From TomPaine:
Pay Raise Politics
Jared Bernstein
June 20, 2006
(Jared Bernstein is a senior economist at the Economic Policy Institute and author of the new book, All Together Now: Common Sense for a New Economy (Berrett-Koehler Publishers, Inc.).
An increase in the minimum wage is once again on the congressional agenda, as Democrats try to wedge it into various bills while Republicans try to sink it.
And once again, as reliable as clockwork, defenders and opponents are snapping into action, dusting off briefs and arguments, updating the analysis for inflation and generally doing the same dance we always do (I’m a defender: see http://www.epi.org/content.cfm/issueguides_minwage_minwage).
There’s got to be a better way.
Facts matter, so I’m not for a second saying that progressives should ignore the superior research, summarized below, that supports an increase. But I think we should also fight this one on basic fairness. It’s simply shameful, in an era of sharply increasing economic inequality, for Congress to incessantly cut rich people’s taxes yet refuse to help low-wage workers.
First, a bit of context regarding the minimum wage. As Isaac Shapiro and I report in a study coming out today (go to www.epi.org), the buying power of today’s minimum wage is at its lowest since 1955. Remember, unlike most other government programs, the wage floor is not adjusted for inflation. Since the last increase in 1997 alone, inflation has eroded 25 percent of the minimum wage’s value.
Second, the federal minimum wage has often been set with the level of other workers in mind, reflecting the principle that minimum-wage workers should share in economic gains and not fall far behind other workers. During the 1950s and the 1960s, the minimum wage was typically about half the average wage of workers in nonsupervisory positions. Today, the minimum wage has fallen to 31 percent of the average wage earned by other workers—its lowest share since economists began tracking it in 1947.
So what about the usual pushback against the increase: that it will hurt low-wage workers, whose employers would have to fire them when the wage mandate priced them out of the labor market? Not to be snarky, but this concern doesn’t seem to come up when Congress mandates their own pay hikes; since the last minimum wage increase in 1997, to $5.15, they’ve raise their pay by about $32,000. Just last week, the House gave itself a $3,300 raise.
That “disemployment” argument would be plausible, were it not for the fact that tons of careful research has disproved it. The federal minimum wage has been raised 19 times by Congress since its introduction in 1938. Twenty-one states, covering about half of the national workforce, have minimum wages above that of the Federal level. In other words, more than any economic policy, we’ve had hundreds of “pseudo-experiments”—rare in economics—that allow us to test the impact of wage mandates on various outcomes. These experiments allow us to compare before and after, or, even better, compare nearby places that face similar economic conditions but have different minimum wage laws.
So what have these studies found? Here’s the way economics Nobelist Robert Solow summarized the findings:
The main thing about this research is that the evidence of job loss is weak. And the fact that the evidence is weak suggests that the impact on jobs is small.
A great example comes from the last federal minimum wage increase, back in 1996-97. The usual suspects predicted massive job losses among those affected by the increase from $4.25 to the current level of $5.15. Instead, low-wage workers experienced the strongest job market in 30 years. Poverty fell to historic lows, particularly for the most disadvantaged workers, such as less-skilled minorities and single-mothers. What’s more, small businesses—that traditional poster child for the opposition—actually did better in areas with higher minimum wages.
I know the opposition forces have their own studies and arguments and even Nobel Laureates. But the point is that any policymaker not in the pocket of those moneyed interests opposed to an increase could absolutely support it with confidence that the policy would have its intended purpose of providing a small boost to the living standards of the least advantaged workers among us.
So what gives?
Well, they’ve been busy passing $70 billion worth of new tax cuts, mostly by extending earlier Bush cuts on dividends and capital gains. These cuts reduce millionaire's tax payments by $43,000, middle-income payment by $20, and low-income payments by $0. Oh, and they got awfully close to repealing the estate tax, a gift to the Paris Hiltons of the world that would have cost $1 trillion over 10 years.
So, here’s my question: I know inflation has eroded the value of the minimum wage. What’s responsible for the erosion of Congress’s values?
Is it an electorate that is too busy or too distracted to notice? Is the Republican spin machine really so effective that a majority is convinced that trillions of dollars in regressive tax cuts are fine yet a moderate minimum wage increase will cripple the economy?
These are probably part of the answer, but here’s another part: Too few of our leaders are hammering home the shame of these actions. With notable exceptions (Ted Kennedy, George Miller and precious few others), the dog is neither barking, howling or growling.
We are in desperate need of a Howard Beale “I’m-mad-as-hell-and-I’m-not-going-to-take-this-anymore” moment.So, here’s my plan. If the Congress refuses to act, I say we all pick a time—say, noon on December 2, 2006, the day Congress ties Reagan’s nine-year record for ignoring the minimum wage. At that moment, we all lean out our windows and yell at the top of our lungs, “Raise the minimum wage!”
On second thought, why wait until then? Let’s vote for change on November 7.
© 2006 TomPaine.com ( A Project of The Institute for America's Future )
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