As bipartisan support for raising the minimum wage mounts, it is becoming clear that both conservatives and liberals are learning an important economic reality: we pay for our culture of low wages one way or the other, it just costs less and helps the economy more to pay a living wage to all workers than it does to subsidize the working poor through the social safety net. Given that it’s also the right thing to do in a society of plenty, this should be an achievable effort.
The old economic argument has always been that paying workers more only helps to grow an economy in which 70 percent of the GDP comes from consumption. That remains true. Clearly, if too many workers do not have enough money to pay for essential goods and services, recovery of a robust consumer economy — which tends to rely on many wants in addition to needs — isn’t really possible.
Workers on the low end also tend to spend more of their money, first on necessities, then on very minor luxuries (like cable, a more dependable vehicle or better quality food and clothing). For this reason, giving 100 poor people 100 additional dollars each month will typically do much more to grease the wheels of a local economy than giving one well-off person $10,000 would. On a larger scale, we’ve been doing much more of the latter than the former, which hasn’t been good for growth.
But if any good has come of our recent economic doldrums, I would say that it would have to be the falling of the veil over the flawed notion that most poor people are unemployed and/or poor by choice or laziness. In recent years, more and more Americans have either experienced working poverty themselves, or first-hand through someone close to them. As unemployment has remained persistent, wages have fallen and expenses have continued to rise.
The adjustments for those who have been fortunate enough to find a place in the shrinking middle class may be difficult, but for those on the bottom rungs of the working class socioeconomic ladder, the water has gone from neck deep to just above the chin — if they’ve been lucky enough not to drown.
Nearly every study of what it costs to afford basic necessities in a very spartan existence (that does not usually account for economic disasters like severe illness) puts a living wage somewhere around $15-$16 an hour (more than twice the federal minimum wage of $7.25), which is right around the median individual income here in Manatee County.
For those beneath the middle, even such a bare-bones spartan existence can be a far-off dream, while the likelihood that they will have to utilize the social safety net is very high. Unfortunately for them, as well as for our economy, such jobs (which exist primarily in the service sector) are growing, as pathways to the middle class continue to dry up. While unemployment in Florida has dropped, a new report shows that 64 percent of all job openings pay less than a living wage.
While some of the more fortunate among us have focused on reducing the safety net — cutting food stamps, making it harder to access Medicaid, etc. — more and more are realizing that if Ronald McDonald doesn’t pay full-time employees enough to buy things like food, gas and health care, they themselves will have to.
As the manufacturing base continues to wither and retail continues to grow, this becomes a magnified problem. Inflation-adjusted wages for nonsupervisory retail workers have dropped nearly 30 percent since 1972. Economists frequently point to two big-picture problems within our economy: a lack of consumer demand and low savings rates. You can’t fix either if wages continue to remain flat or fall.
The minimum wage is also more important than most Americans understand. The myth that it mostly impacts high school kids working after school in a burger joint is easily dispelled by taking a good look at the low-wage sector, where you’ll increasingly find displaced tech workers hawking cell phones, carpenters cleaning carpets and certified LEO’s working security.
Plus, you’ll find that a lot of those “teenagers” in Starbucks and Barnes and Noble are actually recent college grads unable to find work that requires their increasingly expensive degree, especially when you consider that 9 in 10 jobs created since 2009 have been part-time. Minimum wage also serves as a sort of benchmark, and raising it has a rippling effect on other jobs where “at least you’re making more than minimum wage.” Raise the minimum to $10 an hour, and a $10 an hour job will soon pay $12-13 as it continues to compete for the better employees.
The idea that the market effectively sets wages based on supply and demand and meddling with it will cost jobs simply doesn’t hold water. States and municipalities who’ve raised their own minimums higher than the federal rate as well as neighboring ones, have seen no such effects and like I’ve said, the historical data has shown by nearly every metric that the market does a very poor job in maintaining a healthy maximum in financial inequality.
The U.S. economy has more than doubled since the 1970’s while inflation-adjusted wages in the middle have remained flat and those at the bottom have fallen sharply. During that same time, the amount of millionaires and billionaires have grown at near exponential rates, leading to the greatest wealth gap in this country since the Great Depression. That’s not class warfare, it’s simply data, and I’ll point out again that it’s bad news data for a consumption-based economy.
There are still many economic consequences of globalization which are only beginning to be understood. As advances in technology continue to make each individual employee more productive, creating not only an increase but a surplus of capacity, too few have been able to leverage their higher productivity into higher wages.
So if fewer people are needed to produce more goods and services on the low-end (think automated toll booths, self checkout lanes, robotics in factories, etc.) and those same technologies and the increased quality of education from foreign competitors have made others easier to export (think call centers in India and factories in foreign countries with plenty of low-cost engineers and semi-skilled laborers), something has to give.
While it is vulnerable to technological replacement, the retail sector is one of the few that is not at risk of being off-shored, a common argument against higher wages in some areas. Of course, paying them more is not only an economically sound idea, but a moral imperative.
When I turned 14, I got a second job flipping beef at McDonald’s after school. It paid minimum wage, which was $3.35 at the time, and even then there were many older employees who were relying on the paltry $117.25 before taxes from the full-time 35 hours (no paid breaks) to get by. To think that those who are working full-time in such occupations today are doing even worse in terms of real dollars, doesn’t do much to incite pride in our society of plenty.
In the wealthiest country on Earth, working long hours over hot vats of grease, scrubbing toilets and tile, cooking food, or monotonously stocking, scanning and bagging goods, while dealing with angry and insensitive customers shouldn’t leave you choosing between gasoline or meat — and needing food stamps or Medicaid to try and fill the gap. Think about that as you retail yourself through this holiday season and remember that the dollar board at Mickey D’s ends up costing quite a bit more out of your pocket. Paying all Americans a living wage for honest work is simply the right thing to do.
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