The Business Elite Shuffle

 

It's long past time to raise the minimum wage.

One of the goals President Barack Obama outlined in last week’s State of the Union address was a long overdue raise in the minimum wage. Obama proposed increasing the national minimum wage, which is currently an anemic $7.25 an hour, to $9.00.

While a measly $1.75 increase would hardly be sufficient for most working-class Americans, the renewed attention to the minimum wage the president generated is at least encouraging. The simple fact is American workers in low-skilled jobs are not getting paid what they are worth.

Of course, even if enacted, Obama’s proposed minimum wage hike would not take effect until 2015. And, as already noted, $9 an hour, even for an individual worker, is not nearly enough to make ends meet. According to The New York Times’ editorial staff, economic measures—such as “purchasing power, average wages and productivity gains”—dictate the minimum wage should be at least $10 an hour (“From the Bottom Up,” 02/18/2013).

As it is, candidate Obama campaigned on a minimum wage of $9.50 an hour in 2008. So the new goal of $9 an hour is low even by Obama’s standards.

A quick note regarding terms before moving on: 

 

A higher minimum wage should not be confused with a “living wage,” which is roughly defined as the hourly rate an individual must earn to support one’s family if that person is the “sole provider and is working full-time.” Unlike the fixed minimum wage, a living wage would vary from state to state, based on overall living costs. For example, a living wage for one adult and one child living in Portland, Maine, according to MIT’s online Living Wage Calculator, would be $22.50 an hour. It would be $26.99/hour for one adult and two children; $21.22 for two adults with two children; and $9.88 for one adult with no children. (The minimum wage in Maine is $7.50.)

Regardless of what kind of a wage we are talking about, the fact remains the United States has the lowest minimum wage of all the industrialized nations in the world. Australia, France and Ontario, Canada all pay their workers a higher minimum wage—and most of them also provide universal health care not tied to an employer to boot.

 

In fact, according to Nobel Prize-winning economist, Joseph Stiglitz in his recent book, The Price of Inequality (Norton, 2012), decades of diminished worker wages have prevented the minimum wage from keeping up with inflation. As a result, Stiglitz writes, “…the real federal minimum wage in the United States in 2011 is 15 percent lower than it was almost a third of a century ago, in 1980” (p. 242, italics his).

Predictably, penny-pinching business owners have already slammed Obama’s proposed minimum wage hike.

 

A story in The Portland Press Herald last week (“Maine critics say raising the minimum wage has risks,” 2/15/2013) quotes local “small business” owners who drag out the tired conservative argument that higher wages inevitably lead to higher unemployment.

“Opponents of Obama’s proposal say that raising the federal rate to $9 an hour would prevent employers from hiring more workers,” the story states. Staff writer Jessica Hall then goes on to quote Jake Wolterbeek, owner of Jake’s Seafood restaurant in Wells—a wealthy tourist town hardly representative of all of Maine—who bemoans the prospective of having to give his entire staff a raise if the wage-hike were enacted. Judging by the gridlocked traffic in Route One, Wells every summer, I am more than confident Mr. Wolterbeek can afford it.

Actually, the only thing “preventing” employers from hiring more workers would be a lack of business--i.e. demand for their product. Basic supply-and-demand economics suggests higher wages would mean workers have extra money to spend on luxuries (like eating out at Jake’s Seafood, for instance). That’s more money that would circulate in the economy, thus leading to greater overall consumer demand and, therefore, more jobs. (After all, consumers, through their purchasing power, are the true job-creators—not the wealthy as is often claimed.)

Furthermore, the argument that higher wages are a “job killer,” has been thoroughly debunked by a range of economic studies. According to the Times Op-Ed a Federal Reserve Bank of Chicago study concluded, “[A] $1 increase in the minimum wage results, on average, in $2,800 in new spending by affected households in the following year...”

 

Or, as NYT columnist, Paul Krugman writes in the same issue, “…the main effect of a rise in minimum wages is a rise in the incomes of hard-working but low-paid Americans—which is, of course, what we’re trying to accomplish” (“Raise That Wage,” 2/18/13).

Now, if Wolterbeek and the rest of the business elite are simply too cheap to pay their employees a decent wage that reflects their labors’ worth… well, that’s another thing entirely.

Growing up in Kennebunk (pre-Zumba-era), I had no trouble finding summer jobs at local restaurants. I remember making close to $9 an hour washing dishes and preparing desserts at the Arundel Wharf restaurant in Kennebunkport, a popular tourist stop. As a teenager, that was good money for CDs, rock concerts and filling the tank of my red Eagle Summit—my primary financial obligations at the time. Problem is, some 15 years, a college education and a devastating economic recession later, $9-$10 an hour is the starting pay for the few jobs currently offered. Such a wage was fine when I did not have a monthly rent, a college loan, a phone and electricity bill, and the like.

And those are just my individual expenses. I cannot fathom how families with two or three children make ends meet on such meager wages. I really can’t.

Again, even if enacted, Obama’s anemic increase would likely not make a significant difference in working-class Americans’ wages. But the important thing is the issue has been pushed back into the public dialogue. We need to ensure it stays there until lawmakers get the message: Workers are the backbone of our economy. We deserve to be paid what we are worth.

 

 

Watch Bill Moyers' excellent conversation with economist Richard Wolff, from the latest episode of Moyers & Company, below.