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The Minimum Wage Debate

Sigma Investment Counselors

November 11, 2020

A minimum wage is the lowest remuneration that employers can legally pay workers, a concept that remains controversial.  Proponents tend to argue that increasing the minimum wage reduces poverty, while opponents believe that increases in the minimum wage reduce employment opportunities.

This debate continues and is unlikely to be resolved.  The federal minimum wage of $7.25 per hour was last increased on July 24, 2009. While debating the minimum wage may provide continuing campaign fodder, as a practical matter, the need for a national minimum wage has been marginalized by reality.  Numerous states, cities and other jurisdictions have enacted a wide range of minimum requirements, many tailored to local conditions, and generally well above the national minimum.  Perhaps even more important, market forces are playing a major role in setting wages.  Large employers, such as Target, Walmart and Amazon are currently starting employees at $15 per hour, which, in effect, amounts to a de facto minimum wage, of approximately $15 per hour.

Investors should note that government, employer, and employee reactions to the dislocations created by Covid-19 and efforts to maintain incomes and support essential workers, are providing valuable insights into the dynamics of employer/employee relations.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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