Why isn't minimum wage linked to inflation like salaries are?

[oshunluvr]

This question has occurred to me on more than one occasion and recently. I feel we have a rather wide spectrum of individuals here, so why not ask it here?

My income sources, a pension and a salary, have automatic, annual increases based on the CPI (consumer price index) or COLA (cost of living).

So how come the Federally mandated minimum wage isn't adjusted - automatically and without debate - just like CSRS/FERS, SSI, Social Security Benefits, etc. In fact, I've never read or heard anyone else asking this question. It seems like a basic need. The value of minimum wage adjusted for inflation has declined most years for the last 50. Adjusted to 2015, in 1968 Federal minimum wage was $10.68. Now it's $7.25. In 1975 as a dishwasher at Sambo's (anyone remember those?) my hourly went up to $2.10. The 2017 equivalent amount is $9.53.

It's even worse here in NC where a waitress makes $2.13 an hour because employers are allowed to factor tips into their salaries. Despicable. That means I am paying the workers' salaries while their bosses collect the profits. One restaurant I know of in New York (with the same $2.13 rule) pays it's staff salaries and benefits and doesn’t permit them to receive tips. Apparently, if you leave a tip there, the restaurant keeps it, not the employee. AFAIK, the USA is the only country where the customers are required to pay the salaries of restaurant employees.

[GreyGeek]

Social Security has not had a COLA adjustment in the last four years. And, the last one amounted to less than 1%.

[vinnywright]

that is a vary good question !

but not all salaries are linked/raised with inflation either .

remember one of the largest expenditures for any business is payroll and material,,,,,,so keeping our salaries down is good for the employer .

and in a climate where business has a LARGE sway over such decisions ,,,,,,,,,,well you see where I am going .

I had a good laugh with a fella at work just after twitler/trump got elected ,,,,,,,,,,, he said to me , well we should be getting some raises now! ,,,, My eyebrow raises and and I turn my head ,,,,, paws for a second and ask , how ya figure ?

He said , well duhu man trump's a business man and is going to make our businesses strong again,,,,,,,,,,,,,,,,,,,,,,,and I say,,,and so,,,,,,,,,,well then they will have more money to give us raises he said ,,,,,,,,,,,,,,,,,, I couldn't help it , I bust ought laughing ,,,,,,,,,,,, then say ,,,,,well yes yes he may ,,,,,,,,and do you think that just because the business is doing better they will have some incentive to give you some of it ,,,,,in fact he may lift restrictions of all sorts on them to the point if you even ask for a raise they will feel comfortable telling you if you don't like what your getting go somewhere else...and that somewhere else will start you ,,,,,,,,at minimum wage $7.50 and it took you a year and a half to get the $8.50 your getting now .

I kid him every other week or so ,,,saying as I walk by ,,,,,,,"get that raise yet"

I am not kidding about the wages at the plant I work at ,,,,,,,,,I see it every day , new temps coming in and getting worked for over a year at $7.50 and then get tossed a quarter or they go elsewhere to try their luck

I get just over $10.00 ,,,,,after 5 years of working like I owned stock in the business and a lot of heated discussions with the higher ups,,,,,,,,now granted most temps that come in wont work like their making more (so showing they should receive it) but still they should get something just for being their every day for that long .

VINNY

[Bings]

Increasing everyone's wages increases inflation, so continually adjusting wages with inflation will result in a permanent cycle where everything rises in price and the currency will devalue. This will make importing things more expensive, which will also further add to inflation.

[oshunluvr]

Hate to argue GG, but from the Social Security web sight:

Automatic Cost-Of-Living Adjustments received since 1975

July 1975 -- 8.0% July 1976 -- 6.4% July 1977 -- 5.9% July 1978 -- 6.5% July 1979 -- 9.9% July 1980 -- 14.3% July 1981 -- 11.2% July 1982 -- 7.4% January 1984 -- 3.5% January 1985 -- 3.5% January 1986 -- 3.1% January 1987 -- 1.3% January 1988 -- 4.2% January 1989 -- 4.0% January 1990 -- 4.7% January 1991 -- 5.4% January 1992 -- 3.7% January 1993 -- 3.0% January 1994 -- 2.6% January 1995 -- 2.8% January 1996 -- 2.6%

January 1997 -- 2.9% January 1998 -- 2.1% January 1999 -- 1.3% January 2000 -- 2.5%(1) January 2001 -- 3.5% January 2002 -- 2.6% January 2003 -- 1.4% January 2004 -- 2.1% January 2005 -- 2.7% January 2006 -- 4.1% January 2007 -- 3.3% January 2008 -- 2.3% January 2009 -- 5.8% January 2010 -- 0.0% January 2011 -- 0.0% January 2012 -- 3.6% January 2013 -- 1.7% January 2014 -- 1.5% January 2015 -- 1.7% January 2016 -- 0.0% January 2017 -- 0.3%

So last year zero and a few others - also when the inflation rate was zero or nearly so. Interestingly, if you apply the above increases to minimum wage from 1975 - $2.10 - you get to $8.20 for this year. We're currently at $7.25. $0.95 is not as large an increase as many people are calling for. A jump as large as Seattle's (eventually to $15) would not be a good idea I imagine.

Another interesting comment I read; for the most part, raising minimum wage has little, if any, long term effect on businesses or the employment rate so there's really no reason not to tie COLA to minimum wage. At least then, the business owners would know it's coming and be better prepared than if we suddenly jack it to $12-15 like some are calling for. If they did that, I suspect many businesses would have to cut wages on the top earners to keep the lower end employed. Let's not forget we're talking about those at the bottom of the pay scale. There aren't many folks in that range that would do anything with that money other than spend it. More money being spent is good for business.

Vinny, IMO part of the problem of how your company runs things is eventually they have only bad employees. Over the long term, those employees that stay for the extra quarter are the ones who are unable to get a better paying job. They would likely do better in the employment department if they tried to keep the "cream of the crop" by paying more to those who deserve it. Obviously, there are reasons other than money people may keep a job - good working conditions, location, enjoyment of the job, etc.

You would think that if salaries are such a concern they CEOs would lower their own salaries - LOL- yeah right, like that's going to happen.

[GreyGeek]

.... In 1975 as a dishwasher at Sambo's (anyone remember those?) my hourly went up to $2.10. The 2017 equivalent amount is $9.53.

In 1960 I was working at Samsonite in Denver, loading luggage boxes into railway cars, for $1.28/hr. After room, board and other expenses I usually had around $2.50/wk spending money burning a hole in my pocket! It didn't take too many nights bar hopping to realize that drinking was a waste of money. That realization also applied to cigarettes as well, and fortunately I never got addicted to either vice. TV's were too expensive, so I'd just go jogging and view the parks and people. In bad weather I'd go to the public library, a very inexpensive place to visit, besides being educational and entertaining! The library is still one of my favorite places to visit, and the Internet is the biggest library on the planet!

[SpecialEd]

>>>>>> In bad weather I'd go to the public library, a very inexpensive place to visit, besides being educational and entertaining! The library is still one of my favorite places to visit, and the Internet is the biggest library on the planet!

Back in 1988, I was working for one of the big Credit Card banks here in Delaware and on one "fun" day they were doing a sort of scavenger hunt and awarding gift certificates to people who could produce a memo more than five years old, etc. One challenge was "The first person to bring us a library card gets dinner at such and such a place." Out of a department of about 30 people I was the only one who had a library card. I always thought that was sad.

[GreyGeek]

... Out of a department of about 30 people I was the only one who had a library card. I always thought that was sad.

Sad but typical.

Equally sad is the sad shape of many libraries, especially in the science, math and technical departments. The books are old and outdated. The most recent Linux books in the library near to me are nine years old and older. Technical books suffer as well. That's why most of my "library research" takes place on line.

Besides the Library my son and I would hang out in the science & computer sections at the major books sellers, like Barns & Nobel. But now it is as bad at the major book stores as it is at the libraries. In the early and mid 2000's our Barnes and Nobel had 30 feet of shelving 3 rows deep of computer related books and at least 1/5th of it was Open Source and Linux. Today our B&N has maybe 5 feet and its mostly Win10 and Office, with a little Mac. So they've driven me to the web stores.

[GreyGeek]

Hate to argue GG, but from the Social Security web sight:
.....

It matters little to me what the Gov posts on their web site, because they invented tricky accounting. For the last FOUR years the monthly amount they deposit to my bank account has NOT changed one penny. Neither has my wife's. The "gross" amount has changed but the insurance deduction miraculously takes up all the increase every year. Funny how that works out. The big print may give us very modest annual increases but the small print takes it all away. The net effect is that while food and other expenses have gone up double digits percentage wise, our Soc Sec income has not. IF we lived on SS alone we would be in a world of financial hurt right now. There are lots of people who are getting SS but didn't or weren't able to save regularly and don't have savings or annuities to draw from. Food and living expenses continue to rise rapidly but, as I said, the in-our-bank SS deposit hasn't changed in FOUR years. The 2012 increase added a little but there has been no increase in take-home since then. Other retirees in our circle of friends have made the same observation.

EDIT: Just got the SSI notice of our SS income for next year - less than $50, BUT insurance won’t eat it this year. However, our monthly electric bill rose $33/mo.

[oshunluvr]

It matters little to me what the Gov posts on their web site, because they invented tricky accounting. For the last FOUR years the monthly amount they deposit to my bank account has NOT changed one penny. Neither has my wife's. The "gross" amount has changed but the insurance deduction miraculously takes up all the increase every year. Funny how that works out. The big print may give us very modest annual increases but the small print takes it all away. The net effect is that while food and other expenses have gone up double digits percentage wise, our Soc Sec income has not. IF we lived on SS alone we would be in a world of financial hurt right now. There are lots of people who are getting SS but didn't or weren't able to save regularly and don't have savings or annuities to draw from. Food and living expenses continue to rise rapidly but, as I said, the in-our-bank SS deposit hasn't changed in FOUR years. The 2012 increase added a little but there has been no increase in take-home since then. Other retirees in our circle of friends have made the same observation.

Can't argue with you there. My insurance has risen enough to more than consume my raises..

[TWPonKubuntu]

With tongue firmly planted in cheek: Because the printing presses at the Federal Reserve are already maxed out...

Yeah, I know it is now done electronically and not by printing of physical notes. Still, this game is self defeating and looks to end badly, soon...

Got commodities, in your physical possession?

[Qqmike]

We can analyze social security increases until we are silly. And I understand about the formula they use vs COLA vs various inflation indexes. However, as anyone retired and receiving monthly soc sec checks will tell you, the fact plainly is, that the soc sec increases do not begin to cover the very real increases in most retirees actual and necessary expenses. And I'm not talking about luxury items. I mean s&it like utility bills, cost of certain food items, health care costs (like increased premiums and increased co-pays), certain basic clothing items, Bounty paper towels, plumbing repairs (labor), and this list goes on and on. Can't and shouldn't expect gov't to pay for everything. But their 2% increase this year--itself long overdue--is a joke versus actual out-of-pocket cash costs for increased monthly living expenses. And many, many people ARE relying totally on Social Security for many reasons. One reason is the bust of the 2006-ish recession. I personally was hit (sole proprietorship); and I know several people who were hit real hard and never recovered (e.g., feeding cash to their slipping businesses before they were able to let go and bail [into bankruptcy]).

All in all, something just ain't right.

In fact, something stinks and stinks real damned bad.

[TWPonKubuntu]

I used to live in the Bay area of California. My office space (15-20 years ago) cost $375 / mo. I'm told that it now costs $600/mo. The apartment where I first lived ($800/mo.) is now $1200/mo. I would be homeless now, if I were still in California. I do not make even half what it would cost to live there now and my SS check would be toast before I got to the need for food.

Yes, those are California prices, which are, I think, higher than most of the rest of the US, but I'd bet many across the country are feeling the bite of higher cost of living. It is not that goods are more valuable, but that the currency is less valuable...

I don't think I could live on what I can make from programming these days. Fortunately I have other skills which pay marginally better.

With respect to the OP's question, minimum wage is still paid in fiat currency and any increase merely causes the producers and manufacturers to raise prices to compensate. A vicious circle...

[Snowhog]

I’ll say it, and it will anger some (but my saying it isn’t intended to anger; just to inform), but Social Security was never intended to be ones ‘living income’ once they finished [re: retired] working. It was always intended to be a ‘supplement’ to ones retirement plan, what ever that consisted of. Yes, I understand that many; very many; people who contributed into and whos employers contributed into Social Security rely solely on that income. I feel deeply for those in that circumstance, but (and again, this will anger some) they didn’t plan for their retirement as they should have during their working career.

I place much of the blame however, on Government, as it is they (Government, and by that I mean the elected elite) who have steadily established and encouraged the ‘entitelment mentality’ that has made so many Americans dependent on Government programs; programs that Government then doesn’t fully fund (based on the demand they themselves created!). Yes, a visious cycle.

Now all that said, I am one of those who didn’t fully and sufficiently plan for my retirement. I did plan, and I did contribute to the plan my employer had, but I did so not soon enough and not deeply enough. Add to that the fact that I ended up retiring early (at age 58), my monthly income is not sufficient for me to live by myself, unless it were in near poverty. For sure I wouldn’t ‘enjoy’ retirement, and I would have to make very hard choices. I am blessed to be living with my sister and her husband here in Minnesota. We are all retired. They both planned for their retirements “well”, and as a result, their combined incomes are very generous. The house we three are living in, they paid for ‘in cash’, so no mortgage. Cost of living here is considerably lower than Alaska (where we all three retired from), and that has a significant impact on overall expenses. So, with my living arrangement, my income is ‘sufficient’ for me to live a reasonably comfortable lifestyle. I still have to watch my spending, and money is something that I will and do have to think about.

[TWPonKubuntu]

Snowhog, yes, SS was sold as a "suppliment" to ones retirement income...

Let me point out to those who either are still to young to be drawing SS "benefits" and to those who expect to keep working after "retirement age". Your "benefit" is subject to garnishment and/or reduction if you make too much money... I ran into this when I took a lucrative contract job as an outside contractor. Not only did they drop my SS benefit, but they took back payments for the three months in which I "made too much"...

Hence, I now try to avoid any work which might push me over that income limits. Due to the temporary nature of independent contracting, I would spend far too much time wrangling with the SS admin about my actual income. They DO NOT like to keep changing my account status because my contract was completed and my non-SS income changed...

Much as I hate living in this artificial "paradise" of government supported retirement, I recognize that my real, working income will not remain stable for the rest of my life. It sucks, to politely say the least.

Snowhog, like you, my retirement plans fall well below reality and the failing US dollar is just one part of that problem.

Can you say "dumpster diving for fun and profit"? I need to go sell my bag of aluminum cans now, back later.