The Moral and Economic Case for Raising the Minimum Wage

No one with a family working full-time at the lowest allowable income can possibly survive without major assistance.

Demonstrators march and block traffic in a major intersection outside a Walmart store during rush hour September 5, 2013 in Hyattsville, Maryland.
National Journal
Norm Ornstein
Dec. 4, 2013, 4:42 p.m.

One of the most in­ter­est­ing re­cent polit­ic­al and policy de­vel­op­ments is the in­volve­ment of Ron Unz in a ma­jor ef­fort on be­half of a ref­er­en­dum to raise Cali­for­nia’s min­im­um wage to $12 an hour by 2016.

Unz, a liber­tari­an Sil­ic­on Val­ley en­tre­pren­eur, pre­vi­ously shot to fame by suc­cess­fully push­ing a ref­er­en­dum to re­place bi­lin­gual edu­ca­tion in Cali­for­nia with Eng­lish-im­mer­sion pro­grams (which led to a sharp rise in SAT scores). He also ran for the GOP nom­in­a­tion for gov­ernor of Cali­for­nia in 1994, los­ing to then-in­cum­bent Pete Wilson.

Why would Unz, who has writ­ten reg­u­larly for The Amer­ic­an Con­ser­vat­ive (he served as pub­lish­er un­til re­cently), fa­vor an in­crease in the min­im­um wage, when one would be hard-pressed to find a single Re­pub­lic­an in Con­gress who would do so? He says, “We have all these low-wage work­ers who are get­ting $7.50, $8, or $9 an hour, and be­cause they earn such small wages, the gov­ern­ment sub­sid­izes them with bil­lions or tens of bil­lions of dol­lars of so­cial-wel­fare spend­ing that comes from the tax­pay­er. It’s a clas­sic ex­ample of busi­nesses privat­iz­ing the be­ne­fits of their work­ers while so­cial­iz­ing the costs.” Mc­Don­ald’s re­cently took his point one gi­ant step fur­ther by ur­ging its low-wage em­ploy­ees to get food stamps.

The past few weeks have brought an in­tense fo­cus and dis­cus­sion on the min­im­um wage, at the na­tion­al as well as loc­al and state levels. Rep. George Miller, D-Cal­if., and Sen. Tom Har­kin, D-Iowa, both long­time cham­pi­ons of in­creas­ing the min­im­um wage, have a bill to raise it na­tion­ally to $10.10 — still leav­ing the earn­ing power lower than it was in 1968 when the min­im­um wage was $1.60. In New Jer­sey, a pro­pos­i­tion to raise the state min­im­um wage to $8.25 and in­dex it to in­fla­tion passed hand­ily over the op­pos­i­tion of Gov. Chris Christie. In­deed, 19 states have high­er min­im­um wages than the na­tion­al one of $7.25 an hour (nine states have either a lower rate than the na­tion­al fig­ure or no min­im­um at all). In Wash­ing­ton state, a loc­al ref­er­en­dum in the com­munity of SeaTac, home of the Seattle air­port, to raise the min­im­um wage to $15 passed nar­rowly over the in­tense op­pos­i­tion of the busi­ness com­munity. We now have a body of re­search by top-flight eco­nom­ists show­ing that an in­crease in the min­im­um wage does not re­duce em­ploy­ment or sig­ni­fic­antly hinder the eco­nomy.

The re­cent fo­cus is in part be­cause of some clear real­it­ies in the con­tem­por­ary, slug­gish Amer­ic­an eco­nomy. One is that where jobs ex­ist, they tend to be at the lower end of the scale. A second is that no one with a fam­ily work­ing full-time at the min­im­um wage can pos­sibly sur­vive without ma­jor as­sist­ance. Keep in mind that if one works 40 hours a week, 52 weeks a year at $7.25 an hour, that means an an­nu­al in­come of $15,080 — as­sum­ing no time off and no sick days. Can any of us ima­gine try­ing to house, clothe, and feed a fam­ily — while pay­ing for trans­port­a­tion to work, health in­sur­ance, and oth­er ne­ces­sit­ies of life, much less go­ing to an oc­ca­sion­al movie — on $15,080 a year, or $13,926 after FICA de­duc­tions? Ima­gine pay­ing mar­ket rates for rent in the D.C. area, where a tiny apart­ment might take up two-thirds of the in­come, and re­quire an hour or longer com­mute to get in­to the city, with sub­way costs tak­ing up an ad­di­tion­al 10 per­cent or more. Not much left for food or oth­er ne­ces­sit­ies, even with a zero in­come tax rate. Ima­gine if you need child care!

Here is the in­fam­ous Mitt Rom­ney quote from the 2012 cam­paign: “There are 47 per­cent of the people who will vote for the pres­id­ent no mat­ter what. All right, there are 47 per­cent who are with him, who are de­pend­ent upon gov­ern­ment, who be­lieve that they are vic­tims, who be­lieve the gov­ern­ment has a re­spons­ib­il­ity to care for them, who be­lieve that they are en­titled to health care, to food, to hous­ing, to you name it — that that’s an en­ti­tle­ment. And the gov­ern­ment should give it to them. And they will vote for this pres­id­ent no mat­ter what…. These are people who pay no in­come tax…. [M]y job is not to worry about those people. I’ll nev­er con­vince them they should take per­son­al re­spons­ib­il­ity and care for their lives.” That 47 per­cent in­cludes those work­ing at or near the min­im­um wage.

Wheth­er or not most of those who work 40 hours a week at the min­im­um wage or near it and are sup­port­ing fam­il­ies be­lieve that they are en­titled to food and hous­ing, the fact is that they are do­ing what we have long be­lieved was ful­filling our ba­sic so­cial con­tract — work hard, be pro­duct­ive, and you and your fam­ily can live a de­cent life with a place to live, food on the table, clothes on your backs, and oth­er ne­ces­sit­ies. In the past, Re­pub­lic­ans thought that the mar­ket ought to set wages, and that a com­bin­a­tion of gov­ern­ment devices — in­clud­ing the earned-in­come tax cred­it, hous­ing sub­sidies, food stamps, Medi­caid, and oth­er so­cial-wel­fare pro­grams — could fill in the gaps to make that so­cial con­tract work, while also try­ing to re­move dis­in­cent­ives from work via wel­fare re­form. There is not only a con­tinu­ing be­lief in some quar­ters that mar­kets should set wages, but strenu­ous ef­forts to make deep cuts to food-stamp fund­ing and slash oth­er pro­grams that help low-in­come work­ers — con­demned as “takers.”

It is a fact that our eco­nom­ic sys­tem con­tin­ues to have big gaps. The web of sub­sidies can cre­ate real dis­in­cent­ives for those at the bot­tom of the scale who want to work but would ac­tu­ally lose more be­ne­fits than their min­im­um-wage in­come would bring in. The ef­fect­ive mar­gin­al tax rate for a couple both mak­ing low wages if the second per­son works can be more than 100 per­cent be­cause of be­ne­fit for­mu­las. A couple of weeks ago, when I wrote about the war on food stamps, I men­tioned a D.C. wo­man who is strug­gling to feed her­self and her daugh­ter, but cal­cu­lated that she would need a job pay­ing $15 an hour to do bet­ter. That is an ar­ti­fact of poorly con­struc­ted, patch­work policies. Lib­er­al cant not­with­stand­ing, there is a cul­ture of de­pend­ency that can dis­cour­age work among many. But the fact is most people out of work want to work — it defines their self-worth.

How about a new ap­proach? Let’s try to al­ter the in­cent­ive struc­ture to make work pay, while main­tain­ing devices like EITC, rent sub­sidies, and the health in­sur­ance sub­sidies un­der the Af­ford­able Care Act so that those who are work­ing can sup­port their fam­il­ies and live de­cent lives. As Jared Bern­stein has writ­ten, let’s provide a tax cred­it when two people in a fam­ily want to work so that their work pays. Let’s do more ro­bust job train­ing in­stead of cut­ting fund­ing, and ex­per­i­ment with in­nov­a­tions like the Ger­man ap­pren­tice­ship pro­gram and their work-shar­ing policy. And let’s raise the min­im­um wage to make it easi­er to re­form the pro­cess and ul­ti­mately re­duce the sub­sidies for those who do as we ask and ful­fill their part of the so­cial con­tract.

What We're Following See More »
WORDS AND PICTURES
White House Looks Back on bin Laden Mission
1 hours ago
WHY WE CARE
NO BATTLE OVER SEATTLE
SCOTUS Won’t Hear Appeal of Minimum-Wage Law
2 hours ago
THE DETAILS

"The U.S. Supreme Court on Monday rejected a sweeping constitutional challenge to Seattle’s minimum wage law, in what could have been a test case for future legal attacks on similar measures across the country. In a one-line order, the justices declined to hear a case by the International Franchise Association and a group of Seattle franchisees, which had said in court papers that the city’s gradual wage increase to $15 discriminates against them in a way that violates the Constitution’s commerce clause."

Source:
DOWN TO THE WIRE
Sanders Looks to Right the Ship in Indiana
2 hours ago
THE LATEST

Hillary Clinton may have the Democratic nomination sewn up, but Bernie Sanders apparently isn't buying it. Buoyed by a poll showing them in a "virtual tie," Sanders is "holding three rallies on the final day before the state primary and hoping to pull off a win after a tough week of election losses and campaign layoffs." 

Source:
CONSTITUTIONAL CONVENTION IN JUNE
DC to Release Draft Constitution as Part of Statehood Push
3 hours ago
WHY WE CARE

"The New Columbia Statehood Commission—composed of five District leaders including Mayor Muriel Bowser, D.C. Council Chairman Phil Mendelson, and D.C.'s congressional delegation—voted today to publicly release a draft of a new constitution for an eventual state next Friday, at the Lincoln Cottage." It's the first step in a statehood push this year that will include a constitutional convention in June and a referendum in November.

Source:
ALZHEIMER’S OUTCRY
Will Ferrell Bails on Reagan Movie
3 hours ago
THE LATEST

Amid outcry by President Reagan's children, actor Will Ferrell has pulled out of a movie that makes light of Reagan's Alzheimer's disease. A spokesperson for Ferrell said, “The ‘Reagan’ script is one of a number of scripts that had been submitted to Will Ferrell which he had considered. While it is by no means an ‘Alzheimer’s comedy’ as has been suggested, Mr. Ferrell is not pursuing this project."

Source:
×