This week, Irene Koo and Joe Schuman go head to head on the minimum wage and the “Fight for $15” movement as part of our Political Pen Pals series. See more Political Pen Pals debates here.
Dear Joe —
The Fight for $15 began in 2012 when two hundred fast-food workers in New York City went on strike to demand a $15 wage and a union. Although this grassroots movement began in the fast-food sector, it is important to recognize exactly who—and how many workers—we’re talking about. More than 42% of all workers in the United States earn less than $15 an hour. Workers in food service, manufacturing, construction, child care, education, healthcare, and other industries (notably, even those considered “skilled” or traditionally “middle class”) would benefit from an increased minimum wage. Minorities are also overrepresented among the working poor: over half of all African Americans, nearly 60% of the Latinx population, and 55% of women workers earn fewer than $15 per hour. When we discuss raising the minimum wage, we are discussing a policy change that would radically change the lives and circumstances of nearly half of the entire American workforce.
Since its inception in 1938, the minimum wage has been raised by Congress only 22 times, and these increases have fallen far short of compensating for the decline in value since the 1960s. In 2016, the federal minimum wage of $7.25 was worth 10% less than when it was last set in 2009 and 25% below its peak value in 1968. This decline in purchasing power has brought us directly to our current morass: a reality in which low-wage workers are forced to work longer hours to achieve the bare minimum standard of living from half a century ago. A parent earning the federal minimum wage today, working full-time, does not earn enough to fall above the federal poverty line. This is unconscionable.
At the heart of Fight for $15 and wage battles more broadly is the troubling, decades-long trend of wage stagnation, as well as the divergence between productivity and worker pay. Inflation-adjusted hourly compensation for the vast majority of workers has not risen in line with economy-wide growth. Between 1973 and 2014, “typical worker” compensation grew by only 9.2% while CEO pay has risen by more than 800%. Between 1979 and 2012, the lowest 20% of American families saw a decrease in real income of 12.1%, while income for the top 5% of families rose by 74.9% during the same period. Additionally, workers’ wages as a share of national GDP have fallen almost exactly in proportion to rising corporate profits; instead of entering the real economy as higher wages or increased investments, trillions of dollars are directed toward stock buybacks and excessive dividends. In other words, the returns from economic growth in the last 40 years have increasingly accrued to the top of the pay scale, instead of to the workers generating said wealth. I want to emphasize that had the hourly pay of the typical American worker kept pace with productivity growth, today’s federal minimum wage would be $22 per hour!
Questions of justice and fairness aside, there are of course several other practical reasons to support higher wages. Higher minimum wages increase worker productivity, attract higher-skilled workers, reduce employee turnover (decreasing hiring and training costs), and incentivize more people to enter the labor force. Because the poor spend a relatively large proportion of their income, higher wages translating to greater consumer buying power also result in more robust economic growth overall.
Importantly, a higher minimum wage also pays dividends to taxpayers by reducing the demand for costly anti-poverty programs. Safety-net benefits going to low-wage workers and their families make up more than half of total spending on Medicaid, welfare (TANF), food stamps (SNAP), and the Earned Income Tax Credit. Public assistance to working families costs federal and state taxpayers more than $152 billion annually. Please pause to marvel at the efficiency of the market at work.
Since the Fight for $15 began, three states representing approximately 18% of the U.S. workforce—California, New York, and D.C.—have raised their minimum wages to $15 an hour, with other states (including Washington, Oregon, Colorado, Arizona, and Maine) and several major cities approving minimum wage increases ranging from $12 to $14.75 an hour. Several academic studies and business press reports in the last few years suggest that these measures have boosted worker pay with no discernible job loss or impact on employment. Seattle, the first city to institute a major minimum wage increase (to $15 an hour) in 2015, boasts a low unemployment rate of 3.4%, a booming restaurant industry, and no negative effect on food service employment. The sky hasn’t fallen.
With all that said, here’s my hot take: I don’t actually believe that owners of capital fear a $15 minimum wage because they think it would be catastrophic for business or employment. I think they oppose it so vehemently because they fear that it would work as intended—that it would lift millions out of deprivation, expose trickle-down economics for the scam that it is, and push this country’s poorest workers to demand en masse what they have long been denied.
If the theory of supply and demand lacks empirical evidence and fails to describe reality (which it does!), then raising the minimum wage is simply a question of morals and political will. Do we believe that all people who work deserve to be adequately compensated for their labor such that they can live a decent life? Do we sincerely believe in the American Dream™ and the notion that one should reasonably be able to work her way up to the middle class? If the answer is yes, then the path forward is clear—a fair minimum wage for all. Fifteen dollars an hour alone will not solve our crisis of inequality and the ills of the U.S. political economy, but it is a start.
Dear Irene —
Thank you for your piece on the “Fight for $15,” a continuation of the many thought-provoking discussions and debates we have had to date. I look forward to many more.
At the end of your piece, you ask whether “we believe that all people who work deserve to be adequately compensated for their labor such that they can live a decent life.” I can tell you that this is precisely what I hope for. This debate, therefore, is about the proper means to achieving that end.
A typical argument against raising (and, for some, even having) the minimum wage is that it increases unemployment and reduces business competitiveness abroad. Given that we are in an economic boom with historically low unemployment—which, as an aside, should be credited in large part to the Trump Administration’s economic policies including reducing taxes and deregulation (but we will save that for another day)—I do not think this argument is presently compelling. Although, the shock of doubling the federal minimum wage from $7.25 to $15 would inevitably increase unemployment.
However, the impacts of a $15 federal minimum wage should primarily concern us regarding the reduction of business competitiveness abroad. Increasing the minimum wage means that businesses must necessarily spend more on employment. They will not simply absorb this cost: It will be passed on to consumers through price increases, which will reduce exports and hurt businesses, as other countries produce the same products for cheaper. This will hurt the American economy, businesses, and the very individuals in the populations that you wish to assist with a higher minimum wage if they get laid off in the process. In today’s international economy, in which we are competing against countries with far lower standards of living and employment costs (such as China and India), this concern is one that we should take very seriously.
The minimum wage is a tricky thing. Money doesn’t grow on trees—it has to come from somewhere, and wherever that might be, there will be implications for individuals, businesses, and the country. I should note that I am not necessarily opposed to raising the minimum wage. I think that tying the federal minimum wage to inflation would make sense. However, I would ask: Why $15? I hope it was selected for a better reason than alliteration. The burden of proof rests with the proposition. You say that the peak minimum wage in 1968 was 25% above the current federal minimum wage of $7.25. So why not restore the minimum wage to this level, which would be about $10? (Your inequality.org source gives a figure of $10.55.) The Fight for $15 also strikes me as overly simplistic because it necessitates a minimum wage of $15 an hour in New York City as well as York, Montana. Should we not consider purchasing power?
You point out that various states are experimenting with a $15 minimum wage. I say, let them do so. The states are intended to be the laboratories of democracy. They should test policies and reap the resulting rewards or suffer the resulting consequences. Unfortunately, in the case of a $15 minimum wage, they will suffer consequences. You cite Seattle’s thriving metropolis as an example of a place in which a $15 minimum wage has been implemented. (I will ignore for now the fact that Seattle is not thriving because of a minimum wage or any other government policies or programs. Rather, it is thriving because of the capitalists and entrepreneurs at Amazon, Microsoft, and Boeing, who have created value, jobs, and a growing economy. Of course, they receive the Left’s ire for having done too well and creating too much wealth—but that is for another day.)
To your point about “no discernible impacts,” I would simply suggest observing how people are voting with their feet. You’ll notice that many states with low to no minimum wages—North Carolina, South Carolina, Georgia, Tennessee, Florida, Idaho, Utah, Texas, and Nevada—are also seeing positive growth in population as a result of domestic migration. New York and California may have made a statement with their $15 an hour minimum wage, but people are leaving at extraordinarily high rates. Many variables go into these decisions, of course, but the standard combination of increasing taxation, spending, and regulations tends to have this effect. This is happening in my home state of Connecticut as we speak, which has the eighth highest negative net migration rate. Why? Ask anyone who lives there—a downward economic spiral of high taxes, chronic budget deficits, and business flight (General Electric just moved its headquarters out of the state). A minimum wage of $10 is certainly a contributing factor among many other self-defeating economic policies. I wish things were different.
You say that a higher minimum wage would “pay dividends” to taxpayers by reducing the demand for costly anti-poverty programs. I agree these programs are costly. For all the cries of insufficient social spending, the United States spends three-fifths of our federal budget (more than $2.5 trillion) on Medicare and other health programs, Social Security, and labor. Would it be fair to assume that, were we to raise the minimum wage to $15, you would support cuts to social spending? I know you support Medicare for All. Would you support raising the retirement age for Social Security? I’m not seeing where dividends would be coming from.
You also talk about the difference between worker pay and CEO pay. I agree that workers should share in the benefits of a growing economy and successful business. However, what is the right and proper distribution? I do not believe that labor and CEO should receive the same; I actually think such a system would be unfair. Entrepreneurs who build companies take significant risks and experience significant costs—time, money, stress—and should therefore reap the rewards of success, just as they deal with the pain of loss. Inequality can also be the making of unequal things equal, as Aristotle said. Workers should be given a livable wage and should reap the benefits of success. That the CEO still takes home the biggest paycheck, even by a lot, is not overly concerning to me.
To your “hot take” about the owners of capital not wanting to increase the minimum wage because it would work, I am reminded of Charles Krauthammer’s Fundamental Law: conservatives think liberals are stupid; liberals think conservatives are evil. I would prefer that discourse assume the best intentions until proven otherwise. Many conservatives, and self-styled freethinkers like myself, simply want to determine the best means of growing the economy, creating jobs, and alleviating poverty. I believe that the free market, with limited intervention and redistribution from the government, provides the best means of doing so.
As Margaret Thatcher said, the problem with socialism is that sooner or later you run out of other people’s money. This is the problem with the $15 minimum wage, particularly if it were to be implemented alongside other “Sanders-ista” policies, such as Medicare for All, free college education, or a universal basic income. Slowly, we are dragged towards the fate of Venezuela. I’d prefer to stay true to the path that has made the United States of America the richest country in the history of the world. Here’s to the Fight Against $15.
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