Say, starting from it’s original amount.
The only problem I see is it would increase vastly the political pressure to alter the Cost of Living index – either keeping it down if the powers that be want low wages, or more likely despite the power of corporations, pressure to make it artificially high to increase wages.
This in turn would wreak havoc on other things that are linked to the Cost of Living, although some of them such as Inflation Indexed Savings Bonds do have provisions to de-link if they feel the COLA has been politicized.
However, if it gets so bad that no one bases their COLA on whatever index the government uses, it’s back to the same old situation of ad hoc increases since the COLA becomes entirely worthless!
A “dollar” really doesn’t have a precise definition - which benefits those holding large amounts of debt, as they get to pay off those debts with cheaper dollars. Unfortunately long term obligations, insurance policies and similar items are seriously impacted.
You mean you want to lower it to about $3.75 now? 
Seriously, though, I don’t think it would be that big a deal, provided the % of workers making the MW is low. If it gets too high (and I don’t know what “too high” is), you would probably get a feedback look creating inflation, since an increase in wages can lead to an increase in inflation.
You mean, index it to inflation? We adopted that in Florida in a referendum in 2005. Too soon to tell how its effects will differ from a non-indexed MW law.
Because it institutionalizes the ever-increasing damage such a policy produces:
Not to mention:
And…
Minimum wage is a wrong-headed, feel-good issue that does more damage than good. Systematically increasing it is not a good idea.
I’m no fan of the MW, but if we had to develop some kind of automatic increase, I’d do it this way. Pick two percentage points that define a range that we think is reasonable for the number of MW workers. Let’s say it’s 4% and 7%. When the MW hits 4%, we hike it a certain amount such that we will have 7% of hourly workers making the MW. Then, no more increases until it falls back to 4%.
We could try to hit a certain fixed %, but then we’d have to reduce the MW at times, and I don’t see that as politically feasible.
Not following. If 4% are currently earning the minimum wage, increasing it will lower that percentage, not raise it, correct? If you want to maximize the number of people earning the MW, lower it. Or did I misunderstand?
I’m assuming that some people making more than MW will now make MW once it’s raised. Everyone doesn’t get an automatic raise just because the MW goes up.
Look at the last graph in the link I gave in my first post. We’re at an historic low for % workers making MW.
But I’d much, much rather do this at the state level than at the federal level. There’s too much variability in CoL across this great nation.
It’s fine to let states fend for themselves, but the problem is that the progressive areas end up paying for the places like Missisipi, Alabama, and other states with brain dead economic policies. Big cities and liberal states that conservatives love to hate have thriving economies and end up paying more in federal taxes than they get back in benefits.
I was going to jump in with my strong views on the minimum wage until it registered that your primary concern was indexation.
That concern is meaningless unless you have a reasonable minimum wage to start with and are prepared to restrict labour to documented workers.
And, if you believe in government mandated entitlements, you might as well argue for and against all indexation.
It’s tough to make comparisons between “then and now” - for example in the 1960’s, the minimum wage only applied to skilled workers - not everybody la-de-da-di. Hardly anyone is actually paid minimum wage, most make considerably more (at least on a percentage basis) and are awarded further wage increase when skills and longetivity increase.
It’s the political equivalent of spam, I suppose - and any increased costs won’t be borne by the employer but rather consumers and/or taxpayers.
If they are true liberals, that shouldn’t be a problem at all now should it? Mississippi, Alabama, and others have issues that the Connecticuts of the country don’t and they aren’t all self-induced at least not within the last generation or two. The population demographics are skewed in ways that no state has fully overcome let alone in the amount that they have to address.
I think you hit on something. The minimum wage has been a political football for one party or the other from the start. For the last 5 years it seems to have been the political football of Democrats.
If you index MW, you remove that football from the political arena.
Then don’t pay. It was the “progressives” who set up that type of system in the first place. I have a problem with that type of circular argument. First you come in and say we have to federalize services, then you say we have federalize taxes to pay for the federalized services. No thanks.
But I dispute your claim that progressive states are rich and non-progressive states are poor, if there even is a way to define “progressive states” and “non-progressive states”. If we could turn Lousisiana into an industrial powerhouse by simply raising the MW, I think that would’ve been done by now. More likely you’re mixing cause and effect. Certain states raise the MW because they can-- they’re rich enough that it doesn’t affect the economy much to do it. They didn’t become rich because they had a high MW.
Alternatively, Dan, can you tell us how much less taxes the “progressive states” will have to pay to the “non-progressive” states for each $.50 incrimental raise in the MW in the latter? If not, then I think your objection is one more of policy than of economics.
If only economics were more science and less art then we could have factual answers to questions like the OP. I can see the downside to the MW as well as the upside, but I think you are right that I favor it as much for policy reasons as economic.
One thing I will say for it is that, as welfare systems go, it has very little if any administrative costs. But I think it probably would hurt the economy significantly if it were raised to a level where it could be an effective welfare system. It would be effective for those people who still had jobs, but a disaster for those who lost theirs. As I’ve said in other threads, I favor the EITC as an alternative to the MW, and that should be indexed to inflation.
The proposed MW increase by the current Congress sets it back up to about where it was historically, on the average. Shouldn’t make that much difference in terms of performance of the economy as a whole. Indexing it to inflation without any other control would be risky, though.
The problem with a federal minimum wage is precisely that it levels the playing field. This eliminates comparative advantage in labor at the low end. If a depressed state like Arkansas can’t support a $7/hr minimum wage, then people won’t find jobs. Or conversely, a state might offer a lower minimum wage to attract investment and create job opportunity for people who would be otherwise unemployable.
Notice that the current minimum wage hike exempts American Samoa, for precisely this reason. The economy there simply can’t support a minimum wage of $7.15/hr. Of course, it helps that American Samoa’s main employer, the Del Monte corporation, has its headquarters in Nany Pelosi’s home district. I wonder how many other regions that will also have a hard time supporting it are out of luck because they don’t have a powerful Democrat behind them?
Arkansas is actually at $6.25 already. Bad choice. 
There aren’t that many left at $5.15. Although I agree with you in principle, Sam, the current increase is small enough that it won’t likely matter. Many of the states at $5.15 aren’t the poorer states: Texas, South Carolina, Utah, Indiana, Virginia. One might make a case for Louisiana and Mississippi, though.
American Samoa has gnerally not been subject to the federal MW, so I doubt Pelosi had anything to do with that this time around. According to wikipedia:
You gotta fact check on some of those righty blogs, Sam. 