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
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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.

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