Farid Khavari: A $10.10 Minimum Wage Will Boost Florida’s Economy

Khavari

(The following was posted on economist on Independent gubernatorial candidate Farid Khavari’s campaign website.)

A $10.10 or higher minimum wage will boost Florida’s economy, create more jobs and reduce government social costs. Independent Florida governor candidate, economist Farid Khavari says conservatives should love higher minimum wages even more than liberals do. Holding down wages has vastly increased government’s costs of corporate welfare. 

Since 1968, the minimum wage has in Florida officially declined by almost 25% in inflation-adjusted dollars. And that’s the inflation that the government admits to.  1968’s $1.60 per hour would be $10.20 in today’s dollars, compared with Florida’s new $7.93 which went into effect this year. The $7.93 represents a whopping 14-cent raise over 2013.

Florida’s Republican governor Rick Scott says he “cringes” whenever the topic of raising the minimum wage comes up.  That is no surprise, because Scott has repeatedly demonstrated his lack of concern for anyone without a million-dollar checkbook, his willingness to sacrifice over 6,000 lives per year and thousands of jobs in the name of ideology, and his ignorance of simple economics.

In his 2006 campaign for governor (as a Republican) Charlie Crist was silent on raising the minimum wage. In his reincarnation as a Democrat, Crist now says “we have to do more”.

Ironically, the people who most strongly oppose raising the minimum wage are the same people who are horrified by the expansion of the Food Stamp program, Medicaid, and other forms of social costs (often called “socialism”) which lead to higher deficits, higher taxes or both.

In fact, holding down the minimum wage has greatly expanded corporate welfare in America, which costs us more than we know.  According to research by the University of Illinois and UC Berkeleytaxpayers subsidize the employers of low-wage workers by $243 billion per yearbecause their wages are so low that the workers qualify for $243 billion in Medicaid, Earned Income Tax Credit, Food Stamps and Temporary Assistance.

Interestingly, 73% of families receiving these benefits are working.  This means that taxpayers enable big corporations to shift their labor costs onto the public. This is exactly the definition of corporate welfare.

That’s right, taxpayers are already paying for a higher minimum wage, but the employers get the extra money rather than the workers.  If the employers pay workers more, the social costs to taxpayers would be reduced.  Reducing social costs to the taxpayers (“socialism”) is a core tenet of conservatives, right?

Are those working people who receive government benefits the “takers”? Or are the “takers” thecorporate welfare recipients who save $243 billion per year on labor costs subsidized by the taxpayers?

The Congressional Budget Office says that raising the minimum wage would benefit about 15% of workers, and raise 900,000 people out of poverty.

What are the real economic benefits—or consequences— of raising the minimum wage?

We have all heard that people will lose their jobs. We all worry about the price of a Big Mac.  What we don’t hear much about is the fact that putting more money into the hands of people who will spend it increases economic activity much more than it costs 

In Florida, $10.10 is about $86 per 40-hour week than $7.93, about $4,500 per year.  About 1,000,000 Florida workers, including many who earn more than the current minimum wage, would benefit by raising the minimum wage to $10.10 by 2016. Let’s say the average benefit is only $3,000 per worker per year, which makes $3 billion per year in increased pay.

When that $3 billion per year circulates and recirculates through Florida’s economy, at least $15 billion per year in economic activity happens—enough to support 150,000 new jobs in Florida.

$15 billion being spent more than compensates for $3 billion more in costs.  Employers will offset the higher direct costs by a combination of raising prices, increasing volume, or improving productivity. The fact is, there will be many times more people who can afford a Big Mac at an extra 25 cents than there are who can afford one at today’s wages and prices.

The state of Washington has led the country in minimum wages for 15 years now, currently the highest at $9.32.  Job growth in Washington  has continued at 0.8% annual growth, 266% of the 0.3% national rate.

New Jersey raised the minimum wage by $1.00 to $8.25 in January and immediately saw 8,320 new jobs created.    Where are the job losses?  Most economists simply don’t understand business.

Anyone can understand that there will be only as many jobs as it takes to meet demand. When there is more demand you get more jobs.  When more people have more money to spend, you get more demand.

Further, most of that added demand will go directly to the kinds of businesses who employ low-wage workers. This is why a smart retailer like the Gap is raising minimum pay to $10 by next year.  When you think about it, this is not a new idea at all. Remember how Henry Ford prospered during the Great Depression by raising pay to an unprecedented $5 per day, so folks could afford to buy cars?

But what about inflation?   Most people assume that rising wages will cause inflation.

The actual definition of inflation is when you have more money chasing a finite amount of goods and services.  In fact, as long as you can produce more goods and services, you do not need to have inflation.   And, overall, producing larger amounts of goods and services is generally more efficient and cost-effective.  Computers and electronics are just one example.

By creating additional economic activity we get an increase in demand for goods and services, and therefore more demand for workers to produce them.  The economy grows by production rather than inflation.

Please go to the home page and learn how we can create good middle class jobs in Florida–at no cost to taxpayers–and how we can reduce living costs so that a higher minimum wage can actually approach a “living wage”–enough money to live on!

 

6 thoughts on “Farid Khavari: A $10.10 Minimum Wage Will Boost Florida’s Economy

  1. Nicholas Sarwark

    Unless he can cut the corporate welfare by as much or more than the offset from the increased minimum wage, his theoretical model will not work in practice. I doubt that he can due to (a) entrenched interests who rely on that corporate welfare and (b) the amount of it that is Federal.

  2. George Phillies

    As a general statement, people who argue from “the actual definition” are highly suspect.

    They are however less suspect than people who utter something, often something barking mad, and then follow that with the rant “And that is a fact” as if saying that something was a fact made it a fact.

    The virtue of Federalism is that people can try different things and discover what actually happens.

  3. NewFederalist

    What a piker! $10.10 is just over $21,000 a year. Who can live on that? What a corporate lackey!

  4. paulie

    They are however less suspect than people who utter something, often something barking mad, and then follow that with the rant “And that is a fact” as if saying that something was a fact made it a fact.

    Are you referring to something in this article or comments on it here? If so, I missed it.

  5. paulie

    Mr. Khavari,

    Please don’t be like OrlandoChris is for Wyllie with the the same repeated post he posts on every article. At least you actually read and respond here and all these articles are about you, but still, seven times in a row?

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