Defining Minimiums

Ardent free market advocates are correct in arguing that the wage support that is the minimum wage creates artificial unemployment. The economics prove that if the minimum wage were abolished, that there would be no unemployed Americans. The downside of their argument is that Americans would be working for 10 cents per hour somewhere.

Obviously this is unacceptable, which is why labor laws were created in the late 19th and early 20th centuries; labor laws that included limitations on child labor as well as the Federal Minimum Wage.

While some may argue that this was the beginning of socialistic economic planning, it should be clear to most that letting corporations have free reign on their labor forces was not working.

Which brings us to the current situation: The Federal Minimum Wage has been set a $5.15/hr since 1997. However, many states have exceeded this Federal Minimum. Minnesota has increased its wages to $6.15. Which has put pressure on the Fargo economy as workers can cross the river for a better wage.

Opponents of a higher minimum wage argue that the minimum wage is something only teenagers earn. Fine, let’s limit the increase to those members of the workforce over 18 years of age. Those under 18 will still be protected by the Federal Minimum.

The fact is, if we are to have a minimum wage, it should be at a level that a person can sustain a living – even if just for the short term.

What should the minimum wage be set at?

Since the current rate of $5.15 was set in 1997 we have had fairly low inflation, roughly 3% inflation on the annual rate from 1997 to 2005. Since any legislation during the 2007 biennium would not take effect till August 1st, 2007 at the earliest. That will equate to a 10 year period. $5.15 at 3% compounded yearly for 10 years equals $6.92. Thus, setting the North Dakota minimum wage at $7.00/hr as of August 1st, 2007 would be economically supported.

The inflation has already occurred in the economy. If we are to have a minimum wage, it must keep up with the economic conditions or else those workers who rely on these lower paying job will continue to lose purchasing power, and the economy will stagnate.

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