Minimum Wage Increase, Income Disparity, And “Free Trade”

Since 1938, the federal minimum wage has increased a total of 22 times, but has never been adjusted to the rate of inflation. The unfortunate result of this has been a widening gap between the rich and poor — increased income disparity. As things stand right now, many Americans are working 40 – 50 hours a week at minimum wage and are still struggling to make ends meet.
To combat this seemingly omnipresent poverty supported by minimum wages, Senator Tom Harkin and Congressman George Miller have recently joined forces to raise awareness of this income problem that affects so many Americans. An article in the Huffington Post recently revealed that Mr. Harkin and Mr. Miller have proposed plans to increase the hourly minimum wage to $10.10. Combined with adjustments for inflation, Mr. Harkin and Mr. Miller are confident their plan would successfully combat the income disparity in our country.
So far the proposed bills set out by Mr. Harkin and Mr. Miller have roused a mixture of applause, speculation and concern. However, neither conservatives nor liberals–nor President Obama and Congress–are addressing the effect that raising the minimum wage could have on trade and our “free trade” agreements.
There is concern among conservatives that increasing the minimum wage would result in more businesses outsourcing their jobs overseas where workers are paid much less than $9 an hour. One the other side of the aisle, liberals view the proposed increase to the minimum wage as our moral obligation to ensure workers who hold a full-time job are actually making a decent living—a yearly income greater than the poverty line.
There’s also a belief that an increase in the minimum wage would spur economic development. Some scholars, like Larry Doyle have suggested that instead of raising the minimum wage, what the U.S. needs is to raise our workers’ skills so they are more in demand, thus driving up their wages. Sound advice, except we’ve shipped all of those skilled jobs overseas to countries that pay significantly lower wages. The idea that better skilled workers would create more jobs is unlikely seeing that so few things are still made in America. By dismantling and outsourcing our manufacturing infrastructure, the U.S. lost the very job opportunities that would call for those higher skill sets.
A better over all solution would be to not only increase the minimum wage but also to protect our workers from the foreign imports putting them out of work. In other countries, workers and companies are protected by boarder adjustment taxes, like the foreign value-added tax (VAT). By increasing the minimum wage to a living wage and protecting our boarders to create fair competition, not only would worker be better off but the U.S. economy as a whole would improve and the recession could end for everyone, rather than just the top 1 percent in this country.

MD. SHANE HAIDER
PGDM 3rd Sem