If the average starting wage and the national minimum wage are both less than the cost of living, is an economy diseased?
What do you mean by “diseased” in this context?
I think its fairly obvious - why do you need to ask?
It’s not in the least bit obvious. “minimum wage” is a number. “starting wage” is a number". “cost of living” is a number. “less than” is a mathematical comparison.
“diseased economy” has no mathematical, financial, logical, or even dictionary definition. It might as well have been a line from a poem.
I wouldn’t get too hung up on that. There’s a generalized sense of what consititutes a “healthy” economy. We can argue about the fine points, sure, but I think the gist of the question is “Is the situation described sustainable, or are these conditions that will lead to recession?”
The question doesn’t contain enough terms to be answered meaningfully, though – we need a few more data points.
What percentage of the population relies on minimum-wage jobs? How long do people stay at “starting wages” before their income increases significantly?
Dependant on these additional points, an economy as described in the OP can either be booming or heading down the toilet.
In the past 20 years has this at any time never been the case?
In the 1950’s (for those of us who remember – in my case it must have been from a past life 
) it was possible for a family to live on one income. Starting in about the mid 1970’s it became more and more necessary to have a two-income family, whether from two people working or from one person working two jobs.
And we wonder why our kids are getting into dangerous drugs (like ice), pre-teen sex, gangs, criminal activity and why our social system is going down the tubes.
Nobody is home.
Though we have a seemingly high standard of living (i.e., we have lots of “stuff”), there are signs that our economy is suffering terribly.
A family could live on one income; but, they’d be stuck living like a family on one income. That’s not the sign of a sick economy, it’s a sign that people are willing to sacrafice for higher income and the benefits it brings.
I don’t know that those statements are true; however, they’re not really that meaningful by themselves. For example, most minimum-wage workers, IIRC, are teens picking up extra cash. That statistic is not such an alarming one in that context. Similarly, what does “average starting wage” include?
We need quite a bit more information before we can make any meaningful statements on the health of the economy.
Also to note is the fact that if these facts represent a necessary adjustment, then they are a signs of good health. If you see me wheezing on the floor gasping for breath, that fact by itself is not indicative of much at all. If you step back and see me in the dojo, then you can determine that I’m exercising, which is a good thing; but, if you step back and see me in a supermarket, then you probably should call 911.
An example of this may be so-called “outsourcing.” Software firms are going to India to find good employees at good prices. If this is because domestic software workers aren’t plentiful enough, or aren’t efficient enough, then this is a sign of a necessary adjustment; however, if it is because of a wide-spread failure of U.S. education, then it is a sign of a real problem.
Let me just say the most of the increases in the cost of living, at least in the State where I live, have been due to the increase in property values and the increase in the services people consider indispensible. (E.g., thirty years ago, nobody spent money on internet access or a cellular telephone plan, and few people considered cable TV to be worth it.)
No, unless you are living in perpetual debt, your wage will always be above your cost of living. I think what you are trying to figure out is what is a reasonable standard of living and what % of people earn enough to live at or near that level or above.
Because it does not make sense in the context of what people look at when they examine the health of the economy.
Yes, there is a lot of tongue-wagging and hand-wringing in statistical circles when it comes to using, defining and measuring such a useless term as “cost-of-living”. By cost-of-living, we certainly do not mean the cost to maintain the standard of living that was most prevalent 50 years ago.
For myself, personally, I would consider a definition of poverty as roughly: no air conditioning, tacos, booze or internet access (roughly in order of importance).
Others certainly have a different point of view.
What right does anyone have to have it all? Even if you don’t, this has been making the rounds lately.
From the AFL-CIO:
“One reason for such poverty and need among workers is the eroded value of the minimum wage. In the past, the minimum wage provided enough income to lift a family of three out of poverty. During the 1960s and 1970s, the poverty level for a family of three was roughly equal to the yearly earnings of a full-time, year-round worker earning the minimum wage. The minimum wage, however, remained unchanged at $3.35 an hour from 1981 until April 1990, and thus minimum wage earnings slipped significantly below the poverty level. Recent increases have not restored all the lost value. To reach the poverty level for a family of three in 2001 ($14,129), a full-time, year-round worker would need to earn $6.80 an hour—$1.65 more than the current minimum wage.”
Also:
“A 2001 U.S. Conference of Mayors study found that 37 percent of adults seeking emergency food aid were employed. Officials in 63 percent of the cities surveyed identified low-paying jobs as a primary cause of hunger.”
Teen jobs? (And don’t forget that you can be the primary breadwinner for yourself and your family [which may include an infirm parent or two], legally, as young as 16):
“Opponents frequently argue that the minimum wage is poorly targeted, helping primarily teenagers and middle-income families who don’t need it. Not true. While the minimum wage is not perfectly targeted, it is one of the best policy tools available to lift low-income families out of poverty. Of those who directly benefited from the 1996-97 increase, 70 percent were adults (20 and older).”
As far as this connects to the OP, unfortunately, it doesn’t. “The economy” as generally reported in the news and especially business news is defined by a set of statistics which have nothing to do with human suffering, and which unsurprisingly will even report a downward pressure on wages as good news. As a wise man once siad, freedom of the press belongs to the man who owns one.
Is this then the condition that most economies are in?
Is it something we have to live with?
In Glasgow, Scotland where i’m from, property prices sure are to blame, although maybe not 100%. There is just a complete drought of affordable housing, and the minimum wage is too low.
You are getting more and more people doing heavy overtime, and taking 2 jobs just to make ends meet. Its virtually inconceivable to think about actually buying a house outright, yet we come to accept this as though its unchangeable. All the time banks and landlords are benefitting of course.
The local council should in theory here have a policy to deal with the problem - but all they are concerned with is appearance. They want the city to look good for tourists and have spent disproportionate sums on various schemes to improve its image. They pushed a law through the Scottish parliament called the “Anti-Social behaviour bill” that essentially allows them to remove and detain anyone who they believe is acting in an “anti-social” way. This way they can simply sweep the streets clean so the tourists don’t have to look at the homeless and destitute. There are all sorts of superficial adjustments costing the council millions, while the real problems go un-adressed. To top it all off they sold the entire stock of council housing, which was the only really affordable housing in the city to a private firm.
If I was a Hindu I would definitely say the age of Kali is here - the corruption, or just blindness seems to be steadily increasing.
Well thats the rant over. Anyone elses economy as bad as that?
Och!!
I wouldn’t say property prices (or prices of any other good or service) is to “blame”. Prices are generally a symptom, not a cause. Without knowing anything else about the situation, the most obvious cause would be a shortage of ownable housing (ie non-rental properties) relative to the local demand.
We have a similar problem in New York City. If you want to own a place in Manhattan, you better have at least half a million or more for a studio.
A common problem that develops with tourist destinations is a disparity of income that develops between the locals and the summer/winter folk, effectively creating two economies - one for the visting tourists and summer shares and another for the people who work there.
I guess no one else fails to see that high property prices means that there’s a lot of demand, i.e., that they’re affordable despite the price. If no one could afford these properties, they’d cost less quite plainly.
A new development is going up behind my house, with prices “starting at [a ridiculously high amount].” I ask myself who would pay such a quantity for a house that’s smaller than mine and a lot just a couple of inches larger than the house. There are 70 or houses going up, and they’ll probably go quick despite the price, so it’s obvious there is demand, even though I fail to understand it. At least my value ought to skyrocket as a result, making my property less affordable to even myself had I to buy it next year.
Additionally, in areas where there’s high concentrations of minimum wage jobs, there are higher concentrations of “affordable” housing. When neighborhoods start losing their middle class, properties devalue, so that the less than middle class can then afford them. Okay, the become slums at some point, but they never started out that way.
Sorry, Scarf, didn’t realize you weren’t posting from the US…
According to this page, UK minimum wage for 16-17 year olds is US$5.43, which is 28 cents more than ours/hr.
For 18-21 year olds it’s $7.42, which is 42 cents more an hour than John Kerry’s best offer for American adults 3 years from now, with the Republicans blanching even at that.
Above 21? In the UK you’re legally paid $8.78/hr, or more than $3.50 more per hr than an American, which is $122 more/week, or $488 more/month. That’s rent (usually the largest budget item for families) for the month in a lot of poor America.
Five states appear to have minimum wage laws which set the bar higher than the federal minimum, the most generous being Washington at $7.16 (edging Alaska by a penny). Kansas will pay as little as $2.65 for employment not covered by the Federal Fair Labor Standards Act (farms?). For the same in Ohio, apparently the less money your employer makes during the year, the less your labor is worth 
:mad: As little as $2.80/hr.
I’d say things are pretty bad for many people all around. Depending upon cost of living in the UK and taxation at the bottom of the pay scale you could debate where/who is comparable I suppose.
Another point is that the minimum wage is an hourly figure, while any reasonable standard for cost of living should be a yearly figure or the equivalent. So how many hours a year should it be considered acceptable to work?
Crandolph:
Very interesting, but maybe the cost of living is also a lot different. Only as a ratio would that be a good indicator of the health of the economy in that respect.
As Chronos points out that would only work if it was a yearly figure (though i’m not sure I agree).
I can see something like (average cost of living per year) / (minimum wage) as being a meaningful indicator.
If you work full time at mininum wage in the US, you’re still below the poverty level. And the poverty level is still determined here by an equation that counts food higher than rent, even though rent surpassed food as an expense in American society decades ago.
Of course Americans also have to pay for health care (more per capita than anyone else on Earth) and college, etc. If you’re going to college.
But hey, gas is cheaper. :rolleyes: If you can afford a car I guess that makes everything all better…
So if I live in a cold climate, don’t like Mexican food, don’t drink, and live prior to 1992 or so, I’m in poverty? :eek: