Mr. Warren Buffet believes that raising the minimum wage to $15 an hour is not the best answer to alleviatingpoverty in America. Instead, he calls for the expansion of the Earned Income Tax Credit (EITC) and names this as a better alternative. All things considered, his suggestion makes as much sense as someone bringing a lone fire extinguisher to put out a forest fire.
The EITC is an excellent federal program, but its expansion is not a long-term solution to addressing poverty in America. A living wage is and will remain the best method to reduce poverty.
Mr. Buffet asserts “the poor are most definitely not poor because the rich are rich.” On the contrary, the poor are poor because the rich are rich. To be more specific, the poor are poor because the rich are too rich.
From 1979 to 2007, the wealthiest 10% in our country acquired over 91% of all gains in income. A report by the AFL-CIOstates that the CEO-to-worker pay ratio was 331:1 in 2013, as opposed to the 46:1 ratio that existed in 1983. For those looking to decry income redistribution, here’s your chance.
Mr. Buffet attributes the reason behind this widening gap to structural inefficiencies in the market. He uses the argument that, since workers do not possess the skills required for the advanced jobs in the market, increased income inequality has therefore ensued.
However, this is at best a half-truth only. A half-truth in the sense that it does not take into account the jobs in the market that will always be “minimum wage” and will remain essential in our society. If paid a living wage, these jobs would keep countless people out of poverty and lessen the degree of income inequality.
As to the part of the solution that does deal with addressing these market inefficiencies, Mr. Buffet’s take on the matter is downright repulsive. To suggest that “the brutal truth” is a great many people will be left behind because they do not possess the mental ability to succeed in this high-skills based economy is elitist as well as inaccurate.
Anyone can become a successful professional in this job market if they are provided with the necessary tools. It is not a matter of skill, but rather one of opportunity and educational investment from early childhood to college. Contrary to what Mr. Buffet believes, education of the masses can fix these market inefficiencies.
Surprisingly, his primary argument against raising the minimum wage is that it will “distort our market system.” Now, this assertion is most shocking because he doesn’t complain about the market being distorted when pharmaceutical companies are provided with strong patent protections that keep the prices of their drugs artificially high.
He also doesn’t complain about market distortions when big oil companies are supported in maintaining their monopoly by selling gasoline only (and not ethanol or methanol) at gas pumps around the country. It seems Mr.Buffet is only opposed to distorting the market when he or his colleagues are not the beneficiaries.
And to temper his concerns about a living wage drastically reducing employment, it’s best to step away from economic theory and focus on the economic realities. Cities like San Francisco, CA and Sante Fe, NM have implemented living wages and both experienced little to no effect on employment.
When living wages are properly phased into the existing wage structure, companies have time to better account for the wage increase and are able to implement changes that minimize reductions in employment. In essence, the employment issue is not as dire as critics like Mr. Buffet might have you believe.
To make matters even worse, his suggestion of expanding the EITC further places the burden on the taxpayer. The money for programs like EITC comes from the American public.
Taxpayers’ hard-earned money should not have to subsidize the payroll of billion-dollar corporations as they do now when underpaid workers are forced to rely on food stamps and other public assistance programs while corporations underpay their workers in order to increase profits. That tax money could instead be used to rebuild our crumbling infrastructure, improve our public schools, or subsidize local small businesses in helping them pay their workers aliving wage.
The minimum wage is $7.25. If it had kept up with gains in productivity since 1968, it would now be between $16-$22. When confronted with this information, asking for a $15 minimum wage is well within the bounds of reason.
There is nothing wrong about being rich. However, there is something wrong when the magnitude of one’s wealth takes away from the necessities of another’s life. Raising the minimum wage would put the system back in balance by making sure the gains in productivity are more equally spread among us. That is how we can effectively tacklepoverty and income inequality in America.