In July 2009, the federal minimum wage was increased to
$7.25 from $6.55.[1]
In his 2015 State of the Union, President Obama called on Congress to raise the
minimum wage.[2]
The minimum wage debate has caused protests and, like all topics, is hard split
by the two parties. Most of the debate revolved around raising the federal minimum wage to $15 from $7.25.
This is more than doubling the previous wage increase in just six years. The
intent of this blog is not to discuss politics but to address personal finance
concerns. So this blog post won’t be discussing whether we should or should not
increase the minimum wage; but rather, it will focus on what you can learn from
what the true debate should be on.
If you’re mathematically or economically inclined, then your
first question should or probably is why isn’t $7.25 enough anymore? What’s
changed from 2009 to 2015 requiring an increase of over 100%? The real answer
and one of the biggest problems in our economy is the damaging impact of inflation. The debate isn’t centered on
reducing the cost of Consumer Prices though; it’s simply based on increasing
the wage.
If you just analyze simple inflation, using the Consumer Price
Index from 2009-2015, then $7.25 is equal to $8 in today’s dollars.[3]
So why is the current administration and federal minimum wage supporters asking
for $15 instead of $8? The answer and another problem in our country is way we handle of our current income (regardless of what we’re currently making).
- Inflation: Every adult has experienced inflation in almost every commodity. College tuition, health care costs, movie prices, gas, food, utilities, etc. Most of us aren’t seeing our income keep pace with this inflation either. So even in times of low Consumer Price Index (which doesn’t capture all commodities) increases, inflation is still outpacing our incomes. To protect yourself, you need to start saving money for your short-to-long term goals, retirement and long-term health care costs. The economic principles of time value of money and compounding interest relies on timing to help protect you against inflation. The sooner you start saving, the better protected you’ll be against inflation.
- Handling of our current income: One of the main reasons that people want it increased to $15 versus the inflation adjusted $8 is because we don’t know how to handle our current income. People can become financially independent by making $8 an hour or by making $200 an hour. Conversely, people can be in extreme debt and financial ruin while making $15 an hour or $200 an hour. There is too much focus on how much we make and not what we’re doing with the money we’re currently making. When I help people with their finances, the first thing I do is track expenses. By raising the minimum wage to $15 we’re not solving the problem of helping people financially. To help protect yourself, you need to track your expenses and maximize the income you currently earn. I’ve always recommended to people that before you seek and pay for professional financial guidance, you need to track all expenses for 30 days. About 60% of people I’ve dealt with quickly saw where they could make life changes without earning more income.
So regardless of whether you oppose or support a federal minimum
wage increase, you can still implement changes in your life to protect yourself
from the real problem.
To publish any financial report relating to any fruitful or important author must play role being a financial report writer. Because minus the function of financial report writing this article may not express the data which is being designed to convey.
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