Posted by: Middleclass Search | April 10, 2014

Minimum wage as a requirement and not a way of distributing wealth

As a system engineer I have a problem with the concept that the minimum wage is a way of distributing wealth – with that logic any wage is a way distributing wealth. If it is goal of the United States to support the American Dream (which is defined as a middle-class lifestyle) then there is a need for a wage that provides the basics for an individual. Adam Smith recognized this stating “A man must always live by his work, and his wages must at least be sufficient to maintain him.” From the systems point of view even in the most laissez faire economic system there is a need for a minimum/living wage to maintain a stable system. Without a “bottom wage” and with a non-fully employed economy (caused in part by globalization) theoretically wages could fall to a level where gulags become commonplace throughout a nation.
A common alternative often proposed to the minimum wage is the earned – income tax credit while this is a more targeted solution than a minimum/living wage it begs the problem which is the price of a product or service must include all the costs required producing it. The earned – income tax credit approach transfers some of those costs to the taxpayer. From a systems point of view this method complicates the long term goal of building an economic system that promotes a broad-based middle-class.
If we are to have a truly capitalistic system with a strong middle-class, economists need to address minimum wage/living wage as a requirement and not away of distributing wealth.


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