Tuesday, August 01, 2006

Just Raise the Minimum Wage, Already

We need to raise the federal minimum wage.

The current $5.15 per hour is ridiculously inadequate. It translates into about $10,700 a year for a full-time employee. It is also, adjusted for inflation, the lowest wage paid to employees since 1955.

The House has already passed a bill raising the wage to $7.25 over two years. The Senate is debating its own version of the bill. If passed, it would give a raise to about 15 million Americans (11% of the 136 million working Americans).

(Of course, the House Republican leadership set up the bill so that approving it would also mean approving a big cut to the estate tax. I guess the theory is that if the Congress is going to cut down on super-rich people's ability to screw the poor, it will have to make it up to the super-rich by tossing their salads. That's the only explanation I can come up with, anyway. The estate tax doesn't really affect anybody but rich people. Only the wealthiest 1% of American estates are taxed in any way whatsoever under the estate tax, and only the richest of the rich come anywhere near its maximum rate.)

I've heard two arguments against raising the minimum wage. The first is that a lousy minimum wage is a social good because it encourages people to get better trained and to work harder so that they can get better jobs. This argument is so cynical and disingenuous that it's hard to see as anything but a joke. A lot of people making $5.15 an hour already work harder than a lot of people making $50,000 a year. And a lot of people without the training required to move ahead would love to get that training, but when you're working forty hours a week and raising kids, you don't have a lot of time to get a finance degree from Wharton.

The whole reason for a minimum wage is that we as a society believe that people working full-time are making a real contribution and therefore shouldn't starve to death or die of exposure. To deliberately keep the minimum wage so low that it becomes a threat rather than a protection betrays that belief. You could also encourage people to study and work harder by requiring local police to pour hydrochloric acid into the ears of anyone over the age of 24 who doesn't have at least an associate's degree. But it would be, as the philosophers say, a shitty thing to do.

The second argument against raising the minimum wage is that employers only have so much money to pay their employees, which means that raising the minimum wage would force them to cut minimum-wage jobs. The main problem with this claim is that it doesn't actually seem to be true.

Right now, 18 states in the US already have minimum wages higher than the federal wage. (They range from Wisconsin's $5.70 per hour to Washington's $7.63). If you compare those states' economic indicators either before and after implementing those wages or to those of other states, there's no meaningful correlation between a higher minimum wage (HMW) and job loss.

Jeff Chapman at the Economic Policy Institute has done a study suggesting that HMWs have little or nothing to do with statewide job loss; instead, unsurprisingly, the most likely factor in job loss nationwide is the loss of manufacturing jobs, fairly high-paying jobs which aren't tied to the minimum wage. (This, I suspect, is why the strongest job growth has lately been in the West, where there were never a lot of manufacturing jobs to lose in the first place.)

Moreover, when compared to other states collectively or individually, my own (far less sophisticated) research indicates that HMW states seem to do at least as well as federal-minimum-wage states in terms of wealth, growth, or employment. In fact, if anything, they do a little better.

According to the US Department of Commerce, in 2005 the 18 HMW states accounted for 47% of the total of all gross state products (GSPs) but only 43% of the US's population. Taken as a group, the states with higher minimum wages (HMWs) generate 16% more economic product per capita than do federal-minimum-wage states. (Per capita GSP is $40,500 per year in HMW states and $34,700 per year in states using the federal minimum wage.)

Individual states with HMWs also tend to have better economies. Of the 11 states with the highest GSPs, 8 are HMW states.* And 15 of 18 HMW states are at or above the median nationwide per capita GSP. (There are 18 states above the mean nationwide per capita GSP; 12 of those are HMW states.) In contrast, of the states with the lowest per capita GSPs, only 1 is a HMW state. (The 9 worst all have the $5.15-per-hour minimum wage.)

One might say, sure, but rich states can afford HMWs and probably (due to higher cost of living) even need them to keep workers around. That's probably partly true, but it's also true that having HMWs doesn't seem to hurt states in terms of either unemployment rates or economic growth. According to the Dept. of Labor, HMW states were distributed evenly across the range of economic growth and employment. For both employment and economic growth, there were 5 HMW states in the top third, 6 in the middle third, and 7 in the bottom third. For both employment and growth, half of the HMW were at or above the median rates. (10 of 18 were above the mean employment rate; 8 of 18 were above the mean growth rate.)

So there's there's no excuse to overlook our moral imperative and and cultural incentive to raise the minimum wage. After all, this country isn't supposed to be run for the rich. It's supposed to be run for everyone. If the country is doing well on average, the average person should be doing well. It that's not the case, something unfair is afoot.

And something unfair is afoot. For the past three decades, the rich have been turning into the super-rich, and people who work for a living have been getting shafted. Don't take my word for it. Here's what the raving Communists at the CIA say about America:
Since 1975, practically all the gains in household income have gone to the top 20% of households.... Long-term problems include... stagnation of family income in the lower economic groups.

Raising the minimum wage wouldn't fix that. But it'd be a step in the right direction.

* - The District of Columbia (a HMW “state”) is included in the states with the 10 highest per capita GSP, but it has such a bizarrely high one (more than double the natioan average) that I've added an extra state to the top 10. My unresearched hunch is that DC (which actually does have high unemployment) has such a high GSP because it generates a lot of wealth but has relatively few permanent residents (because it has so many commuters from Virginia and Maryland). Leaving out DC, 7 of the 10 states with the highest GSPs are HMW states.


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