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Blog Post#9 (Class 15) – Cheng Dong
March 19, 2015 | Leave a Comment
Class 15: Living Wage – Myths and Realities
Having read through the readings, I can’t help but find the work of Forbes’ John Goodman on the myths of income inequality to be the most interesting. Though by interesting, I do not mean that the reading is an enlightening piece of work, but rather it’s quite disturbing to read as the writer seems to shifts the fundamental beliefs that we have on the issue of income inequality. The writing has ideas that could be looked into, while also containing others that are quite ill-considered. After reading the other two articles, I feel that Goodman could draw from these readings to bettering his own before suggesting to others that certain belief that the public hold about income inequality is simply a myth.
Perhaps the most disagreement I have with Mr. Goodman is his stance on the income of stagnant income of people from the lower income levels. Mr. Goodman tries to prove that the income for the average families has increased over the past years by setting the situation to an optimum state, in which all taxpayers in the family can achieve median income and the size of families drops to a certain point. On the other hand, Mr. Goodman also suggests that family income has risen due to tax cuts, government transfer payments, and employer provided health insurances. I have found these so called increases to be rather unconvincing, as family situations are unlikely to be as well as Mr. Goodman expects them to be and the fact that Mr. Goodman fails to account for the increase in the cost of living over the years as well. There may be families in which all taxpayers achieve average income, but that certainly does not include ones that are single parent working minimum wages. While the increases in government benefits has given more incomes to the poor, there is no guarantee that the increasing living spending over the years have been counteracted. How can we be sure that the purchasing power of the poor has actually increased with the increasing wage? Not to mention that Mr. Goodman based his argument on the average family, which means that the data could have been pulled up by increasing income of the upper income level families while the low income families still suffer stagnation of income. Another issue that we can’t ignore is that many of the people living under the poverty line does not have a wage increase to talk about as they have no job at all.
Thus we are brought to the second myth of Mr. Goodman on income inequality, where the blame lies for those who ended up on the bottom of the income brackets. According to Mr. Goodman, the people living under the poverty line are there due to no one’s fault but their own. These people are there because they don’t work. Reading up to this point, I felt a sense of anger towards Mr. Goodman, as he simply fails to relate to the poor. It is true that a great proportion of people living under the poverty line are there due to unemployment, but that is not entirely their fault. Some of these people are unemployed because they have the wrong technical skills in their place of residence and can’t afford to move where opportunities fit their abilities. Others have no technical skills to talk about due to lacking educational resources in their youth because their families were also poor. Mr. Goodman is overly general in his criticism of the unemployed as a great number of them aren’t unemployed by their own decisions or controls.
However, Mr. Goodman does have a great stance on the issue of government subsidies and minimum wages. Like he says government subsidies towards the low-income groups tend to be ineffective in bettering their statues due to the development of dependence on these subsidies. In many instances, workers are reluctant in searching for work or even getting a raise at their jobs due to the fact that increase in income would make them ineligible for government subsidies, and actually make them gain less than when their earned less wages. In the case of minimum wage, there is the issue that many working for minimum wage isn’t living in poverty and the groups that minimum wage is intended to help didn’t get the benefits. While minimum wage could also hurt the group it’s meant to help by forcing employers to fire their staff or raise the price of goods, leading to an increasing living cost for everyone. Like Andrew Hawkins of Crain’s suggested, small businesses like those franchise restaurants ran by private owners might not be able to handle that kind of pressure. Yet, even these arguments are not without exceptions. Take the article by Jana Kasperkevic of The Guardian for example; the restaurant service industry desperately needs a higher minimum wage to decrease their reliance on customer tips. Without a higher standard wage, waiters depend greatly on the mercy of the customers to decide how much they make in an hour. People bringing food to our tables can’t afford to do the same for themselves sometimes due to instability in income, and therefore a great deal of their life planning. Now of course, as we talked about the issue on Kasperkevic’s article, small restaurants may not be able to handle minimum wage going up to $15 per hour. However, it is only reasonable that they slightly draw up their waiter’s payroll to keep their life in balance.
Mr. Goodman has a good argument regarding these myths of income inequality. The problem that he has is that he fails to corroborate his stories from a different angle. On the issue regarding the increase in income, one must understand that rise in the amount of income is worthless if the purchasing power of the income does not increase along. The question is did the purchasing power of average families increase along from 1979 to 2007? How much was the rate of inflation over that period of time? More than the rate of increasing income? Other issues that I spoke against Mr. Goodman on shared the same problem, there is not enough sides covered by his statements. Take the issue on the people at the bottom of the income ladder for example. Mr. Goodman failed to mention whether these people are not working based on their own decisions or their inability to find suitable work. If only Mr. Goodman was able to cover all the basis for these issue, his arguments would have been much more convincing.
