Changing Wages

The federal minimum wage remains at $7.25. However, last week, the Los Angeles city council voted to raise the city’s minimum wage from $9 to $15 an hour. The increase will be implemented gradually between 2015 and 2020. It is hoped higher wages for minimum wage workers will help address cost-of-living issues that affect LA’s poorer residents, according to The Economist.

Did the minimum wage really need to increase by two-thirds? According to the Massachusetts Institute of Technology (MIT) Living Wage Calculator, an individual living in the Los Angeles-Long Beach-Santa Ana area, who was the sole provider for his or her family (1 adult, 2 children) and worked 2,080 hours a year, would need to earn about $29.84 an hour to earn a living wage and $9.00 an hour to live at poverty level. The living wage is different in various parts of the country. For example, the living wage for the same family if they lived in:

  • New York-Northern New Jersey-Long Island area $35.84
  • Milwaukee-Waukesha-West Allis, WI $29.39
  • Portland-Vancouver-Hillsboro, OR $27.86
  • Dallas-Fort Worth-Arlington, TX $25.02
  • Little Rock-North Little Rock-Conway, AR $25.58
  • Louis, MO $24.50
  • Fargo, ND $24.33
  • Charleston-North Charleston-Summerville, NC $24.28

Is a higher minimum wage good for business? It depends on the business model employed. One Harvard Business Review blogger opined:

“The smart way to deal with an increase in the minimum wage is to design work in a way that improves employees’ productivity and increases their contribution to profits. All this is possible even in low-wage settings. In fact, some companies are already doing it… When I examined these companies, I saw that they made four choices in how they designed their work. They: (1) offer less, (2) combine standardization with empowerment, (3) cross-train, and (4) operate with slack. These choices transform their heavy investment in employees into great performance by reducing costs, improving employee productivity, and leveraging a fully capable and committed workforce.”

There is some food for thought.

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