Viewpoint: Raising minimum wage would unleash many benefits

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Karen Rubin, Columnist

The Senate parliamentarian made a grave mistake – born of myopic bias – in arguing that raising the minimum wage was not related to the federal budget in order to deny Democrats the ability to include it in the American Rescue Plan and pass it through reconciliation with 51 votes.

Republicans, who have aligned themselves as obstructionists even on something as popular and as desperately needed as COVID relief, have said that $100 billion in higher incomes a year for 27 million people isn’t enough of a budget impact to warrant inclusion in reconciliation.

I guess that’s pretty paltry if you measure it against the extra $1.1 trillion that 614 billionaires have pocketed in just nine months of the economic tumult of the coronavirus pandemic.  This elite club has a collective net worth of $4.1 trillion, a 40 percent increase from a year ago, compared to $2.6 trillion in collective wealth of the bottom 150 million of us.

And yet raising the minimum hourly wage from $7.25 ($2.13 for restaurant workers) – where it’s been since 2009 – to $15 would amount to a doubling of income from $15,080, an amount that is below poverty, to $31,200, still barely enough to live. The poverty line for a four-person household is $26,500.

Raising the minimum wage would boost incomes for 27 million people (42 percent of U.S. workers earn less than $15 per hour), generate $107 billion in higher wages, and lift nearly one million out of poverty, according to the Economic Policy Institute.

There is another budget impact: the ridiculously low minimum wage means that taxpayers are subsidizing employers, including some of the biggest and most profitable corporations, to the tune of $153 billion a year in public support to underpaid workers. Among them McDonald’s, Walmart, Amazon, Dollar Tree, Dollar General, Burger King and FedEx, according to a General Accounting Office report.

Raising the minimum wage strengthens workers’ purchasing power – cumulative pay for those workers would jump as much as $509 billion over the next 10 years – which in turn, boosts the overall economy. The money is typically spent in neighborhoods, which has a rippling effect through the local economy, creating more consumer demand (as Henry Ford well knew when he decided to pay his workers enough so they could afford the automobiles they built in his factory). This increases the need for workers, creating and supporting more jobs, which, in turn, generates more tax revenue for government while at the same time reducing public spending. A virtuous cycle.

Raising the minimum wage has other social benefits: reducing financial stress and insecurity on families is shown to reduce domestic violence, mental health issues, and crimes of poverty, says Leigh Goodmark of the Gender Violence Clinic at the University of Maryland, problems that taxpayers pay for in court fees, social workers and incarceration. Also, it would help close the unconscionable, systemic racial wealth gap, which is at historic levels.

So raising the minimum wage cuts poverty, lowers government spending on services, reduces homelessness and hunger, raises children’s performance in school which, in turn, results in higher earnings over a career and reduces local spending for remediation, and generates more spending, more economic growth, more jobs and more tax revenue. In essence, it is the opposite of “trickle down economics” – or giving more and more tax cuts to the richest, who can’t spend it all in multiple lifetimes. If the GOP tax scam could be passed through reconciliation, so should raising the minimum wage.

The minimum wage has been raised 22 times by 12 presidents since first adopted in the Fair Labor Standards Act of 1938 in the midst of the Great Depression (with the same opposition as today), but has gone longer without an increase than in the 80 years since. Since 2009, when it was last raised, inflation has eaten up $1.56 of its purchasing power – now lower in real value than in 1956.

Republicans love to cite the figure from the Congressional Budget Office that a $15 minimum wage would cost 1.4 million jobs. But that is disputed by the Economic Policy Institute because new jobs would be created with higher consumer demand.  Past experience also shows in states that raised the minimum wage jobs were not lost (14 states raised their minimum wage at the beginning of 2016) and consumer prices did not rise significantly.

Republicans, citing the sanctity of capitalism (the minimum wage is “socialist”), claim employers are incentivized to raise wages to compete for workers. But that simply hasn’t happened. If anything, “capitalism” enables employers to act as a monopoly in keeping wages low, as we saw even when unemployment rates fell to 3.5 percent (not quite lowest in history at 3.4% in 1969). The only reason wages did rise at the lower rungs was because of states that raised their minimum wage.

In fact, by not raising the minimum wage, those employers who do are disadvantaged if they have to raise prices for their products and services, compared to say Walmart, which doesn’t. Because they pay their employees so little that they qualify for public benefits, these companies can pay their executives millions of dollars in salary and stock options and their shareholders dividends, further pushing up their stock prices. Another vicious cycle.

So, in 2013, taxpayers spent $6 billion in public assistance to Walmart workers, but four years later Walmart mounted $8 billion in stock buybacks. “This is all possible because of the low wages they pay their workers and compliments of U.S. taxpayers,” U.S. Sen. Bernie Sanders said.

Since raising the minimum wage will not be part of the American Rescue Plan, President Joe Biden again needs to do what he can to raise the minimum wage paid federal workers (which also has budget implications) and to require federal contractors to pay it as well (he has signed an executive order moving in that direction). Since the federal work force is the largest employer in the country, that should exert some pressure on private employers. It should also be part of his infrastructure plan.

“No one in America should be working 40 hours a week and living below the poverty level. No one. No one,” said Biden.

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