August 12, 2009

How minimum wage increases really work

What really happens to low-income people when the minimum wage is increased? Well, my son has worked at Starbucks for more than four years. When he started out, the minimum wage was $5.15. A price that was set in 1997. He's a good worker so he managed over time to get a raise and was making $6.25 an hour in 2007 when the minimum wage was increased to $5.85. Starbucks couldn't afford the increase, so everyone making over $5.85 received a decrease back to the current minimum wage. So my son lost $0.40 an hour in 2007.

But, as I said, he is a fine barista and he eventually climbed back up and was making $7.00 an hour in 2008 when the minimum wage was moved again, up to $6.55 an hour. Of course, you guessed it, Starbucks had to reduce the higher wages to fund the minimum wage increase again... so once again my son lost $0.45 an hour in 2008.

Does the story end, no... it repeats... just this July our wonderful, caring representatives in Congress increased the minimum wage to $7.25 an hour which caused my son to lose another $0.30 an hour as he was once again reduced to minimum wage. Add to this continual disincentive the fact that Starbucks 1) reduces its workforce more and more due to the higher cost of labor (making those who remain work all the harder for their reduced wages) and 2) increases the cost of their drinks to fund the labor increases but lose customers which results in fewer workers -- you can see that not all low wage workers look forward to minimum wage increases.

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