Should Minimum Wage Be Adjusted For Inflation?

No – And Higher Wages Should Not Be Adjusted For Inflation Either!

Recently the issue of minimum wage has come up in the Washington State Governor’s Race.  Dino Rossi is accused of wanting to cut the minimum wage, a charge he denies.  Apparently, the controversy is about having a different minimum wage for minors vs. adults.  Our friends to the north in Canada have a different minimum wage for minors than they do for adults; and this argument may make some sense.  Our government regulates the workplace more strictly for minors, limiting hours minors can work; as well as tasks that can be performed.  Given this, it would seem to make good sense to have a different minimum requirement for minors than for adults.  Currently, in the state of Washington, most minors get paid the same rate as adults in minimum wage positions, despite doing less work.  This does not make any sense from a business or economic perspective.  I bring this up, because this is part of the reason Washington has the highest minimum wage in the nation.  The Yakima Herald-Republic recently ran an editorial asking for lawmakers to stop the “runaway minimum wage“.

The biggest factor, however, is that under current state law, the minimum wage is adjusted annually to compensate for inflation.  The reason this is done is because of a voter approved initiative that was passed several years ago.  The new increase to be effective 1/1/09 will bring the Washington minimum wage up to $8.55.  The current Federal minimum wage is $6.55 with an increase to $7.25 coming in July 2009.

The biggest problem, as I see it, is not whether or not wages should be adjusted for inflation.  The biggest problem is inflation itself.  The whole reason it is an issue is because of the monetary policy of our Federal Government.  If we did not have inflation, there would not be any pressure to increase prices of goods, or wages of employees, due to weakening of the dollar.  Under the US Constitution, our founding fathers stipulated that currency and coin should be based on gold and silver (Article 1, Section 10).  They did not create a central bank or Federal Reserve System.  If the current system of issuing money does not bother you, consider why it is necessary for the US Government to have legal tender laws requiring banks, businesses, and individuals to take the paper money in circulation.  Prior to legal tender laws, people would only take paper money if it was backed up by something of value.  During the 19th and early 20th centuries inflation was not a significant problem for most people.  In the last 100 years, however, it has taken a toll on the dollar.  For a quick comparison: McDonald’s 1955 price for a cheeseburger was 19 cents.  It is now about $1 for the same item.

Inflation is a tax on the people, just like any other kind of tax.  It is a taking by the government.  There are winners and losers in the inflation game.  If you are paid wages for the work you do, you are being cheated out of the value of your pay by inflation.  This is morally wrong.  The voters of Washington understand this, and most people around our country do too.  Most businesses and local governments give employees annual raises based partly on the cost of living.  Some business owners are prompted by government regulation to do this, such as in the voter approved minimum wage initiative passed in Washington.

What it boils down to is this: the voter approved initiative in Washington was a public rebuke of DC having inflationary policies in the first place.  It is my belief that all wages should be adjusted based on the value an employee brings to a business.  I don’t believe we should have inflation, and that is why I don’t think we should adjust people’s wages for inflation.

We are not powerless, and do not have to accept inflation in our society.  We can push our Congress and President to change this policy.  One way to start, is to ask our elected officials to support an audit/review of the Federal Reserve.  Until we begin to seriously consider the damage the current system is doing to our money, we will continue the movement towards the zero dollar: