‘Wages? Do you want to be wage slaves? Answer me that!
“No, of course not. But what makes wage slaves? Wages!”
Groucho Marx, “The Cocoanuts”
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In Minnesota and across the nation, throngs have taken to the streets to demand that workers who earn the least make more. Many seek a minimum wage of $10 an hour; some want $15.
That’s significantly more than the bottom rung of workers makes. In Minnesota, the minimum wage stands at $9 an hour.
In many states, low pay is even lower. The federal minimum wage has been stuck at $7.25 an hour for six years. Twenty-one states offer not a nickel more than the federal minimum.
Yet the clamor for a higher minimum keeps growing louder. The impertinence of some people.
Don’t they know the facts about the minimum wage? It kills jobs. It undermines profits. It coddles kids from middle-class families, not just the poor. It invites inflation. It is a weak substitute for tax credits to encourage work by the unskilled and inexperienced.
All true, more or less. But given the current economic climate, the case for doing nothing grows weaker and the case for action becomes more compelling.
Do businesses cut jobs and hire fewer workers when the minimum wage rises?
No doubt. But any increase in wages — for anyone, at any pay scale — can make workers targets for layoffs. And changes in technology, the decline of unions, foreign competition, and the rise in “contract workers” toiling without overtime or fringe benefits have caused far more disruptions in the workforce than paying more to the workers who make least.
When I was young, I had two very different experiences with selling my labor for money. The first, in the late 1960s, was as a sub-minimum “tip” worker, a bellboy paid 70 cents an hour. It was a cold introduction to capitalism, schlepping luggage up stairs for whatever change visitors offered.
In college, I struck it rich. I made my tuition — and them some — working two summers in the General Motors St. Louis assembly plant.
Both jobs — innkeeper lackey and prosperous factory worker — had one thing in common: each all but disappeared.
Who needed help with the luggage after someone invented rolling bags and motels installed elevators? Why hire at an auto plant when robots can do the job faster — and with no pay demands?
An increase in the minimum wage to $10.10 in 2016, a proposal favored by President Obama, would pare a projected 500,000 jobs from the U.S. economy, by the reckoning of the Congressional Budget Office (CBO.)
But 33 million workers now making less than $11.50 an hour would see their real incomes climb by $31 billion, as employers lift pay not only for minimum-wage workers but for current workers making slightly more. Experienced workers clamor for more when they see newcomers getting raises.
The greatest good for the greatest number, a worthy trade-off. Especially when no one can assume that any job created this year still will be around the next.
Raising wages pares profits. But spare your tears.
The federal minimum wage peaked in 1968, after factoring in inflation. The floor on wages when LBJ was president translates to $11.02 in today’s dollars.
Higher wages are a problem for employers only if worker productivity grows more slowly. But, at the bottom end of the pay scale, real wages have declined and examples abound of output per worker soaring.
People order pizzas online, reducing errors and the need to employ people who exclusively answer the phone. In many pizza restaurants, the dough is prepared daily at a central kitchen. Delivery drivers with GPS no longer get lost.
Trash haulers used to travel in trios. A driver, with two collectors walking behind to empty cans into the back of the truck. Today, the driver, in many cities, works alone, using mechanical arms to lift and empty trash cans designed for automated pickup.
Clerks in supermarkets once spent hours pasting price tags onto cans of soup, boxes of cereal and bags of flour. Universal price codes, scanned at the register, saved store owners countless hours of labor. More goods placed on shelves in less time.
Who pocketed the gains? Not the low-paid workers.
What’s more, the mom-and-pop shops often cited as examples of suffering from minimum-wage hikes get a break. In Minnesota, they pay $7.25 an hour — a rate set to rise to $7.50 next August.
Minimum-wage gains go to kids from families in middle-class homes.
More than a third of minimum-wage earners come from families with incomes three times — or more — as high as the poverty level, the CBO estimates.
That suggests the minimum wage is a flawed tool for targeting financial benefits to the most needy. It is.
But one of the goals of the minimum wage, introduced in the New Deal era, was to shield as many people as possible from the employers eager to drive labor rates as low as the market would bear. It worked.
What’s more, don’t assume that young, minimum-wage workers from middle-class homes seek cash only to pay for parties.
A University of Minnesota undergrad in 1968 would have had to work 184 hours to make as much, before taxes, as the annual tuition. Today, at the $9-an-hour Minnesota minimum wage, that goal requires working 1,340 hours. That’s no party.
Raising the wage fans inflation.
Economists who say the most about the perils of raising pay at the bottom often say the least about CEOs making 300 times the pay of the average worker.
Sure, a gain in the minimum wage may add a few pennies to the cost of a hamburger and fries. Polls suggest most Americans are willing to pay that price.
In competitive industries, the price of higher wages will be shared by consumers and business owners.
Noticed accelerating inflation since the last minimum-wage rise? No.
A better way to aid the disadvantaged is at hand, but getting little attention.
The U.S. Earned Income Tax Credit lifted an estimated 6.2 million people out of poverty in 2013. A Minnesota version of the credit in 2015 will put a projected $208 million into the hands of 340,000 of the state’s poorest working families.
These programs give the working poor anywhere from a few hundred dollars to a few thousand dollars. Based on income, they benefit only people who work.
So why not let the U.S. government — and 24 states with tax credits for poor working families — do all the work in raising incomes at the bottom of the wage distribution? No need to burden business with ever-increasing minimum-pay rules.
Great idea. Too bad politicians find reasons to vote no.
Everyone understands the minimum wage. Under public pressure, more than a score of cities, from Seattle to Santa Fe and Chicago to Washington, D.C., have raised local minimum wages in recent years. Target and Wal-Mart are among the companies who’ve raised their base pay — partly to quiet critics and partly to reduce worker turnover.
In contrast, the words “Earned Income Tax Credit” invoke blank stares. Until the streets are clogged with rallies for changes in tax code, the minimum wage will attract more enthusiastic voter support. Seize the day.
Republicans and Democrats once agreed that the Earned Income Tax Credit was the best way to encourage — and reward — the labor of the poor.
In recent years, as Congress and state legislatures, pared budgets, some Republicans even called for gutting the credits. After all, the Earned Income Tax Credit is a major reason why four of every 10 working Americans pays no taxes.
Horror! The poor have “no skin in the game.” “Everyone should have to pay taxes.”
Yes, raising the minimum wage is a far-from-perfect strategy. But no matter how flawed anti-poverty plans may be, opponents walk about with a whiff of condescension.
I once had lunch with an economist who had spent years advising President Ronald Reagan. I asked why he hadn’t done more to advocate for people living in poverty.
“Who’s going to wash the plates after we eat? Who’s going to wash the windows? Who’s going to mow the grass?” he said, as we sat in his cushy enclave, the Harvard Faculty Club. “Every distribution has a bottom decile.”
At least we can ensure those dish cleaners, window washers and grass mowers don’t wait years for a raise.
Mike Meyers, a former Star Tribune business reporter, is a Minneapolis writer.