Posted tagged ‘Minimum Living Wage’

A two minimum wage proposal

June 13, 2017

Minimum wage, the lowest wage that hourly employees earn, is a controversial issue. Supporters of minimum wage laws believe that it helps lift people out of poverty and reduce income inequality (the gap between higher-income and lower-income people). Opponents of minimum wage laws believe that it reduces the number of new jobs and raises prices, as businesses adjust for higher labor and payroll costs.

Rather than debating the value of the minimum wage, I would like to propose that we create two categories of wages: minimum wages and minimum living wages.

The minimum wage would be the lowest wage that entry-level, unskilled employees earn. It means that businesses could limit their up-front investment in an employee who will only be temporary.

The minimum living wage would be the lowest wage for more experienced, skilled employees who have worked part-time or full-time for an business for over one year. It would put into law the current practice of offering employees raises during annual performance reviews.

Businesses take most of the risks when hiring entry-level employees, so it makes sense to offer a lower minimum wage. Businesses must conduct interviews, offer job training, fill out employment paperwork, trust employees to show up on time and do the job.

Of course, new employees take risks as well – that the paperwork will be correct and that they will get paid – but there is less uncertainty in accepting the job, especially if a business has been around for a few years. Employees have the reassurance of visiting the business and seeing how it works before accepting the job.

After one year on the job, wages could be increased to the minimum living wage, a higher wage that is closer to what employees need to live and work in the area. The minimum living wage could also be tied to increased benefits, such as additional vacation time, family leave, retirement plans, or continuing education subsidies.

This one-year minimum living wage probation allows businesses to evaluate the employee’s skills and fit with the company. It also allows employees to decide whether they want to keep working for the company and gives them job experience if they decide to look for a new job.

A good business with sound finances will voluntarily offer raises the employees who show up and work hard, even if they can’t offer raises every year. While there is always the risk that an unscrupulous or poorly-managed business will fire employees before the one-year mark to avoid paying a higher wage, those businesses would suffer from higher job turnover, constant training, and poor reputation.

Do you think that two minimum wages would be an effective compromise between employees and businesses? What do you think of minimum wage laws?