Hidden Costs of Stagnant Minimum Wage
This past week I was speaking with a group of small business owners and professionals in Dothan. One business owner felt that an increase in the Alabama minimum wage will make them need to raise prices at least a little, but that prices for all goods were already going up even without a wage hike, so maybe minimum wage workers needed higher pay. Another noted that very few people in Alabama get only minimum wage: the men who do yard work or home repairs for these professionals are getting a lot more than $8/hour (even the neighbor boy who dog sits for us gets more than that).
Probably the only employers in Alabama paying minimum wage are larger companies like Wal-Mart or corporate franchises for fast food. With rising prices, minimum wage is not enough to take care of the costs of living, even in low cost Alabama. Despite inflation of 11% over the last 5 years, the minimum wage has not been increased since 2009. I look at it this way: when I last earned minimum wage, that $3.35 bought what is now worth $9.70, not the current minimum wage of $7.25. Many families with children supported by a minimum wage worker will qualify for food stamps and their children will qualify for Medicaid. Health insurance for the parents can cost 1/3 to 1/2 or more of the annual pay of a minimum wage worker so the parents have to go without if their company does not provide health insurance.
Alabama tax payers support these minimum wage workers (and their employers, who get a worker for less than they really cost to feed, house, and get medical and child care) with food stamps, public housing, child care assistance, Medicaid for the children, and unpaid emergency room costs when an uninsured worker has a serious medical problem. As many have pointed out, the profits from Alabama tax payers picking up the tab for these costs go directly to the owners of the companies which pay minimum wage because they do not have to bear the burden of higher wages.
An old economic maxim is this: give a rich man a raise and he’ll probably put the money away for later; give a poor man (or woman) a raise and they’ll buy Baby shoes! Every increase in minimum wage will come straight back into the Alabama economy; not the case for big businesses that continue to see skyrocketing corporate earnings. If we do not raise the minimum wage, we should consider asking employers to contribute a little more to the state funds that support those minimum wage employees who receive state benefits because of their lower wages. As it stands, those stingy employers are just forcing the rest of us to subsidize their profit margin.
We all recognize that raising the minimum wage may contribute a little bit to inflation, but maybe it’s time for some wage inflation instead of just price inflation!