If state and federal lawmakers look to economists for guidance as they contemplate raising the minimum wage, they’re bound to be befuddled.
Economists have been dueling for two decades over whether the economy in general and low-wage workers in particular gain or lose when the minimum wage rises. The gain from higher wages — and consequently higher spending — by some workers exists in tension with the burden higher labor costs place on employers. The resulting tilt is a matter of dispute.
But the policy debate in Washington and St. Paul this year is not only about economics. It’s also about values.
That’s especially so in Minnesota, a state known for its work ethic. Minnesotans believe that work has intrinsic value that ought to be recognized with a decent paycheck. They hold that work should always pay more than idleness, and that full-time work should assure reasonable freedom from want. It should also relieve taxpayers from the need to provide workers with life’s necessities.
If those Minnesota values are their guide, state and federal legislators will raise their respective minimum wages this year. President Obama has proposed taking the federal minimum from $7.25 an hour to $9 in stages through 2015. That change would apply to businesses that engage in interstate commerce or have annual revenues in excess of $500,000.
In Minnesota, the Legislature is considering several bills that would raise the state minimum, which primarily governs employers with annual revenues below $500,000. For them, today’s hourly wage floor is $5.25, among the lowest in the nation (see box, right). A few larger employers that don’t qualify for the federal minimum must pay a state minimum of $6.15. Several proposals under consideration in St. Paul would raise those floors to amounts ranging from $7.25 to $10.55.
We favor Obama’s proposal and the more modest of the state proposals, save for one feature. Both would link the minimum wage to an inflation index, so that future increases would occur automatically without votes by lawmaking bodies.
That much autopilot is worrisome in a volatile economy — though its appeal is understandable, given the long intervals that have become habitual between congressional and legislative action on the minimum wage.
The state’s wage floor was last lifted in August 2005; its previous boost had been in 1997. Congress last acted in 2007 on increases not fully phased in until 2009. Inflation has eroded the value of the current minimum to a level not seen since the 1970s, according to the Obama administration.
Instead of autopilot increases, we’d prefer a concerted effort to revive a sense of stewardship for the minimum wage among elected officials. They should retain the capacity to adjust the wage for rapidly changing conditions in particular industries.
In St. Paul, if legislators insist on a tie to inflation, it should include automatic suspension of inflation-indexed increases during recessions or whenever the unemployment level exceeds a threshold level, say, 6 percent. (Minnesota’s unemployment registered 5.6 percent in January, according to the latest state report.)
One business category — restaurants — has long claimed it deserves special treatment. About a third of Minnesotans employed as food preparers and servers are paid the minimum wage, according to a state count, though many of them take home more than the minimum because they also earn tips.
Minnesota has long declined to follow the lead of other states in setting a lower minimum wage for tipped employees. This year, the Minnesota Restaurant Association is asking that employees tipped at more than $4.25 an hour in a pay period be governed by a minimum wage no higher than the current $7.25 federal hourly minimum.
The Legislature’s DFL majorities are likely to be wary of this notion, for good reason. Wages for tipped employees were a high-profile issue in the 2010 gubernatorial race. That election’s outcome suggests that Minnesotans believe an employer’s duty to pay a minimal wage is not diminished when that employee receives often unpredictable additional pay from customers.
That affirmation during economically difficult 2010 underscores our point: Since its adoption in 1938, the minimum wage has been about values as well as dollars. It’s a response to history’s lesson that society destabilizes and democracy suffers when labor is chronically undercompensated.
Despite a recovery that’s gaining steam, the latest count found 93,000 Minnesotans — 6 percent of the hourly-wage workforce — paid at minimum-wage levels. Depending on a recovering economy alone to reward their work in a manner consistent with Minnesota values leaves something important to a marketplace whose values often appear to be quite different.