themselves. Such that more income goes toward ‘savings’ and spending is deferred to a future time, when these singles and couples have families (that is to say, kids). That is the case of Missouri, where the minimum wage is at $7.70 (nearly equal to the Federal floor of $7.25). And raising the minimum wage will have an indirect (or delayed) impact for business, unlike the immediate and direct impact in a state like New Jersey or New York, where the increase will be spent right away.

Back to Missouri, this delay is like a ‘interest charge’ for businesses. Now here is the economics part of things. If Missouri is pro-business and pro-family at once – it might offer businesses a tax credit in order to raise the minimum wage, as to ‘create’ families while baring the burden for businesses.
Alaska – $9.80
Arizona – $10.00
Arkansas – $8.50
California – $10.00 for small employers; 10.50 for large employers
Colorado – $9.30
Connecticut – $10.10
Florida – $8.10
Hawaii – $9.25
Maine – $9.00
Maryland – $9.25 (as of July)
Massachusetts – $11.00
Michigan – $8.90
Missouri – $7.70
Montana – $8.15
New Jersey – $8.44
New York – Varies across state from $9.70 to $11 (as of 12/31/16)*
Ohio – $8.15
Oregon – $10.25 (as of July)
South Dakota – $8.65
Vermont – $10.00
Washington – $11.00
(Source)
Thanks for reading my post. You know my name. I’m about to start my MBA in the new year. I have a Bachelor degree in Economics. And I love to share.