The Strength of Wage
By Steve Casey
Stonewall, LA
Once again we are hearing about a higher minimum wage. But, basic economics shows that raising the minimum wage is nothing but a feel-good Band-Aid on a festering problem.
The strength of any wage is its buying power. In 1966, the minimum wage was $1.25 per hour. But gas was only 24.9 cents a gallon. One hour of minimum wage could buy five gallons of gas! That $1.25 in 1966 had much more buying than even the highest proposed minimum wage today.
Buying power is dependent upon the cost of the products one buys. The cost of products is based on their cost of production. When minimum wage goes up, the cost of production of most products goes up and the buying power of the individual dollar goes down. If minimum wage was raised, within a few weeks the cost of living would rise to compensate for the new cost of production. The new minimum wage would soon have no more buying power than the present minimum wage. It might have less!
How can we help those on minimum wage? Simply lower the cost of living by raising the buying power of each dollar. How could government raise the buying power of the dollar? By lowering taxes!
When you make money, you pay income tax. When you buy a product, you pay sales tax. But that’s not all! Built into the price you pay before sales tax is the cost of the tax that the industry has to pay. The prices of all products are adjusted to cover the taxes involved in production.
If taxes are lowered on business, the cost of products goes down. If income taxes are lowered, the useable portion of your income goes up. If sales tax is lowered, the buying power of your wages goes up.
Raising minimum wage doesn’t really help the poor or anyone else. Lowering taxes helps the poor and everyone else.
------------------------------------------------------------------------------
Back to Pakistanlink Homepage
