Introducing the 'Inflection Theory', a new way to optimize the Minimum Wage. #CanWeAgree

This is my 9th post in a series of articles I am writing on various subjects in such a way to identify things about the problems that we can all agree on.?My intention is not to attempt to change 'what' people think, but am focused on 'how' people think.?The bold items are things that I believe #WeCanAgree on, but please challenge them in the comments if you do not. This post 'kind of' dove-tails on the Geographic Indexing #CWA, but that is related to a higher level issue regarding decisions and geographies acknowledging cost of living.

1) Jay is not a professional economist and couldn't even play one on TV.

I am fairly confident that I did not get better than a B in either Micro or Macro, and regret that I didn't 'get it' more in college, now 35 years ago. I just wanted to start off with this as it will become very obvious. In Boston, I hung out with a long-time friend who is a famous economist (hoping soon to get her own Nobel Prize), and it reminds me that Freshman Econ majors probably know more about this as a science than I do after over 30 years of working.

2) We don't really enforce a 'minimum' wage across all work.

This is just a point I like to make, as we have a minimum wage cliff, but we also have many people doing work for others for no pay. Some charities pay their executives 100s of thousands dollars and even over a million dollars in salary, but then have people working for them for free as volunteers. For years, Professional Sports cheerleaders made minimal amounts as many who do that are not full-time employees or are not using that as their sole employment, but freely chose (and vigorously completed for it) that as they had additional benefits, including fame, as an incentive to justify the sacrifice and time. I am not going to digress into this subject, but do like to remind people of it as it is a complicated subject.

3) Any law regarding a minimum wage should optimize something.

The simple point here is if we are going to create a law related to minimum amounts of payment, there should be a focus on what it will achieve, and the hope should be the optimization of 'something'. The number of different things seems endless if you think about it - number of people working, minimization of social services, total tax revenue, total business revenue, total employment growth, minimization of unemployed (different than people working). So many things to consider!

Some people are focused on living wage and ensure people don't work for less than 'they' need to support themselves (or a theoretical person's living wage), while at the other extreme people want to eliminate the government to maximize freedom in contractual relations between adults (and minors by default). While others (myself to an extent) would like to move the focus to being more granular recognizing the vast differences in cost bases in our country, probably 250% to 300% from high to low (e.g. focus any minimum wage decisions at the county level and then possibly index up from a National Minimum base), along with the vast differences in economic needs for individuals and families.

This last point aside, if we are going to do 'anything' it should have an objective, and that objective is to best optimize something, and be clear as to what it is and how we can measure and adjust it.

4) Pushing for either extreme, (1) 'no' minimum wage (national or local) or (2) an arbitrary one (too high), will have bad consequences for 'some'.

Pick a number too high and 'some' people will be left without job opportunities, and even those who remain employed will have fewer options to choose from. Eliminate it completely and we will open the gates to a mass minimization exercise of economic choices where everyone will choose 'anything' they can do and those at the bottom of ladder will take whatever is left, though this may be a better than other options for those at the bottom who may have been left out completely, but overall in terms this drives large scale wage decreases across a large segment of the group at the bottom.

5) One thing we could optimize would be total wages driven into people at the bottom of the wage scale.

I don't claim to be able to target the 'working class' or others group delineations, as these definitions are all subjective with ambiguous boundaries. The premise here is that optimizing the total wages for this group will maximize the number of people working and their wages, but 'stop' at the point where adding 'more people' at the point where the total amount begins to decrease. Defining this group, and understanding the impact on whoever we decide is above the threshold is very tricky, and should not be dismissed or ignored.

6) This is the 'Inflection Theory', and would be almost impossible to hit exactly, but still could be a good guide on how to manage this contentious issue.

The Inflection Theory first stipulates that from a certain point, as the minimum wage decreases (W), the number of people employed will increase (P). The line of people becoming employed (P) will probably be a fairly stable curve.

The overall curve of this cannot be accurately predicted, but the total wages paid (T=W*P) will reach an optimal point, and then begin to decease as the Minimum wage is reduced as the reduction becomes greater than the additional People employed or choosing to become employed.

We refer to this as the 'Inflection' point.

If the inflection point could be achieved, it would maximize the wealth driven into the working population, which also would reduce the stress, strain and public assistance required for this group as well. Individuals all have 'different' economic needs, depending on lifestyle, dependents, debt and a variety of other things.

The gap between earnings and needs, 'could' be met with a program such as negative income tax. Achieving this would be impossible, but 'trying' to achieve it would be a good start. I am not going to debate social services or other needs here, just going to point out that trying to support the most needy individuals in a group by driving up wages for all in the group has consequences that should be understood.

Just like Geographic Indexing, a term which I coined over a decade ago and I was able to convince a Presidential Candidate to use the concept in one of his debates (we had the same former boss, so I emailed him before), I am not sure how much traction this will get. But its goal is to help people move off the very simplistic and easy solutions they are proposing, as both many voters and politicians really like to gravitate to 'simple', which isn't always the best.

Thanks for reading, and welcome debate on this issue as there are many options, and all have benefits and downsides, just the usual questions are (1) for who and (2) how bad?

Minimum Wage and Geographic Indexing post is below.

https://www.dhirubhai.net/pulse/can-we-agree-federal-minimum-wage-how-should-think-jay-martin/?trackingId=ckhxLDbGRuys%2FR5qI81wlg%3D%3D

#MinimumWage #Salary #Poor #Government #Policy #Election #Laws #economy #Inflection #InflectionTheory #LivingWage #Fightfor15 #UBI