Minimum Wage and You!

(I know this blog is ostensibly for my progress and thoughts in the animation industry, but I have a lot of thoughts about a lot of topics. Sometimes I catalogue them on paper without meaning to, and then you get a big post about wages!)

Raising the minimum wage is not strictly necessary in a society where corporations are sufficiently incentivized to treat their employees well. America isn't that society right now, so a minimum wage hike is a good idea insofar as minimum wage has failed to keep up with inflation, which means that people are getting poorer despite America being the wealthiest* country. That's bad. Not just morally, but for our economy. Without a middle class or a sufficiently moneyed working class, there are a lot of products and businesses that can't swim in our economy.

Even beyond inflation, certain goods are rising more sharply in cost. Namely, education and housing. Two of the biggest possible predictors of long-term financial success. We likely won't see the social devastation that problem is causing for another generation.

All that said, the effect of a minimum wage hike is complicated largely by the fact that cost of living varies by state and a wholesale "solution" to poverty via minimum wage hikes is woefully insufficient. People in New York and California aren't likely to be much better off than before, while many people in rural states will likely be overpaid comparable to what their employer can afford (in the case of local businesses). That's bad too, but in a different way.

Though not as bad as you might think. When people hear wage hikes, they assume that the cost of goods/services will rise directly proportional to the amount of the wage hike, which just isn't true, largely because businesses have more overhead than just payroll. A lot more even.

https://smallbusiness.chron.com/much-gross-revenue-should-payroll-18985.html

This is revenue rather than total overhead, but the principle is the same. Payroll is typically less than 30% of a business' overhead. That means if you took literally every single dollar spent on a wage hike for minimum wage workers and applied it directly to the cost of the goods/services you're selling, you'd still only be raising the price of that thing by under 30%.

However, cause and effect isn't so clean as this. Employers don't typically translate new losses directly to cost of goods all at once. There are other factors to be considered, like cutting other costs that are often done in conjunction with price increases. On top of this, a minimum wage hike wouldn't only increase wages for the lowest earners. Skilled labor (construction, EMTs, basic office work, etc) are just above minimum wage and will likely attract much less talent initially if their employer doesn't also raise wages. This pretty quickly leads to a wage hike across the board up to a certain point. "Rising tide raises all ships" is the adage and it exists for good reason; it's mostly true.

It's impossible to know what a major hike (like to $15/hr) would do to the country as a whole. This on top of the fact that remote work has become much more common since COVID hit, meaning that "local" wages are spreading out in ways that they couldn't before because of geographical barriers. Now a person in Utah can make way more than the cost of living by working for a California tech company. That's a big change that can spell long-term upheaval for the way that more rural state economies look, which may end up coinciding with a wage hike in a way that makes sense.

Over time, the country's income will homogenize greatly if remote work opportunities keep up (which they should, since all studies suggest that people are more productive when they can work from home, on top of decreased business overhead for space reasons). This makes a universal application of a wage hike a less cumbersome and complex process.

But who knows? We aren't there yet, so there would be unforeseen growing pains.