President Obama comes to town

The big news in Ann Arbor today is the Presidential entourage that can be found on Hoover Street, the site of the Intramural Sports Building where President Barack Obama is speaking about his proposed increase in the federal minimum wage. The President’s proposal is to increase wages to $10.10 across the country in order to increase the ability for families to escape poverty. The jump is significant – a 39% increase from the current rate – and could drastically change the scope of the job market.

I have written a few posts about this proposed increase in wage (you can find the most recent one here). However, rather than continuing to examine the President’s plan, I want to offer a new resolution to the issue. First, it is important to realize that the United States is a vast and diverse country. Trying to pinpoint a single fair living wage for those in Manhattan and those in rural Iowa is impossible. Simply look at the cost of living map below to realize how a single wage point wouldn’t make sense.

uscostofliving

So if $10.10 across the board isn’t the answer, what is? There is a definite need, at least in the majority of areas in the U.S., to increase the minimum wage. It’s simply not feasible to live working 40 hours a week at a weekly gross income of $290. To some extent, the current system is performing as it should. 13 states voted to increase their wages at the start of 2014. However, a solution is needed to solve the urban vs rural disparity. One reasonable answer is to leave it in the hands of the local city governments. If the city of Ann Arbor and its residents determine that a $10 wage is right for the community, it makes sense to change it. In the meantime, the neighboring city of Ypsilanti, where costs of living are lower, could go on offering wages at an $8 level. This allows the natural supply and demand forces of each individual market to work and find the equilibrium price point.

In a complex United States economy, it simply isn’t possible to solve problems with a “one-size-fits-all” solution. It is important that our government allows the system to work, and for local issues to be solved with localized solutions. While our President’s efforts to help bring struggling families above the poverty line is valiant, the true solution is to encourage cities to find the wage that is right for them and give them the tools to do so.

7 thoughts on “President Obama comes to town

  1. josimon

    Our nation is too big to be able to control everything such as minimum wage for example. Although Washington likes to have most of the power, I think it would be a good idea if they did disperse certain powers to the hands of the local governments. It would allow for a better balance of prices and would truly help those who need the wage raise.

  2. jyyoo

    Very good insight on mininum wage and price level across US! I agree that it is unrealistic to set a single minimum wage in US.

  3. cjamesj

    I’d have to disagree with Josimons post above. Although states could probably better regulate a minimum wage, there is too much federal regulation that would be effective. Giving up the minimum wage control would be like handing one piece to a jenga tower over to state governments and hoping the rest didn’t collapse.

  4. sekoch Post author

    @cjamesj, I’m interested in how would you propose handling a federal minimum wage? Do you believe it would be more beneficial to set a floor that would be appropriate across the nation or to set an average? For the latter, which I believe $10.10 would be, how can jobs be sustained in areas where that creates a huge DWL in the job market (such as rural)?

  5. nickcoll

    It seems that right now most states minimum wage are higher than the federal minimum wage. I believe that the federal government does need to set the federal minimum wage but states have a better analysis of what the minimum wage in their state should be. A hike to 10.10 is a huge increase and would put the federal minimum wage above most of the states minimum wages.

  6. Chris Chegash

    I think putting minimum wage controls in the hands of local governments would be a bad idea. Businesses might be willing to move or change locations to pay lower wages, and their employees could either be out of a job, or taking a lower paying job.

  7. xcharles

    I like the way you view the topic, however there would be less incentive for businesses to seek operation (or continue operation) in areas with the higher minimum wage. I think many winners and losers would be created, especially because the discrepancy in the jump in minimum wage is so vast. It wouldn’t be good to incentivize businesses to leave the more commercial centers, consumers would also have less incentive to shop in big cities.

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