Tag: poverty

The Reality of Minimum Wage

~ jbwatson ~ Leave a comment

Rally_demanding_$15-hr_minimum_wage_(31326059165)There simply are not enough hours in the day to address every foolish thing you see posted on social media, but there are some things that I just cannot let go. In the words of Christian comedian Ken Davis, “You can’t let people fall in the stupid pit” without out at least trying to help them. The push for an increased minimum wage is one of those things that I have to address. Lately, it has gotten even worse. Ever since it passed in Seattle, the magic number for many proponents of a minimum wage increase seems to be $15 an hour. According to the Washington Post’s questionnaires sent to Democratic candidates for president, all eight candidates still in the race favor an increase in the federal minimum wage to $15 an hour. (That includes Tulsi Gabbard, despite her exclusion from the debates and the DNC doing its best to shut her out. Of course, Gabbard is also the only one still in the race to favor a universal basic income, an idea most prominently supported by former candidate Andrew Yang). Tom Steyer actually favors a minimum wage of $22/hour.

Sure, a $15/hour minimum wage sounds like a great idea. But in reality it is no better than just printing more money. Does an increased minimum wage put more money in the hands of the people? Yes. Will they spend it? Yes, they will have to, because prices will go up.

Let’s use fast food restaurant employees as an example. The web site fightfor15.org features this statement on its homepage: “McDonald’s: Fast-food workers deserve $15 an hour and a union so we can pay our rent and support our families. Agree? Add your name now.”

If McDonald’s workers get a pay increase to $15 an hour, what will that do? Well, my understanding is that McDonald’s franchises employ about 750,000 people in the U.S. and that there about 14,150 McDonald’s restaurants in the U.S. That works out to an average of 53 workers per McDonald’s. Let’s narrow it down even more and look specifically at McDonald’s workers in Illinois, since Illinois has passed a law increasing their minimum wage. There are about 650 McDonald’s in Illinois. That would equate to 34,450 McDonald’s workers if we use the average. Let’s suppose only 60% of them are earning minimum wage, though I imagine that is exceedingly low. That would be more than 20,000 people just at McDonald’s restaurants earning minimum wage, and in Illinois this year the minimum wage went up by $1.00 per hour in January and will go up by another 75 cents per hour in July.

So, imagine 20,000 workers working, for the purposes of this illustration, 20 hours per week, and, come July, making $1.75 per hour more than they were in July 2019. That equates to $700,000 per week in wages that have to be paid by Illinois McDonald’s, or more than $36 million over the course of a year. Are the various owners of McDonald’s restaurants on Illinois going to collectively eat that increase (pun intended)? Of course not. They will raise prices. And every industry that has minimum wage workers will raise prices. So, costs will go up and that nice minimum wage increase will be negated. Various studies project that the cost of a Big Mac would increase by 4.3% if McDonald’s workers were paid $15 an hour. The rate of inflation in the U.S. hasn’t been that high since 1990. And that’s just a Big Mac!

In Seattle, where the $15/hour minimum wage push all began, housing values have increased by an average of 5.49% annually since 2000. The median rent for a two-bedroom apartment in Seattle is more than $1,600 a month–about $500 per month higher than the national median. The median for a one-bedroom in Seattle is $1,332 a month. The recommended food spending per month for a Seattle resident is 23% above the national average. The cost of a dozen eggs in Seattle is 68 cents above the national average. On average, the price of gas in Seattle is the highest for all major cities in Washington. Oh, and Seattle also has a sales tax of 10.1%! True, Washington has no state income tax, but I doubt you’ll notice any benefit by the time you absorb all those other high rates.

The minimum wage is not necessarily beneficial. When the first minimum wage in America was implemented in 1938 it was twenty-five cents an hour. Had it been increased at the rate of inflation, it would be somewhere between $4.50 and $4.80 an hour today. Instead, it is $7.25 an hour, more than 50% higher than it should be if it was only intended to keep pace with inflation.

When the minimum wage was implemented it was one part of a sweeping piece of legislation, the Fair Labor Standards Act, designed to address a number of Depression-era workforce issues. Other elements of the law addressed overtime pay and child labor. According to the Legal Information Institute of Cornell Law School, “The minimum wage was designed to create a minimum standard of living to protect the health and well-being of employees.” Franklin Roosevelt, in his statement after signing the National Industrial Recovery Act in 1933, said of wages, “It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country” and that “by living wages I mean more than a bare subsistence level—I mean the wages of decent living.” That statement has been used by many to argue that the minimum wage was always intended to be at least a living wage.

There is room to debate that assertion too, but let’s suppose for a moment that that has been the intent all along. The current federal minimum wage of $7.25 an hour would pay a worker who works 40 hours a week for fifty weeks a year and annual pre-tax income of $14,500. According to the Department of Health and Human Services, the 2019 Poverty Guideline for the 48 Contiguous States and the District of Columbia was $12,490 for an individual. The 2020 guideline was just released in January 17, and it is $12,760. (And, in case you are wondering, the Census Bureau and programs based on poverty level, such as SNAP, are based on gross income).

Maybe you don’t like the notion of basing the minimum wage’s relation to a “living wage” on a single individual. Fair enough. Let us suppose, then, that there is a family with two wage earners, both working 40 hours a week, fifty weeks a year, for minimum wage. The income for that family would be $29,000. That exceeds the poverty level for a two-person, three-person and four-person family. (The 2020 Poverty Guideline for a four-person family is $26,200). And, in case you are still uncomfortable, there is government assistance available for those families, since eligibility for programs based on poverty level requires that a family’s income be at or below 130% of the poverty line.

According to the Census Bureau’s 2018 report, the official poverty rate was 11.8%, which was the fourth consecutive annual decline and the first since 2007 that the poverty rate was significantly lower than it was that year, which was the year before the last major recession. Another interesting fact: the drop in poverty rate from 2017 to 2018 was highest among African Americans and second-highest among Hispanics. The was a bigger drop for females than males. And when considering educational attainment, the biggest drop was among those with “some college” while the only area where the poverty rate went up was among those age 25 and older who had no high school diploma. The interesting facts are abundant, in fact. The lowest poverty rate when considering family characteristics was among married couples, who had a poverty rate of only 4.7% in 2018. The highest percentage of poverty was among female householders with no spouse present, but that demographic also had the largest drop in poverty percentage.

If you consider the three-year average (2016-2018) of percentage of people in poverty by state, the state with the lowest percentage was New Hampshire, at 6.4%–and New Hampshire uses the federal minimum wage of $7.25. The five states with the next lowest percentages of poverty were Maryland (7.1%), Utah (7.9%), Minnesota (8.7%), Colorado (8.9%) and New Jersey (9.1%). Among those five states only Utah has the $7.25 minimum wage, but the minimum wages of the other states are still modest, and the average minimum wage of those five states is $9.31/hour. The states with the highest minimum wages were New York ($13), California ($12), Washington ($11.50), Oregon ($11.25) and Colorado ($11.10). We already saw that Colorado was among the states with the lowest poverty rates, but the other four states on this list did not fare so well. New York (11.8%), California (12.5%), Washington (10.3%) and Oregon (10.6%) were not the worst by any means, but even with Colorado included the average percentage of poverty was 10.82%. That put those states at 1.5% below the U.S. average that year of 12.3%, but still well above the average percentage of 8.34% for states 2-6 on the list. In other words, the five states with an average minimum wage of $9.31 had a poverty percentage two and a half percentage points below the five states with an average minimum wage of $11.77. I don’t know about you, but I do find it at least noteworthy that the states with an average minimum wage that was $2.46 higher led to a poverty percentage that was 2.48 percentage points higher. Maybe it’s a coincidence, but you just can’t get much closer than that.

 

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https://www.census.gov

https://www.raisetheminimumwage.com

https://smartasset.com/mortgage/what-is-the-cost-of-living-in-seattle

 

Photo credit: By Fibonacci Blue from Minnesota, USA – Rally demanding $15/hr minimum wage, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=53672511

Corrective Lenses

~ jbwatson ~ Leave a comment

In case you have not heard, World Vision has announced that it is reversing its decision on hiring homosexuals in same-sex marriages. Apparently the decision was made at a World Vision board meeting held within a few hours of my last post (a few hours before I posted, I might add–I am not suggesting any correlation between the two events!) This decision marks a quick turnaround by the parachurch ministry since the announcement that it would allow such hirings came just two days earlier.

WORLD Magazine news editor Jamie Dean broke the story of the reversal on Wednesday afternoon, saying that Columbia Theological Seminary president Stephen Hayner, who is a World Vision board member, responded to an e-mail inquiry from WORLD with this statement: “The Board of World Vision is just concluding a meeting and will be releasing a statement shortly reversing the decision that was made. It was never the intention of the Board to undermine our firm commitment to the authority of the Scripture.”

Approximately an hour and a half later Dean posted an update on the story, including the World Vision statement. The statement, issued over the names of World Vision U.S. president Richard Stearns and World Vision U.S. board chairman Jim Beré, begins this way:

Today, the World Vision U.S. board publicly reversed its recent decision to change our national employment conduct policy. The board acknowledged they made a mistake and chose to revert to our longstanding conduct policy requiring sexual abstinence for all single employees and faithfulness within the Biblical covenant of marriage between a man and a woman.

It is encouraging to see that the board acted so quickly to reverse this decision and to acknowledge that a mistake was made. At the same time, it still troubles me that a board of such intelligent individuals would have made the decision in first place, somehow believing that the decision was not undermining Scripture.

The statement continues, “We are brokenhearted over the pain and confusion we have caused many of our friends, who saw this decision as a reversal of our strong commitment to Biblical authority. We ask that you understand that this was never the board’s intent.” Therein lies the problem. I repeat, how could this board of intelligent and accomplished individuals honestly believe that its decision was not a “reversal of a strong commitment to Biblical authority”? When a decision is made to allow accept something that the Bible clearly and unequivocally states is wrong there is no explanation for it other than a reversal.

“We are asking for your continued support. We commit to you that we will continue to listen to the wise counsel of Christian brothers and sisters, and we will reach out to key partners in the weeks ahead,” the statement says. This, too, is encouraging, but begs yet another question; specifically, why was this “wise counsel” not sought before the decision was made? If somehow (and, in my opinion, inexplicably) the World Vision board truly was not sure how the announcement of the policy change would go over among the evangelical community why would they not have sought this insight and counsel before announcing their decision? The furor and backlash that poured forth in the few days between the announcement of the decision and its reversal could have been avoided completely. Yes, it is good to learn from one’s mistakes, but it is also good to avoid mistakes when common sense or, at the very least, a minimum amount of thoughtful reasoning would have prevented it in the first place. Stearns acknowledged as much according to a report from Religion News Service, stating, “We hadn’t vetted this issue with people who could’ve given us really valuable input at the beginning. In retrospect, I can see why this was so controversial for many of our supporters and partners around the country. If I could have a do over, it would’ve been that I would’ve done more consultation with Christian leaders.”

No doubt the possibility that contributions to World Vision would see a sudden drop was at least part of the reason why this decision was so quickly reversed. The Assemblies of God had already encouraged its members to consider dropping their support of World Vision and no doubt many other individuals and churches had or would have soon made similar recommendations. Ryan Reed tweeted on Wednesday, “My wife works for WV. In today’s staff meeting Stearns announced that so far 2,000 kids dropped.” If true, that figure would have equated a drop in World Vision donations of $840,000 since the monthly child sponsorships are $35. That was within two days of the announcement; no doubt the decrease would have ended up being considerably greater.

Richard Stearns did acknowledge in talking to reporters that the initial decision reflected poor judgement; “We believe we made a mistake. We’re asking them to forgive and understand our poor judgement in the original decision.” Still, Stearns also stated, “What we found was we created more division instead of more unity, and that was not the intent of the board or myself.” If that is an attempt to explain their poor judgment it really does not help since, I say again, it confounds understanding to imagine the World Vision board honestly believing that their decision would increase unity. In light of these events I believe that the World Vision U.S. board needs to seriously evaluate Stearns and itself in order to figure out how such an egregious lapse of responsibility could have happened in the first place; there may well need to be some changes made in order to prevent it happening again.

Russell Moore tweeted soon after the announcement, “World Vision has done the right thing. Now, let’s all work for a holistic gospel presence, addressing both temporal and eternal needs.” I think he speaks for many when he states that World Vision did the right thing. Jim Daly of Focus on the Family also released a statement. It says, in part, “I believe the Board of World Vision had the best of intentions when they cited a desire for ‘unity’ in making their original decision. But however well-intentioned, nothing is more important than adherence and faithfulness to the clear teachings of Christ. No matter how hard culture tugs, we cannot relinquish God’s truth.” Frankly, Daly gives the WV board more credit than I do; they may have had the best intentions in pursuing unity in some sense but it certainly was not, in my mind, a unity around biblical truth–and that should be preeminent.

Daly goes on to say that World Vision ought not suffer from this blunder. “I pray that Christians will now respond likewise with a spirit of grace and humility. World Vision does not deserve to be harmed by this incident. The security and fate of too many children are at stake to hold a grudge and punish them by withholding support.” He’s right about the children who are served by World Vision. They had no say in the decision of the World Vision board and they will be the ones who suffer if the World Vision contributions take a hit–and they should not be victims of poor decision making by the board. At the same time, there are many ways to help disadvantaged children around the world and sponsorship through World Vision is but one such way. My belief is that it would only be prudent for Christians who desire to help children in poverty to evaluate their options are to take the position and history of the organization into consideration when deciding where and how to give–and that consideration needs to include this decision and reversal by World Vision.

Of course the outcry that resulted after Monday’s announcement will now reverberate from the other side of the spectrum as World Vision will receive condemnation from those on the political and evangelical left who believe that support for the ministry should now be questioned because they have reversed their decision to embrace those in homosexual marriages. Read through the comments on the story of the reversal on the NPR web site and you will find plenty of comments like this one: “‘World Vision has a yearly operating budget of about $1 billion.’ According to Charity Navigator, $174 million comes from government grants. We should put a stop to that nonsense. … Why should any government be supporting organizations that discriminate?” It’s a no-win situation for World Vision–but one of their own making.

Bottom line, I am thrilled that World Vision has acted swiftly to reverse their decision. They recognized that their vision was blurred and they applied the corrective lenses of Scripture. I am still troubled by the poor judgment that the initial decision reflects and I would personally think carefully and give prayerful consideration to supporting World Vision financially. But I would absolutely continue to find ways to support children in need around the world if that was what I felt the Lord leading me to do.