{"id":209,"date":"2012-02-04T16:24:31","date_gmt":"2012-02-04T22:24:31","guid":{"rendered":"https:\/\/allenergyconsulting.com\/blog\/?p=209"},"modified":"2012-02-07T07:12:00","modified_gmt":"2012-02-07T13:12:00","slug":"current-design-of-minimum-wage-increases-income-inequality-and-stifles-innovation","status":"publish","type":"post","link":"https:\/\/allenergyconsulting.com\/blog\/2012\/02\/04\/current-design-of-minimum-wage-increases-income-inequality-and-stifles-innovation\/","title":{"rendered":"Current Design of Minimum Wage Increases Income Inequality and Stifles Innovation"},"content":{"rendered":"

I came across this USA Today article while sitting at the airport \u2013 <\/span>Minimum Wage Rates May Climb<\/span><\/a>.\u00a0 I felt inspired to throw out another perspective on this issue.\u00a0 The premise of minimum wage was to prevent income inequality.\u00a0\u00a0 Fair Labor Standards Act passed in 1938; noted wages should ensure a “minimum standard of living necessary for health, efficiency and general well-being,” plus, “without substantially curtailing employment.”<\/span><\/span><\/p>\n

I believe there is sufficient history to re-examine the efficacy of minimum wage.\u00a0\u00a0 My contention is the current construct of minimum wage not only provides a minimum standard of living, but it also promotes that form of living versus a desire to do better.\u00a0\u00a0 The \u201csubstantially curtailing employment\u201d is objective.\u00a0 In my mind, minimum wage has substantially curtailed employment.\u00a0\u00a0 In fact, it has also curtailed innovation.\u00a0\u00a0 Minimum wage has supported the incumbent companies stifling competition and innovation.<\/span><\/span><\/p>\n

Refuting the core efficacy of\u00a0 the current design of minimum wage is easy.\u00a0\u00a0 Examining the history of income inequality, it shows the value of having the current design of minimum wage has not helped.\u00a0 The below graph I pulled from Wikipedia \u2013 of course I have validated it \u2013 (one cannot trust Wikipedia 100%).<\/span><\/span><\/p>\n

\"\"<\/a><\/span><\/span><\/p>\n

Many other sites have shown the income equality has only gotten worse with a minimum wage policy (see <\/span>http:\/\/www.ritholtz.com\/blog\/wp-content\/uploads\/2011\/09\/Rising-executive-pay.png<\/span><\/a> & <\/span>http:\/\/www.ips-dc.org\/campaigns\/tax-dodging-ceos\/index.php<\/span><\/a> )\u00a0 Re-designing the minimum wage and the multiple restrictions in starting and creating a company, I would contend, will create many competitive companies not allowing corporations to outsource and further consolidate wages.\u00a0 Mitigation of income inequality has failed to occur in the time period of minimum wage.\u00a0\u00a0 We can pretend that it will eventually prove itself, but I will reference Albert Einstein \u2013 doing the same thing over and over again and expecting different results is insanity.<\/span><\/span><\/p>\n

For those less numerically inclined, I will try to employ some logical deductions.\u00a0 When one decides to start a business and try something innovative and different, there are many roadblocks developed over time to prevent you from succeeding, largely from the support of the incumbent corporations.\u00a0\u00a0 One of the key areas of growing a business is expanding through employment.\u00a0 However, as those who have hired before, realize the choices of people vary in terms of work ethic and capability and it is extremely hard to know beforehand.\u00a0 An ideal situation would be to hire multiple employees in hopes of finding the one or two that will just fit in perfectly.\u00a0 Ideally, they would promote that individual to take on greater responsibility with greater rewards.\u00a0 With a minimum wage structure your ability to experiment and hire multiple employees and eventually promote and reward become limited.\u00a0\u00a0 A cost structure that does not allow experimentation will result in lowering the potential of the individual and the new company.\u00a0\u00a0 Obviously, an incumbent organization can more afford to employ the strategy of hiring multiple individual to find that star performer, leaving the pool even smaller for the new company.<\/span><\/span><\/p>\n

One of the original\u00a0reasons that minimum wage\u00a0exist was\u00a0due\u00a0to significant abuses by employers.\u00a0\u00a0 During those time periods, communications and information traveled very slowly.\u00a0 The sweat shop concerns in the US will be nullified via social network.\u00a0\u00a0 Much of the US has the ability\/access to the internet as compared to the third world employees.\u00a0 An elimination of minimum wage will likely do more to reduce sweat shops since these third world sweat shops are ignored by the general public.\u00a0 Creating a competitive US workforce company will bring the discussion to the forefront.<\/span><\/span><\/p>\n

Another logical deduction is to come from the employee point of view. \u00a0\u00a0I could imagine a situation for a young student to work for \u201cfree\u201d or very minimal for only the pure desire to obtain knowledge, which can be used later in life.\u00a0\u00a0 My thinking is focused on enabling the individual to get out and do something with their skill set.\u00a0\u00a0 It\u2019s rooted in finding and maximizing the ingenuity of the individual.\u00a0 Eventually some of those individuals will create a small business then perhaps a large business.\u00a0 In addition, I am not advocating the removal of all regulations (e.g. building standards \u2013 but if one can build to a standard why not allow that person to build \u2013 buyer beware in terms of cost).\u00a0\u00a0 Let us unlock the power of the individual versus holding everyone back.<\/span><\/span><\/p>\n

Given the\u00a0historical results\u00a0of the past 74 years, the current design of minimum wage\u00a0is holding a large segment back.\u00a0 With a re-design of minimum wage and other similar obstacles for new companies, this country will see a resurgence of private companies and employment.\u00a0 A potential re-design solution could be eliminating the minimum wage for companies under a certain income level.\u00a0 These\u00a0new companies will create a competitive force to the inertia of status quo and make a change to corporations\u2019 ability to outsource and further consolidate wages.\u00a0\u00a0 <\/span><\/span><\/p>\n

The value of multiple\u00a0smaller companies can be seen in the shale gas revolution<\/a>.\u00a0 Shale gas was driven by the smaller independents as the large multi-national companies could not see and\/or innovate to produce shale gas.<\/span><\/span><\/p>\n

 <\/p>\n

We positively and evocatively challenge the current thinking involving any aspect of energy use. We look for projects that offer meaningful, transformative, with impactful outcome to the marketplace or society (see projects<\/a>).<\/p>\n

 <\/p>\n

Please consider All Energy Consulting for your consulting needs.<\/p>\n

 <\/p>\n

Your Energy Consultant,<\/span><\/span><\/p>\n

David K. Bellman<\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

I came across this USA Today article while sitting at the airport \u2013 Minimum Wage Rates May Climb.\u00a0 I felt inspired to throw out another perspective on this issue.\u00a0 The premise of minimum wage was to prevent income inequality.\u00a0\u00a0 Fair Labor Standards Act passed in 1938; noted wages should ensure a “minimum standard of living […]<\/p>\n","protected":false},"author":1,"featured_media":216,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,3],"tags":[34,68,72,14,13,73],"class_list":["post-209","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-insights","category-natural-gas","tag-economy","tag-innovation","tag-minimum-wage","tag-natural-gas-2","tag-shale-gas","tag-small-business"],"_links":{"self":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/209","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/comments?post=209"}],"version-history":[{"count":10,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/209\/revisions"}],"predecessor-version":[{"id":217,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/209\/revisions\/217"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media\/216"}],"wp:attachment":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media?parent=209"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/categories?post=209"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/tags?post=209"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}