Senate rejects minimun wage hike

[Roger1]

Rich Senators Defeat Minimum-Wage Hike

Congressional Pay Rises While Minimum Stays Same

Helen Thomas, Hearst White House columnist
U.S. senators -- who draw salaries of $162,100 a year and enjoy a raft of perks -- have rejected a minimum wage hike from $5.15 an hour to $6.25 for blue-collar workers.
Can you believe it?
The proposed increase was sponsored by Sen. Edward Kennedy, D-Mass., and turned down in the Senate by a vote of 51 against the boost and 49 in favor. Under a Senate agreement, it needed 60 votes to pass.
All the Democrats voted for the wage boost. All the negative votes were cast by Republicans.
Four Republicans voted for it. Three of the four are running for reelection and were probably worried about how voters would react if they knew that their well-heeled senators had turned down a pittance of an increase in the salaries of the lowest paid workers in the country.
The minimum wage was last increased in 1997.
Kennedy called the vote "absolutely unconscionable."



More: http://www.wesh.com/helenthomas/5183628/detail.html

[iGary]

Rich Senators Defeat Minimum-Wage Hike

Congressional Pay Rises While Minimum Stays Same

Helen Thomas, Hearst White House columnist
U.S. senators -- who draw salaries of $162,100 a year and enjoy a raft of perks -- have rejected a minimum wage hike from $5.15 an hour to $6.25 for blue-collar workers.
Can you believe it?
The proposed increase was sponsored by Sen. Edward Kennedy, D-Mass., and turned down in the Senate by a vote of 51 against the boost and 49 in favor. Under a Senate agreement, it needed 60 votes to pass.
All the Democrats voted for the wage boost. All the negative votes were cast by Republicans.
Four Republicans voted for it. Three of the four are running for reelection and were probably worried about how voters would react if they knew that their well-heeled senators had turned down a pittance of an increase in the salaries of the lowest paid workers in the country.
The minimum wage was last increased in 1997.
Kennedy called the vote "absolutely unconscionable."



More: http://www.wesh.com/helenthomas/5183628/detail.html

Meh.

Ask Helen Thomas how much she is worth.

[eva01]

keep trying Ted, this is why MA > Rest of Country in jobs in my opinion, minimum wage i believe is 6.75 and i have not been in a job since i was 16 (?) that only paid me minimum wage. And that job gave me a 50 cent pay raise in 4 months.

[bousozoku]

keep trying Ted, this is why MA > Rest of Country in jobs in my opinion, minimum wage i believe is 6.75 and i have not been in a job since i was 16 (?) that only paid me minimum wage. And that job gave me a 50 cent pay raise in 4 months.

Floriduh also has their own law regarding minimum wage so that it's higher than the federal law.

It's sad that these people get so much that they don't understand how it is to struggle. In this age of high speed communications, they should probably all be in their own states, answering to their constituents on a daily basis, and voting and extolling each other's virtues over the internet, maybe with the new iMacs. Missed votes should be deducted from their salary.

There is no reason for them to maintain a second home or waste fuel commuting to D.C. anymore. They need to work like anyone else.

[kuyu]

Hey guys, just browsing this morning and this one caught my eye. I can tell you why the Rep's voted this thing down, but you must promise to treat my explanation as such. That is, explanation and justification are NOT the same thing. I'm not making a case for the other side, just giving the reasoning. So please, no flames.

I work at a pizza place. We are a fairly profitable venture but no one is buying any yachts with the profits, if you know what I mean. Our two greatest expenses are food cost and wages. We use a Linux database that's updated realtime to monitor wage costs relative to sales. The target is about $44/person/hour. If this number hits $35 then there are people just standing around.

Now, if minimum wage were to suddenly be $10/hour my employer would be in quite a pickle. They would suddenly have two options. One, they cut back the labor force by firing some of us or scheduling fewer of us for a shift. In this scenario, those of us who are at work will have to do the job of two people. And the service would surely suffer for it. The other option is to raise the price of the food and maintain the same workforce. This is good for us, but what good is all that extra money if stuff costs more?

Odds are, they would use a mix of the two. Prices would rise and the workforce would be cutback to cover the new costs. That or they just maintain the prices, the workforce, and go out of business. Basically, the average worker is screwed either way.

Generally, unemployment and inflation are negatively coorelated. But as the example above shows, creating an artificial wage floor actually increases both unemployment and inflation. If this is allowed to happen we could get stagflation, which is a very bad thing. Not to mention the huge advantage for outsourcing this presents.

So you see, it's not the $1 something an hour the republicans are opposed to. It's unemployment and inflation. They see increases in minimum wage as a sort of 'slippery slope'. There is some research to support the idea that with no minimum wage, the average low-skill laborer would earn more like $7/hour. But, the current laws allow owners to pay them some arbitrary wage instead of paying them what they're worth.

Now, I know that the elected democrats with Ivy league educations know this to be true. This begs the question, what is their motivation? Is it to actually help the little guy (which it won't, in the long term) or to help themselves get re-elected (which it will, in the long term). See, they're using the low skilled workers economic ignorance as a political tool.

That being said, someone earning $5.50/hour is in poverty. It's not enough money to pay for rent, food, etc. But, raising the minimum wage is NOT the way to help such people. It does more harm than good. It's a great campaign slogan, but not a great solution.

It's a complex problem and I suspect it requires a complex solution. Tax benefits, education, social services, daycares, and after school activities can all play a part. We can all agree what the endgame is though. Poverty has no place in a nation as wealthy as this one. I don't know what the answer is, but I know what the answer isn't.

To be fair, at least the democrats are feigning interest, which is more than the republicans are doing.

Hope this was informative.:)

[PlaceofDis]

yeah but they aren't talking a HUGE shift like you mention (5.15 to 10) which surely would cause problems. raising it the dollar or should could easily be absorbed by most any business with slight price adjustments and minimal hour cuts if any needed

[IJ Reilly]

What's more, the wage increases would apply equally to every other pizza place in town, and so results in no competitive disadvantage to any one of them.

Many (most?) states set their own minimum wages higher than the federal minimum wage, so this battle takes on mainly a symbolic quality. But as symbols go, it's a potent one. I hope the voters will remember which senators voted for huge transfers of public funds to a variety of industries over the past few years but denied even a dollar an hour to people on the lowest rungs of the economic ladder.

[watcher2001]

Hey guys, just browsing this morning and this one caught my eye. I can tell you why the Rep's voted this thing down, but you must promise to treat my explanation as such. That is, explanation and justification are NOT the same thing. I'm not making a case for the other side, just giving the reasoning. So please, no flames.



I am so glad to see there is someone else out there that understands economics. While I have not worked for minimum wage in many many years I do feel for the people that do. I agree that we need to help the poor but giving them an extra dollar an hour is not going to help anyone at all. What we need to do is push that money into education programs so that they can learn skills for better jobs. then we can leave the minimum wage jobs to the teenagers who can live on minimum wage while they live at home.

[eva01]

I am so glad to see there is someone else out there that understands economics. While I have not worked for minimum wage in many many years I do feel for the people that do. I agree that we need to help the poor but giving them an extra dollar an hour is not going to help anyone at all. What we need to do is push that money into education programs so that they can learn skills for better jobs. then we can leave the minimum wage jobs to the teenagers who can live on minimum wage while they live at home.

and what about the immigrants from hispanic countries that only have jobs at minimum wage? Where do we help them out since they really aren't into education and need a higher wage.

There is ALWAYS going to be jobs that are minimum wage and people (read: not teenagers) are going to be doing the job. Do we just say "oh well" to them and not give them higher wage?

Happened at a restaurant i worked at with immigrants, they were being paid less than the rest of us that were non immigrants.

[IJ Reilly]

Of the economic arguments for and against the minimum wage, none seems to prevail over the others. Just so we're clear on this one: "understanding" economics does not lead inexorably to taking one position over another on the minimum wage. That is why this debate tends to reduce to political symbolism, which is fine as far as I'm concerned. Congress has taken so many actions over the past few years with no regard for their economic utility, all favoring the favored industries in the nation, that I think it is worth reopening the question of who our government serves. Is it the business of Congress to comfort the comfortable, or to help those who struggle to survive on the margins of our society? We just got a roll call in the Senate on this question, one most people can understand. We need more of them.

[zimv20]

kuyu -- after reading your explanation, i'd like to know why we need any minimum wage at all. is it economics or politics which demands it?

[kuyu]

Is it the business of Congress to comfort the comfortable, or to help those who struggle to survive on the margins of our society? We just got a roll call in the Senate on this question, one most people can understand. We need more of them.

Great writing IJ. The problem is that when mainstream America envisions the "marginal" of our society, they don't see a single mother of three working two jobs to survive. They see yesterdays Jerry Springer guest; a welfare opportunist who doesn't have the money for books, but can somehow afford a $35 bag of weed every other day.

I've been going to the 'projects' about twice a week for three years as a part of my job. 80% of the residents aren't there because they have to be. It's a choice they've made. I've witnessed a woman spend $30 dollars on food for her and the boyfriend, while her 3 kids sat on a bare floor eating raw hotdogs. I've seen 6-year old's walk to the dealers house to pickup Mom's drugs because she doesn't feel like going herself, only to go back because the sack was short. I've seen little kids hold the blunt while their parents pay for the food. I've seen children screamed at, hit, called stupid, and pushed down, all for attempting to talk to me.

Unfortunately cases like this aren't the objection, they're the norm. For every honest person who fell between the cracks, there are 10 freeloaders waiting to rape the systems goodwill. They don't care about you, me, or the rest of the hard working people in this world. They don't even care about eachother, let alone themselves. It sucks, but that's the real world.

The government should help these people, no doubt. But the current tactics aren't working. I wish I had the answer.:confused:

[kuyu]

kuyu -- after reading your explanation, i'd like to know why we need any minimum wage at all. is it economics or politics which demands it?

Politics. Mathematical economics shows that minimum wage is a drag on the economic welfare on those who earn such wages.

In a truly competitive system, the mantra would read "From each according his ability, to each according his ability." Instead we get "From each according his ability, to each according an arbitrary estimation of worth tailored to fit the lowest common denominator."

The guy who mops up crap and gets leaky trash juice all over him should make more than the cash register person. But instead they both make $5.15. Go figure...

[leekohler]

Politics. Mathematical economics shows that minimum wage is a drag on the economic welfare on those who earn such wages.

In a truly competitive system, the mantra would read "From each according his ability, to each according his ability." Instead we get "From each according his ability, to each according an arbitrary estimation of worth tailored to fit the lowest common denominator."

The guy who mops up crap and gets leaky trash juice all over him should make more than the cash register person. But instead they both make $5.15. Go figure...

Sorry but- being in corporate America I can tell you that you that people aren't paid what they're worth either- at least where I work. The only time people seem to get offered raises is when they threaten to quit, and by that time they've had enough and quit anyway.

For example, this year I worked tons of hours on salary to get new business for the company I work for. I actually stayed overnight to get one pitch done and we won that account. Guess what? Come raise time? No raise. You know what they told us? "Only the top third of performers are getting raises this year". My question was- "After all the weekends and nights I've spent in this place, I'm wondering what puts one in the top third? Do I need to make this my permanent address?" Turns out it was all BS and the only people who got raises were- three guesses! Upper management. And after doing some asking around, I've found this is becoming more and more common. Your mantra is, sadly, wishful thinking because it fails to take into account human nature. It's human nature to get away with what ever you can.

[Dont Hurt Me]

Billions of our tax dollars for a dreamed up war, Billions to oil companys in a record profit year but raise the minimum wage? Republicans have again showed their true colors. They are shafting every working American but they have been doing it for years, whats new? People take notice.

[leekohler]

Billions of our tax dollars for a dreamed up war, Billions to oil companys in a record profit year but raise the minimum wage? Republicans have again showed their true colors. They are shafting every working American but they have been doing it for years, whats new? People take notice.

I hope they do. After 12 years of Reagan and Bush, I thought people would get it, but no. Those who don't learn from history...

[kuyu]

I make just over minimum wage. I would have gotten a mandatory raise if this bill had passed.

$5.50 is better than getting fired or less hours.

[Chacala_Nayarit]

Alaska: 7.15, but most jobs in the low-end jobs start at 8.50.

Washington: 7.35, but going to 7.65 in 2006, and most low-end jobs start at 8-9.

It seems only the poorest states use the federal 5.15.

[zimv20]

minimum wages by state can be found here (http://www.dol.gov/esa/minwage/america.htm).

[Chacala_Nayarit]

Wow, some of those states should be ashamed of themselves. Example, how dare they pay 2.65 an hour in Kansas, with no over-time until 46 hours. :rolleyes:

Guess them folks ain't gonna be buyin' any of them there Mac computers anytime soon, ya reckon?

This is why it's important to go to college. Even if it's only a two-degree from a community college, it's better than nothing. :eek:

[Chacala_Nayarit]

I make just over minimum wage. I would have gotten a mandatory raise if this bill had passed.

$5.50 is better than getting fired or less hours.


I package frozen fish, and sometimes pull guts when the freezer is down, and average 10.00 an hour. The base pay last year was 7.40 an hour, but I worked like 112 hour weeks, sometimes less. I would sign for my hours and have like 60+ hours of over-time a week. The average was about 10.00 and hour for the whole 6 months. Some months I cleared 3,700.00.

The wages are going up next season, to at least 7.65 (plus over-time, room and board). Oh yeah, the only expenses on the boat are personal stuff like smokes for 35.00 a carton, toiletries, et cetera, from the ship store (tax free). There is always food and three buffet-style meals a day, all you can eat.

The boat leaves Seattle in Febuarary and returns in late August. Most of the crew will not return, and speaking Spanish helps. :)

http://snopacproducts.com

[IJ Reilly]

Great writing IJ. The problem is that when mainstream America envisions the "marginal" of our society, they don't see a single mother of three working two jobs to survive. They see yesterdays Jerry Springer guest; a welfare opportunist who doesn't have the money for books, but can somehow afford a $35 bag of weed every other day.

Everyone envisions what they will, but this doesn't change any realities. In any event, I'm not talking about the chronic welfare recipient. I'm talking about working. Working for the minimum wage.

I have to wonder why so many people have come to think that their choices boil down to getting paid poverty wages or having no job at all. How did they get those ideas into their heads? I suppose it must have been the incessant drumbeat of conservative economic theorists and their allies in industry and the political establishment, not to mention, 30 years of steady downward mobility for the working class in the U.S.

I think this level of demoralization is sad. It's beyond sad, it's tragic. So I welcome this debate, even at the expense of opening it in symbolic ways, such as talking about the minimum wage, and what it really means to survive on it. It makes a change from years of economic fatalism and social darwinism, which is all we've ever really gotten from the conservative side.

[generik]

Anyway I have to say that $5 isn't all that bad really.

In countries like Singapore, MacDonalds pay their counter staffs S$3.50 an hour, and probably $5 if you are "promoted"... now that's only... USD$2.

Ironically contrast it with down under, where the same macdonald's cashier is paid A$10 a hour... approximately USD$7.

Different places have it differently!

[solvs]

Ask Helen Thomas how much she is worth.
I don't think that arguement works because she's for the increase. :rolleyes:

It wasn't that long ago I was working for minimum wage, or barely above. Some of us just take whatever job we can take when we can get it. Of course, I'm making a lot more than that now, but still... Remember this the next time you go to a retail store or fast food joint. You get what you pay for. ;)

[Dont Hurt Me]

I feel if they can act a " Minimum" wage then perhaps they should inact a "Maximum" wage. Almost every CEO is overpaid in this country and these guys are making millions a year, moving factories overseas and get stock options that are more millions. Its time to for a Maximum wage for all those greedy Ceo's. I say a million dollars max anymore is just waste & greed.:)

[skubish]

Its just going to get worse. People in the US already enjoy one of the best standards of living in the world. Americans are going to continue to face increased competition for jobs as outsourcing to low wage countries such as China continues.

But if all the good jobs leave the US for China and India, who is going to buy the products?

And as others have said raising the minimum wage is political. It doesn't really benefit anyone except to help the policitians get re-elected. Sure Average Joe gets an exact dime in his paycheck but the cost of basic necessities goes up to compensate the wage increases.

I hate to say it but major healthcare reform is what is needed. I think this is really the main reason American companies are uncompetitive. At first I didn't believe it but now I have seen enough.

[miloblithe]

I feel if they can act a " Minimum" wage then perhaps they should inact a "Maximum" wage. Almost every CEO is overpaid in this country and these guys are making millions a year, moving factories overseas and get stock options that are more millions. Its time to for a Maximum wage for all those greedy Ceo's. I say a million dollars max anymore is just waste & greed.:)

Or tie the maximum wage to the minimum wage. No one can make more than, say, 20 times the minimum wage.

[StarbucksSam]

I still subscribe to the school of thought where I don't care if you were born here, immigrated here, or you've been unemployed for ten years, $5.15 or even $6.25 an hour is simply not enough for your work. I think that any job anyone does is worth at least $10 or $12 an hour. How else does one afford to live?

If I ever have a business, my employees will have wages they can actually LIVE off of. Shame on you, senators.

[mcrain]

I haven't been here in a while, or more accurately, don't post very much anymore. My recent job experiences seem relevant to this thread.

I'm a public defender in a rural county. To anyone who believes that minimum wage is plenty, I encourage you to go sit in court and listen to people respond under oath to questions by the judge on how much money they make, how they support themselves, etc.

Sure, minimum wage might be survivable if you worked full time, got benefits, etc., but remember, the vast majority of minimum wage workers work part time so the company can avoid things like benefits, insurance, unions, and the like.

Making 10-12,000 per year sounds pretty bad, but strangely enough, for many of my clients, that's well over what they make. You would be amazeds how many people have to get by on far less than $1000 per month.

Obviously, the minimum wage is only one aspect to the problem. Education, job expatriation, and the economy in general combine with it to be the problem we have today.

Anyway, to everyone I haven't seen in ages, hi again.

[zimv20]

nice to see you back here, sir, even if it's short-lived.

[kuyu]

I feel if they can act a " Minimum" wage then perhaps they should inact a "Maximum" wage. Almost every CEO is overpaid in this country and these guys are making millions a year, moving factories overseas and get stock options that are more millions. Its time to for a Maximum wage for all those greedy Ceo's. I say a million dollars max anymore is just waste & greed.:)

Like when Steve Jobs was the second highest payed CEO in America a few years back? $76 million in a year if I remember correctly. That's about $30,000/hour!!!

Don't get me wrong, I love Apple, but when it comes to "greedy" companies they're one of the worst. Check out the profit margins on all this stuff we've bought. Outrageous... 5-10 times that of the "evil" oil companies...

[mactastic]

Hear hear... in internet time it's been eons.

Anyhoo, I'd question the 10-to-1 ratio of scammers of the welfare system to truly needy. Unless we're talking corporate welfare? I've known many hardworking people -- and families -- who've either fallen on hard times or had something catastrophic occur that drives them to welfare or the food bank or both.

Regardless, we need to work to improve the number of abusers-to needy ratio. I'd like to see some mechanism that could weed out the abusers while not jeopardizing the needy. And ultimately if there is a side to err on, it's generosity, not stinginess. I'd rather some abusers slip through than a needy person go without. If the cost of that is some fraud and abuse... well I'd say it's a reasonable trade off. Not that we shouldn't work to eliminate it.....

[tristan]

Given my MBA, I certainly understand the economics behind minimum wage laws and that raising the minimum wage potentially results in higher unemployment for the poor because companies can't hire as many low income people. But my ethics and my long-term view tell me there's more to the story.

Companies shouldn't get to employ someone unless they're going to pay them a fair wage. It's not just a question of respect, it's good for society, because without a fair wage, people can't afford to live in decent housing, eat decent food, get decent health care, or pay enough taxes to get decent schools for the kids or support a decent police force and fire department. And all that becomes society's problem. So I don't care if you'll work for $1/hr, it's bad for the rest if you do. I believe minimum wage should be more like $8/hr, which comes to $15k a year. Maybe $10/hr in DC, NYC, etc. i wouldn't do this overnight but over a five year period.

I also believe that a wage that high would force sectors of our economy to become more efficient with labor. Instead of fast food restaurants or superstores employing armies of low-paid people, they'd employer fewer, higher wage people. As our economy learns how to make better use of people's labor (perhaps by training or automation) it would expand significantly over time because the GDP output per capita would be a lot higher.

[solvs]

Like when Steve Jobs was the second highest payed CEO in America a few years back? $76 million in a year if I remember correctly. That's about $30,000/hour!!!
Wasn't that mostly in stock options and benefits? Isn't his actual salary only $1? Not saying people shouldn't get paid all their worth. Some CEOs make their companies billions. This is a free market and all.

[Dont Hurt Me]

Like when Steve Jobs was the second highest payed CEO in America a few years back? $76 million in a year if I remember correctly. That's about $30,000/hour!!!

Don't get me wrong, I love Apple, but when it comes to "greedy" companies they're one of the worst. Check out the profit margins on all this stuff we've bought. Outrageous... 5-10 times that of the "evil" oil companies...This so true, Apple is just another greedy company. The seperation between the poor & middle class has gotton worse. Why does anyone deserve this kind of money? its a rip off to the company , its stock holders and all of the employees who make it work. Inact the Maximum wage!
We need some sort of balance here but those same greedy bastards run our Govt through campaign contributions. This country is being screwed by this class. If you cant give someone $8.00 bucks an hour for honest work then why are we paying coffee drinking and donught eating Ceo's in committee's Millions for what isnt even honest work? Free market run astray.

[Thomas Veil]

Or tie the maximum wage to the minimum wage. No one can make more than, say, 20 times the minimum wage.That is an outrageous, typical liberal/communist thing to suggest. I like it. :)

Seriously. The inequity between the wealthiest and the poorest is far greater in this country than in other major industrial nations such as Japan...and it just continues to grow. And some of the very wealthiest get that way not by producing, but by rearranging money, e.g., cashing out with huge sums when their company is taken over by another.

For all the b.s. about this being a Christian nation, there is one thing and one thing only that we worship in this country: $

[kuyu]

Wasn't that mostly in stock options and benefits? Isn't his actual salary only $1? Not saying people shouldn't get paid all their worth. Some CEOs make their companies billions. This is a free market and all.

It was all stock options. He had to use his own money to buy the options. I personally don't care how much the guy makes. The stock is up ~600% in the last 3 years, so I'd say he's worth the money.

I see where you all are coming from with a maximum wage, but it's executive incentive programs like the one at Apple that keep these people honest. It removes the incentive to "Enron" the share holders, because now the CEO is a major holder himself.

edit: Regarding the inequity of wealth, the rich understand something the poor do not. Einstein called it the 8th wonder of the world. I'm talking, of course, about compounding. $14/hour average over your lifetime will make you a millionaire if you have the discipline. If you give 10% of your gross away, save 10%, and spend the rest, you will be wealthy. There's no avoiding it.

[Thomas Veil]

I don't think that's necessarily true. Look at Enron itself. Built to record highs via dubious accounting methods. What's to stop an executive from selling his shares right before the duplicity is exposed and the bottom falls out? (Yeah, the law, but that doesn't seem to bother a lot of people lately.)

[tristan]

I guess I'll be the defender of excessive salaries. :-) If you put somebody in charge of a $45B company like Apple, that's a ton of responsibility, and it's important to get the best person you can, and if it means spending $20m a year to get that person, that's really a drop in the bucket. The board of directors is looking at the billions of value that can be created or destroyed, not the millions they're paying the candidate.

Also, most executive compensation is based on options, which are only valuable if the stock price goes up - i.e. you make money for the stockholders.

I am definitely against massive golden parachutes though, not least because they create incentives to push companies into mergers that don't make sense, just so they can trigger both the options clause and the parachute clause. Someday somebody's going to write a case study on the HP-Compaq merger, and it'll be clear that the disaster was caused by a bunch of execs who wanted a monster payday.

Hmm, I'm for high exec salaries but against incompetence I guess. Maybe execs should get a normal salary plus big performance bonuses, assuming they actually perform.

[kuyu]

I don't think that's necessarily true. Look at Enron itself. Built to record highs via dubious accounting methods. What's to stop an executive from selling his shares right before the duplicity is exposed and the bottom falls out? (Yeah, the law, but that doesn't seem to bother a lot of people lately.)

AFAIK, executive stock options are generally a weird hybrid European/American call option. European because there is some date in the future which they must hold the options to, and American because they can exercise them at any point after this date.

And Enron. Oh Enron... They securitized their receivables via paper SBU's (all named after star wars characters), then stole the money that backed the bonds. When they couldn't make the coupons anymore, the gig was up.

Assuming that isolated cases like this are the norm is akin to being racist. You let a few bad apples form your opinion about a particular group as a whole.

[miloblithe]

edit: Regarding the inequity of wealth, the rich understand something the poor do not. Einstein called it the 8th wonder of the world. I'm talking, of course, about compounding. $14/hour average over your lifetime will make you a millionaire if you have the discipline. If you give 10% of your gross away, save 10%, and spend the rest, you will be wealthy. There's no avoiding it.

Crap.

If your income is somewhere roughly equivilent to your basic needs, then saving is really difficult. Many people make far less than $14 and hour (read title of thread). And saving 10% of $14 an hour (assuming 2080 hours a year, which is unrealistic because most wage laborers aren't payed for vacation days) will not give you $1 million dollars unless you work a really long time and there are much higher interest rates than today. And furthermore, even wage laborers who are able to save well need those savings. Some might want to send their childred to college, or pay for medical care (that they either lack because they are wage laborers or have to pay for out of pocket, making saving that 10% even harder.)

And so on.

"The rich understand something the poor do not." Pure, stereotyped, self-justifying crap.

[kuyu]

Crap.

"The rich understand something the poor do not." Pure, stereotyped, self-justifying crap.

Hmmm. Well, $3.57/day would make you a millionaire in 40 years. That's the price of a pack of cigaretts. If you start when you're 18, then at 58 you're wealthy. If you want to do it in 30 years it's $11.35/day. Notice the difference. Compounding, not contribution, makes one wealthy.

And self-justifying? I filed taxes on under $7,000 last year. I'm technically impoverished. You have, in effect, proved my point. Thanks.:)

[tristan]

Exactly. Saving is easy when you make $55k a year and your parents paid for your college and gave you your two-year old Honda as a graduation present and have already promised you $10k towards your down payment as a wedding gift. Not so easy when you make $7/hr and you don't have any health care and your car keeps breaking down and your insurance rates are higher because your credit is bad and you live in a "bad" neighborhood and your brother just got laid off so he moved back in with you, etc.

[miloblithe]

Hmmm. Well, $3.57/day would make you a millionaire in 40 years. That's the price of a pack of cigaretts. If you start when you're 18, then at 58 you're wealthy. If you want to do it in 30 years it's $11.35/day. Notice the difference. Compounding, not contribution, makes one wealthy.

And self-justifying? I filed taxes on under $7,000 last year. I'm technically impoverished. You have, in effect, proved my point. Thanks.:)

I'm set to graduate with a BBA in Finance this December. The past month I've been interviewing all over the place. Right now I've got two good prospects. One is a financial analyst/management position with the Department of Defense. The other is GE's FMP program in Advanced Materials (quartz, silicones, plastics).
--The DoD job is decent money (70-110 after 5 years), 40-50 hours a week, no moving, 36 days off a year to start, and a free MBA.
--The GE job is amazing money (150+ after 5 years, could be over 350), 80-90 hours a week, move every ~18 months, and no MBA. But I'm told their FMP program has the same effect on a resume.

Wow. You really are a member of the working poor there... oh wait. You're a recent college graduate who is eyeing high-paying jobs.

I'm not trying to make this about you. That's not my point. My point is that the rhetoric you are using is typical "the poor are poor because they deserve to be" kind of reasoning. I consider that to be crap.

What interest rate are you using?

[tristan]

I see you're full of optimism. I graduated from a top 1 (not a typo) MBA program in Europe, and what did I get? Ten months of unemployment before I took a job that paid less than I went into the program. What do you think I lived on for those nine months? My retirement savings and equity from a home I sold. See how your projections don't hold up if there's just one bump in the road?

[miloblithe]

Furthermore, lots of wage workers I know in DC send any scraps of excess income they can scrounge together back to their relatives in other countries. In fact, hard working immigrants send more back to the countries that they come from in remmitances than the US spends in development assistance and corporate investment combined.

But they should probably stop doing that and start saving so that they can become millionaires.

[kuyu]

I'm not trying to make this about you. That's not my point. My point is that the rhetoric you are using is typical "the poor are poor because they deserve to be" kind of reasoning. I consider that to be crap.

What interest rate are you using?

Cool. I used 12%. It's the average return on the market over the last 75 years. I am about to graduate, but the only reason I have these opportunities is hard work. My family was poor for a while. I know all about it from first hand experience. I just don't believe it's a life long sentence.

[miloblithe]

Cool. I used 12%. It's the average return on the market over the last 75 years. I am about to graduate, but the only reason I have these opportunities is hard work. My family was poor for a while. I know all about it from first hand experience. I just don't believe it's a life long sentence.

12%? That makes no sense. People with large amounts of excess income can afford to invest in medium to high-risk investments (such as stocks). Poorer people cannot. They can put money in the bank or buy low-risk investments that yield far, far, far less than 12%. Alternately, they could invest in the stock market as you suggest (or why use that measure), but that would mean that some percentage of them would do far better than 12%, while others would do far worse, even ending up with only pennies on those hard-earned dollars they invested.

It's important when thinking about economics to remember that while aggregate data makes sense in certain forms of analysis, when thinking about individual investment choices you have to consider what each individual has to gain or lose. It does no good to someone who loses everything on the stock market to know that someone in their same income bracket made it big.

[IJ Reilly]

Wow. You really are a member of the working poor there... oh wait. You're a recent college graduate who is eyeing high-paying jobs.

I'm not trying to make this about you. That's not my point. My point is that the rhetoric you are using is typical "the poor are poor because they deserve to be" kind of reasoning. I consider that to be crap.

What interest rate are you using?

I have to agree totally. I was actually a bit shocked to see my comment about hearing the social darwinist argument from conservatives confirmed so readily -- and especially from kuyu, whom I don't regard as an ideological wing-nut. This philosophy runs deep -- depressingly deep. A large segment of the country has apparently given up on working class Americans, possibly because they can't even remember a time when upward mobility was a real opportunity.

[kuyu]

12%? That makes no sense. People with large amounts of excess income can afford to invest in medium to high-risk investments (such as stocks). Poorer people cannot. They can put money in the bank or buy low-risk investments that yield far, far, far less than 12%. Alternately, they could invest in the stock market as you suggest (or why use that measure), but that would mean that some percentage of them would do far better than 12%, while others would do far worse, even ending up with only pennies on those hard-earned dollars they invested.

It's important when thinking about economics to remember that while aggregate data makes sense in certain forms of analysis, when thinking about individual investment choices you have to consider what each individual has to gain or lose. It does no good to someone who loses everything on the stock market to know that someone in their same income bracket made it big.

I see your point, but you act like I'm talking about 1 year. Over 40 years, a well diversified portfolio will average 12%. Diversification allows a portfolio to be less risky than the least risky investment therein. Thus, it's only risky if you A) don't know what you're doing or B) gamble on a few stocks.

Besides risk tolerance has more to do with age than income. But, yes, in the short-term your example is true. But in the long-term it's not. Find me ONE well diversified investor who's stayed in the market since 1965 and lost money on the deal, and I'll donate $5 in your name to the charity of your choice.

[IJ Reilly]

A "well diversified portfolio" for a great many Americans is a bag of groceries and a tank of gas. This is a reality which many people can't seem to grasp. And the worst part about this is, the rift isn't healing. In fact the gap between the rich and not rich is growing steadily wider. The middle class in the U.S., which was always the source of our economic and social strength, which has represented opportunity for millions upon millions of Americas for decades, is being steadily hammered into oblivion. And who cares? Who wants to talk about this as if it really matters, as if it has long-term consequences for the sustainability of what we used the call "the American Dream?"

Or maybe this idea is dead, and we just haven't properly buried it yet.

[zimv20]

risk tolerance has more to do with age than income.
i was going to post the same thing.

kuyu's got a point, though i think there are more problems in everyone executing such a plan than the plan in theory.

the two things that must be overcome are:
1) having a good understanding of how investment works
2) overcoming the desire to consume beyond one's means

since we're a country of consuming maleducates (i love making up words), of course we're going to see people not save and/or save inefficiently.

i've recommended the book before, and will do so again: The Millionaire Next Door is full of case studies of relatively low wage earners saving and investing their way into the Big Club. lots o' middle class doing it, but i agree that minimum wage earners would obviously have a much harder time, simply because the resources aren't there.

[tristan]

12% is insanely optimistic. 5 yrs ago the S&P 500 was at 1400. Now it's at 1200. What kind of return is that? Hint - it's not a positive number. By the way, what do you think inflation was during that time? About 3%? Now calculate your real rate of return.

So rerun your calculation using 7%, which is a 10% rate of return minus 3% inflation. Now throw in a couple of recessions - 5 year periods where the inflation adjusted return is negative 25% total, and assume you'll have to draw down $50k worth of savings during those periods to survive. What do you get? A retirement working at Walmart waiting for the dirt nap.

Buddy, there are other classes in the MBA curriculum besides finance. Check out MacroEconomics, and then see how the Bush economy looks going forward and try to predict whether that's an economy that will support your inflated expectations. Then book a flight to Canada or Australia or Hong Kong or Ireland and save me a seat.

[zap2]

this was part of kerry's plan( get min wage to like 7 something) but NO we had to vote bush in, we doomed:(

[miloblithe]

It would be interesting if there were a significant shift in US saving habits. I think a lot of economists are pushing the idea because they are worried about the fact that the US has a very low investment rate compared to other wealthy countries, and that combined with our trade deficit and negative investment position means that the US has a very questionable economic outlook decades into the future. If we saved more, it certainly does seem like it would help the US. If we purchased fewer (foreign manufactured) consumer items and instead spent more investing in businesses, R&D, and infrastructure, we'd probably be a whole lot better off in the long run, even though we'd be sacrificing our standard of living in the short run.

[zimv20]

12% is insanely optimistic. 5 yrs ago the S&P 500 was at 1400. Now it's at 1200. What kind of return is that? [...] Now throw in a couple of recessions
you've gotta look longer term. check out this pdf (http://www.crestmontresearch.com/pdfs/Stock%20Average.pdf) graph. the crashes of 1929 and 1986 are just blips longterm. five years is shortterm, think in 30 year terms.

[IJ Reilly]

you've gotta look longer term. check out this pdf (http://www.crestmontresearch.com/pdfs/Stock%20Average.pdf) graph. the crashes of 1929 and 1986 are just blips longterm. five years is shortterm, think in 30 year terms.

We had a lot of this discussion during the Bush Social Security plan debate. It's fine to look at average returns, but if a person were retiring after (or even worse, just before) one of the big market troughs, they'd be SOL. They can't just wait around for another 10-20 years to get it back. It also makes sense to look at these returns after inflation. We've been through plenty of periods of time when the markets didn't necessary go negative, but that average returns on investments didn't keep pace with inflation -- which is effectively the same thing.

[zimv20]

It's fine to look at average returns, but if a person were retiring after (or even worse, just before) one of the big market troughs, they'd be SOL. They can't just wait around for another 10-20 years to get it back.
agreed. the short term risk of the market is high, so those nearing retirement are advised to transition to safer investments. that's the key though, to start investing while young (like in their 20s).

about inflation, that will be a constant regardless of how the money was invested.

[miloblithe]

about inflation, that will be a constant regardless of how the money was invested.

Unless it's invested in present consumption. If your money isn't going to be worth more in future by saving it, there's little point in doing so.

Another example. The average investor who invests in 1960 (according to your PDF) will in 1980 have ended up with $1.236 on the dollar, which I'd wager was less than inflation. And that's the average, meaning that a large percentage of people did worse.

[atszyman]

Or tie the maximum wage to the minimum wage. No one can make more than, say, 20 times the minimum wage.

Or here's an idea, even rewards successful CEOs. Tie the maximum wage to the smallest wage paid to any employee at the company. If the company does well and wants to reward the CEO then everyone else's wage rises with it. $1,000,000 can boost the wages of 500 employees $1 per hour or it can buy your CEO a new summer home in Maine.

Why is it that raising the minimum wage is always a zero sum game to everyone? "If we raise the minimum wage companies will have to lay off workers and raise prices" seems to always be the argument. Isn't there some benefit that comes from the increased consumption of the minimum wage earners as they have more disposable income? (Which also gets into why tax breaks for the rich don't necessarily stimulate the economy.)

If you give a rich person (CEO) more money they are more likely to save the money since they already have more than enough to maintain a standard of living. Yes some of that money will go to investments and help stimulate the markets, however if you take the same amount of money and distribute it to those who are barely scraping by nearly 100% of it will go back into the system as more goods and services sold since they cannot afford to save much, if any of the extra money.

[IJ Reilly]

agreed. the short term risk of the market is high, so those nearing retirement are advised to transition to safer investments. that's the key though, to start investing while young (like in their 20s).

about inflation, that will be a constant regardless of how the money was invested.

Safer investments don't offer the same opportunities for returns, so you'd need to factor in a transition from equities to bonds, starting age 40 if not earlier. Hardly anyone invests 100% in equities anyway, no matter their age. So forget 12% -- without a bunch of luck, it isn't going to happen.

Still, I think it's odd to be discussing investment portfolios when the real issue is, fewer and fewer people have enough discretionary income to even open a passbook account, let alone buy stocks and bonds. The answer to a downwardly mobile working class isn't turning everybody into investment wizards -- the answer is better wages, education, and providing health care for every person.

[zimv20]

So forget 12%
is that the sticking point? i agree -- i instruct my financial planner to make all calcs based on a longterm market gain of 8%. i've never been 100% invested in the market and i don't think anyone's recommending that.

all i'm saying here is that longterm stock market investment is low risk and provides decent gains, for those thrifty enough and educated enough to invest in it. sadly, there's not enough thrift and education as there should be.

The answer to a downwardly mobile working class isn't turning everybody into investment wizards -- the answer is better wages, education, and providing health care for every person.
i agree with you, but i don't want to discount the benefit of investment. no one needs to be a wizard to save, say, $1 a day into a diversified portfolio.

they just need to be thrifty and educated.

......

example using this savings calculator (http://cgi.money.cnn.com/tools/savingscalc/savingscalc.html).

let's say some 24 year old guy, newly thrifty and educated, decides to sock away $1/day. he'll put 1/3 into the market and 2/3 into savings. assuming a 25% / 6% fed / state tax rate and 40 years investing, plus an 8% annual return, here's what he'll have at retirement: roughly $80k in today's dollars, $24k after adjusted for inflation.

if he starts at 18 and doubles the amount, he'll have $255k / $63k.

not gonna set the world on fire, obviously, but we're talking $1-2 / day. imo, if more people knew about compounding interest and didn't have such a distrust of the stock market*, wouldn't that be better for everyone?

* perhaps the daily ups/downs as reported on tv are turning people off?

[Chip NoVaMac]

Meh.

Ask Helen Thomas how much she is worth.

Why stop there? What about the salaries of the Redskins and Ravens? And the rest of the "entertainment" industry.

This is one area that you and I will end up disagreeing with. Capital Hill should be a shining beacon to the rest of the nation, not one of do as I say - not as I do.

It is high time for the minimum wage to meet the increases that members of Congress, the military, and the federal workforce get each year. Heck let it at least meet the inflation index!

[tristan]

Yeah, the issue is really whether a minimum wage hike will help or hurt the poor and help society as a whole. I definitely think it will help them and help society.

As a point of interest, minimum wage in the UK is GBP5.05, which comes to about $8.85. And their unemployment rate is lower than ours (4.8% vs 5.1%). So anyone who thinks that minimum wage hikes raise unemployment, put that in your pipe and smoke it.

[kuyu]

I think this whole investments discussion started on a misunderstanding. I'm not saying that minimum wage is enough to live on; it's not. I stated that in my first post.

What I said was that it is possible to get out of the rat race. I never said easy, just possible. In the end, it's more about discipline than anything else. How many impoverished American's find the money for cigarettes, drugs, and alcohol? Lots. Of course, that's their choice. I merely wished to point out that there is another choice, and it has nothing to do with Washington DC, democrats, or republicans. The wealthiest man I know was born in the projects and was flat broke at 38. It can be done.

Tristan, congrats on your MBA. I'm just a undergrad in Finance. Of course we have to take marketing, management, accounting, and econ (macro and micro), but the majority of my coursework is in investments, risk management, and capital budgeting. So it's only natural that I be most focused on that side of it.

Zimv20, spot on.

[Chip NoVaMac]

So you see, it's not the $1 something an hour the republicans are opposed to. It's unemployment and inflation. They see increases in minimum wage as a sort of 'slippery slope'. There is some research to support the idea that with no minimum wage, the average low-skill laborer would earn more like $7/hour. But, the current laws allow owners to pay them some arbitrary wage instead of paying them what they're worth.

Now, I know that the elected democrats with Ivy league educations know this to be true. This begs the question, what is their motivation? Is it to actually help the little guy (which it won't, in the long term) or to help themselves get re-elected (which it will, in the long term). See, they're using the low skilled workers economic ignorance as a political tool.

You speak to the general idea that we will need to "buck it up" in the short term in order to give even the lowest of workers a fighting chance to have a life out side of working.

As long as we have NIMBY's resisting affordable housing is high cost areas like DC, then there is little hope for the real backbone of this nation. The ones that pep and deliver our food. Those that work behind the counters at the stores we shop.

Sometimes wages are used by the business sector as a smoke screen. Look at Walmart with an average of under $10 an hour with poor benefits and Costco with an average IIRC of $15 an hour with much better benefits.

We are only rewarding Wall Street profits today, not social responsibility. Costco is getting a greater share of my $'s today, because of their policies.

That being said, someone earning $5.50/hour is in poverty. It's not enough money to pay for rent, food, etc. But, raising the minimum wage is NOT the way to help such people. It does more harm than good. It's a great campaign slogan, but not a great solution.

But it is about self worth, that then will lead to rewards as these workers can make their way up the ladder.

It's a complex problem and I suspect it requires a complex solution. Tax benefits, education, social services, daycares, and after school activities can all play a part. We can all agree what the endgame is though. Poverty has no place in a nation as wealthy as this one. I don't know what the answer is, but I know what the answer isn't.

To be fair, at least the democrats are feigning interest, which is more than the republicans are doing.

Hope this was informative.:)

There in lies the problem. As long as we have PAC's and big money in getting people elected to higher office, we will never really have solutions to problems. It is time for many more "Mr. Smith's" to take over Washington.

[Chip NoVaMac]

Sorry but- being in corporate America I can tell you that you that people aren't paid what they're worth either- at least where I work. The only time people seem to get offered raises is when they threaten to quit, and by that time they've had enough and quit anyway.

For example, this year I worked tons of hours on salary to get new business for the company I work for. I actually stayed overnight to get one pitch done and we won that account. Guess what? Come raise time? No raise. You know what they told us? "Only the top third of performers are getting raises this year". My question was- "After all the weekends and nights I've spent in this place, I'm wondering what puts one in the top third? Do I need to make this my permanent address?" Turns out it was all BS and the only people who got raises were- three guesses! Upper management. And after doing some asking around, I've found this is becoming more and more common. Your mantra is, sadly, wishful thinking because it fails to take into account human nature. It's human nature to get away with what ever you can.

Just look at the Sunday you spent working at no extra cost to your employer when I came up for a visit! Compared to the rest of the world IMO our employers know we are too scared to do a massive strike that is evident in other parts of the world. Maybe it is because of our greed for the good things of life.

[Chip NoVaMac]

Everyone envisions what they will, but this doesn't change any realities. In any event, I'm not talking about the chronic welfare recipient. I'm talking about working. Working for the minimum wage.

I have to wonder why so many people have come to think that their choices boil down to getting paid poverty wages or having no job at all. How did they get those ideas into their heads? I suppose it must have been the incessant drumbeat of conservative economic theorists and their allies in industry and the political establishment, not to mention, 30 years of steady downward mobility for the working class in the U.S.

I think this level of demoralization is sad. It's beyond sad, it's tragic. So I welcome this debate, even at the expense of opening it in symbolic ways, such as talking about the minimum wage, and what it really means to survive on it. It makes a change from years of economic fatalism and social darwinism, which is all we've ever really gotten from the conservative side.

I have more than one European customer come through lamenting that they would love to move to US, except for the lack of decent vacation time.

[Chip NoVaMac]

I feel if they can act a " Minimum" wage then perhaps they should inact a "Maximum" wage. Almost every CEO is overpaid in this country and these guys are making millions a year, moving factories overseas and get stock options that are more millions. Its time to for a Maximum wage for all those greedy Ceo's. I say a million dollars max anymore is just waste & greed.:)

Amen, we are out of step with the rest of the world in that regards. I say that CEO's should not get more than 100x the average of their lowest paid worker. Stock options at least IMO at this point should not be a factor. That should be their reward for getting the job done.

[tristan]

My MBA does me very little good in the DC area, a place stuffed with low-paid government work that requires a security clearance to get. Only reason I'm here is because my wife has a great job. Hopefully we'll get out of this area (and this country) eventually. If it were up to me I'd be in Dubai or Hong Kong or something.

[IJ Reilly]

I think this whole investments discussion started on a misunderstanding. I'm not saying that minimum wage is enough to live on; it's not. I stated that in my first post.

What I said was that it is possible to get out of the rat race. I never said easy, just possible. In the end, it's more about discipline than anything else. How many impoverished American's find the money for cigarettes, drugs, and alcohol? Lots. Of course, that's their choice. I merely wished to point out that there is another choice, and it has nothing to do with Washington DC, democrats, or republicans. The wealthiest man I know was born in the projects and was flat broke at 38. It can be done.

I don't think there's any misunderstanding here at all.

You say it's more about discipline, I say it's more about wages. I think that's a huge difference in the way the problem is defined and understood. The grim truth is, the working class in the U.S. has absolutely lost ground over the last 30 or so years. This is a statistical fact. The gulf between the rich and everybody else has grown substantially during that same time period, and at an accelerating pace over the past ten years. This is also a statistical fact. I think these facts take precedence over any generalized, cynical judgments you might have about people buying cigarettes, booze or lottery tickets or whatever with the money they do make. Or "for instance" proofs, which of course, prove nothing.

Like I've said, I think the conservative line of thinking about these issues is essentially victim-blaming, and not just of individuals, but of an entire class of people who find themselves on the slippery side of the economic slope. It fails to come to grips with the broader problem of a steadily declining middle class. It completely denies the reality of shrinking opportunity for economic advancement in this country and the steadily increasing concentration of the nation's wealth in the hands of fewer and fewer people.

In short, it fails to address the problem of wage deterioration in any meaningful way. It attempts the jawbone the issue into obscurity in what I can only assume is the hope of protecting the interests of the few who benefit richly from the system as it exists today.

[kuyu]

I don't think there's any misunderstanding here at all.

You say it's more about discipline, I say it's more about wages.

I see where you're coming from on this one. I concede that it's not totally discipline, but neither is it totally wages. Perhaps it's a little bit of both. In that case, we are both right!;)

[Thomas Veil]

Assuming that isolated cases like this are the norm is akin to being racist. You let a few bad apples form your opinion about a particular group as a whole.That's a bit hyperbolic, don't you think? All I said that stock options were not necessarily a disincentive to screw the shareholders.