One size fits none: Why a national minimum wage makes no sense

Article Highlights

  • What’s the right minimum wage? It depends on where you live.

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  • How can the same minimum wage be right for NYC and Birmingham when NYC’s cost of living is 2.5x greater?

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  • In a country as vast and diverse as the United States, a one-size-fits-all minimum wage just doesn’t work.

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What’s the right minimum wage? According to President Obama, it’s $10.10 per hour, the amount to which he has proposed lifting the minimum wage. Ask progressive activists and it’s $15 per hour, what they call a “living wage.”

But the real answer is: It depends on where you live. How can the same minimum wage be “right” for Manhattan and Birmingham, Ala., when Manhattan’s overall cost of living is 2.5 times greater? Manhattan will have higher average wages, and Birmingham lower wages due to these differences in the cost of living, but these wage differences say nothing about the quality of life that workers enjoy in the two areas.

Differences are even more extreme when you move out of metropolitan areas and look at rural counties, where costs of living – and yes, wages – can be much lower than in big cities. What seems like a reasonable minimum wage to someone living in San Francisco or New York City would be enough to price a low-skilled worker out of a job in a rural area like Boone County, Arkansas, where the cost of living is roughly 40 percent below the national average.

The conclusion is that a national minimum wage doesn’t make sense when the cost of living in different labor markets can vary so much. Each state – and even each city or county – should be able to set its own minimum wage. And that minimum should be lower than the national minimum if that area’s elected officials think it makes sense for their labor market.

In a country as vast and diverse as the United States, a one-size-fits-all minimum wage just doesn’t work. And the people who suffer from it are low-skilled workers in low-cost areas who will be priced out of the labor market by a national minimum wage that doesn’t make sense for them.

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