Jacksonville Reform: The Wage Price System

Jacksonville Reform: The Wage Price System

By: Robert Montgomerie

A look through the want ads on-line and in the newspaper can be a sobering experience

for those in the market for a new position for what ever reason. Lately many companies are not

offering what they were just two or three years ago. Many positions right now open in small to

medium sized companies, who advertise a starting wage, are offer barely above the federal

minimum wage. Companies will site a down economy as a reason for why starting wages are

so low but that is largely untrue. The real reason is simply because they can.

Employment, like any good or service, is based upon a system of price and that price is

dictated by supply and demand. With unemployment rates above ten percent in a city like

Jacksonville, there is an abundant supply of candidates for a few open positions. If there are

fifty candidates applying for a handful of retail sales positions around town a company will set the

wage price at or just above the minimum they can get away with paying. In many cases that rate

has gotten closer to the federal minimum wage of $7.25 an hour. A local security company, known

by it’s boasts of rapid response in it’s advertisements, has lowered wages in such a manner since

2009. Then a worker just starting was paid $10.00 an hour or better when unemployment rates

were lower. A year later the same positions started at $1.00 to 1.50 an hour less as the

unemployment rate increased. They could slowly replace more expensive employees with better,

or just as qualified, workers. It didn’t matter if the candidate was better qualified or had better

education. They offered the same money because they knew with so many candidates someone

would take it rather than starve. The wage price system is set by companies based upon demand

for their positions and the supply of candidates.

The wage price system is the reason why an important price control, the federal minimum

wage, was legislated. Because companies had an unfair advantage over workers the minimum

wage was proposed as a means to make them pay fairly. In 1938, when unemployment was at

twenty percent, the minimum wage was twenty five cents per hour. Before that annual incomes

dropped from $2300 per year, when unemployment was 3.3 percent, in the twenties to $1500

per year when unemployment was at twenty percent. The idea of a minimum wage, in addition to

fair pay, was to give people a chance to be self sufficient. By 1968 when the minimum wage was

raised to $1.60 per it kept over 80% of low income earners above the poverty line. Today that

figure has dropped to a shameful 64%. Even with the minimum wage in place as a price control

it hasn’t been enough to counter balance slow wage growth. From 2001 to 2007 the bottom 80%

of wage earners grew only .6%. While low income earners stagnated, the top 20% percent saw

their wages grew 5.3%. Despite two raises in the raises in the minimum wage in the later part

of the decade for Jacksonville wages have not only stagnated but have regressed due to

companies seeing an opportunity because of the overwhelming demand for jobs.

The tendency of companies to act in the interest of maximizing profits at the expense

of their employees, existing or newly hired, points out the need for government act of behalf of it’s

citizens to protect them from exploitation and to help improve standards of living. In communities

across the country living wage laws have been enacted in addition to state minimum wages. A

living wage law helps workers because it sidesteps the wage price system and it helps area

businesses, whether or not they like to think so, as it gets money circulating again through

stimulating consumerism. Here in Florida the minimum wage is a whopping .06 cents an hour, or

$7.31 adjusted for inflation, above the federal minimum wage and it is highly doubtful the

administration in Tallahassee will do anything to change that. That’s why it’s important for elected

representatives in cities like Jacksonville to make bold, independent moves to protect and

improve the lives of their citizens instead of waiting for change to come from Washington DC or

Tallahassee.