The strident polemic from extremists on the political Right and Left so common today has drowned out reasoned discussion of minimum wage increases, confusing the public that looks to experts for guidance. The selective statistics each side trumpets recall the adage “The Devil can cite Scripture for his own purpose;” and half-truths abound.
Restaurant industry PR spokesmen funnel large sums to “special pleaders” opposed to wage increases, while trade union spokesmen support those in favor of increases; with ideologues working fervently on both sides of the issue. The conservative Heritage Foundation presents numbers wildly different from those of liberal think tanks, and conservative Forbes Magazine often describes a different world from that pictured by the liberal New York Times.
Even partisans at the recent World Economic Forum in Davos, with income inequality at the top of the agenda, tended to take simplistic positions — those theorists arguing for a zero legal minimum wage ignored the impact on the reduced bargaining power of the poorest; those liberals pointing only to hourly wage figures ignored compensation benefits that increasingly include health care, paid vacations, day care, and the like. How much more one can buy today for an hour’s work is usually not quantified by the Left, and how even a small increase in income can significantly improve lives of the poor is ignored by the Right.
Voices on the Right claim that the numbers of workers at minimum wages or less is small (3.6 million) and shrinking, that they are young and not uniformly poor or struggling, that half work in food service, and that wage increases will be paid by customers who may be no richer than the workers.
Voices on the Left assure us that raising the hourly minimum wage (currently $7.25) to $10.10 by 2016 would affect 27 million workers with an average age of 35 and would reduce those below the poverty line by some 5 million—without requiring the government to tax, borrow, or spend. On the contrary, they say, it would cut government welfare spending by some $40 billion, while also providing economic stimulus that would increase tax revenues. The relentless drive toward automation will continue in any case.
Business spokesmen shed crocodile tears over the poor who will lose jobs if wages are increased, while academic and government studies show that past increases in the minimum caused no actual job loss. Some on the Left, like Senator Elizabeth Warren, claim that if the minimum wage had risen in tandem with national worker productivity, the hourly minimum today would be $22. Most reputable economists believe that a hike to $22 would indeed be reflected in a loss of domestic jobs and foreign exports, while small increases (like Obama’s proposed $10.10 by 2016) would be felt largely in local food services. (Paul Krugman writes, “Americans are unlikely to travel to China for a hamburger and fries.”)
Conservatives and liberals do agree on the desirability of an Earned Income Tax Credit (first proposed by conservative economist George Stigler and endorsed by Milton Friedman), a major financial benefit which does not diminish the incentive to work, at least for the poorest. Liberals want the E.I.T.C in addition to, not instead of, minimum wage increases; they also want extended unemployment insurance and restored food stamps.
Today the benefits of increasing American productivity flow to profits, executive pay, and shareholder returns rather than to workers’ wages—and automation, globalization, and international outsourcing are stifling employment prospects for our unskilled, semi-skilled, and even skilled labor force. There are those (and I am among them) who believe the obvious answer—to maximize our national human potential—is free high quality education, from preschool through university, with admission based only on ability to learn.
In the meantime, we are challenged both to increase the size of “the American pie” and to apportionate it fairly and wisely; past experience indicates the proposed increase in the minimum wage seems a prudent (and humane) step.
The 600 leading economists (including seven Nobel laureates) who signed the Economic Policy Institute’s letter to Congress in support of the increase made a compelling case. The recent Quinnipiac poll showing that 71% of American voters (including 52% of Republicans) support the increase should not be lost on even the most obtuse congressman.
Theoretically, in a free market economy there should be little role for government wage regulation; but today we will not accept “nature red in tooth and claw,” or Tea Party guidance.
A moderate increase in the minimum wage will help those at the bottom, will not harm the rest of us and will conform to the public’s sense of fairness. Those business groups unaware that their own best interests are served by a financial system that is, and is seen to be, fair for all are a problem. America needs a dynamic, productive, capitalist system in spite of the capitalists
(Daniel Rose’s talks may be found on www.danielrose.org)