Why a Minimum Wage increase?

An article in yesterday’s New York Times reported Chicago’s City Council voting to allow the Mayor to veto a regulation that would impose a $10 an hour minimum wage for companies with more than one billion (yes, that’s BILLION) dollars in average sales and stores of at least 90,000 square feet, which would include stores like Wal-Mart, Target and Home Depot (in the article, they refer to these companies as “big-box” stores).

NYT reporters Monica Davey and Michael Barbaro wrote that this was in stark contrast to the aldermen voting 35 to 14 in favor of the ordinance that would require “big-box” retailers to pay at least $10 an hour by 2010, plus $3 and hour in benefits. The article goes on to describe how the several alderman who shifted sides were pressured into doing so both by political organizations and, in the case of one south-side alderman, Wal-Mart, who had promised to build a store in her “struggling” ward.

For fear this measure would start a national trend, Target also stepped up the pressure by saying it would halt plans to build new stores in Chicago while it waited to see if the ordinance became law. It comes as no surprise that Target and Wal-Mart would object to this new ordinance.

The last time there was a federally mandated minimum-wage increase was during the Clinton reign in 1996 – yes people, 10 years ago! At the time, the minimum wage was increased to $5.15. Before he left office, Clinton proposed another wage increase to $6.15, which the Republicans attached to a tax cut they were sure Clinton would veto. Sneaky! An increase was rejected again in June of this year. The fact that the house was even voting on it prompted this blog post from the Chairman of the CATO Institute, William A. Niskane, (Read all of the article here, ’cause it’s a real laugh riot!) indicating why the Republicans don’t want a federally mandated minimum-wage increase with these 3 points:

  1. The employment of the least-skilled members of the labor force—often new entrants—would be reduced.

  2. The non-wage benefits and working conditions of those who keep their jobs at the higher wage would probably be reduced.

  3. Most of those who keep their jobs at the higher wage would be secondary workers in non-poor families.

So, what he’s saying here is, if the minimum wage is increased, first of all there would be fewer jobs, there will probably be fewer benefits, and those who do get these better paying jobs will only be the secondary workers of non-poor families.

Let’s think about that. Okay, I’ll admit that there might be fewer jobs and I’ll even go so far as to say the competition will be a lot stiffer for what jobs there are. From what I can figure, that should play nicely for the employers. Don’t they want a better quality workforce competing for their jobs? But for him to say “non-wage benefits and working conditions . . . would probably be reduced.” Probably? What, you don’t know? And how do you reduce NOTHING, Mr. Niskane? Really, could there possibly be any worse working condition than Wal-Mart? Obviously, this guy doesn’t get out much!

Finally, he thinks that those “who keep their jobs” (which I think is subliminally saying “you will be fired”) would be secondary workers in non-poor families.  What do you think he means by this? Is he presuming that teens and spouses from households that aren’t poor are better workers and therefore will be the ones who keep their jobs? Yeah maybe, but do they want to keep their jobs? I think employers would be smart enough to assess that if they keep this group, they will be increasing their turnover. Every employer knows that turnover means re-training and re-training costs money. A teen or a spouse from a non-poor household is probably going to move-on to something else eventually, while those that aren’t in this group will NEED to stay, and frankly WANT to stay if they are making $10 an hour, especially if another $3 an hour is being put towards benefits. I truly believe that treating the poor with dignity will only raise them to a level that will benefit the employer with a better worker. Another possible angle to this “secondary worker” notion, is that they might be referring to both parents working. Somebody should point out to Mr. Niskane that 5 + 5 = 10. So, one parent working for $10 an hour, works out to be close to the same as 2 working for five. Maybe Mom would prefer to stay home while Dad makes the $10 an hour.

On the flip side of this view, the Economic Policy Institute’s research has shown “There is no evidence of job loss from the last minimum wage increase.”  On their website, epinet.org, they list how a federally mandated minimum wage increase will benefit our society and then punctuate the seriousness of the issue by saying:

The inflation-adjusted value of the minimum wage is 30% lower in 2006 than it was in 1979.
  • The effect of the last minimum wage increase in 1996-97 has been completely eroded by inflation.
  • $5.15 today is the equivalent of only $3.95 in 1995 — lower than the $4.25 minimum wage level before the 1996-97 increase.

Just as I suspected, the rich are getting richer while the poor get poorer.

Do you remember Ronald Reagan’s “trickle down theory”? This is where the Republicans foolishly tried to convince us that if we made the rich richer, their generosity would trickle down to all the poor. Ha, ha, ha! We know better than that now, don’t we? We know you aren’t going to give it to us! We know what you do with your money! You hoard it in those little things called “shares” that make you an influential “shareholder” so you can go to Wal-Mart or Home Depot or Target and say, “I’m a shareholder and if we have to pay our workers a decent wage, we won’t make as much money on our shares!” Geesh!

I do not believe in the trickle down theory. I believe in the trickle up theory. I believe that giving more money to the masses who are yearning to buy a new tv, car or even (gasp!) a home will benefit the shareholders just as much if not more than the workers. After all, won’t there be more profit per share if General Motors sells more cars? Or Home Depot sells more drills? Or Wal-Mart sells more jewelry and cotton candy buckets?

Let’s face it, if we give some rich guy a $10,000 tax break, he doesn’t run out and spend it in a Wal-Mart. NO! He buys more Wal-Mart shares! Which only makes him more powerful while further slowing the economic engines.

I’m only asking that you consider the following “possible” benefits to raising the federally mandated minimum wage, and please notice that none of these actually benefit the worker:

1. When workers make more money, they pay more taxes, so our tax revenues will increase at all levels: local, state and federal.

2. The welfare roles will be reduced. See how this ties in with number one? We bring in more money, but spend less. That’s just good common sense budgeting.

3. According to the EPI, raising the federally mandated minimum wage to even $7.25 will provide an hourly wage increase for 14.9 million workers. Yes, you read that right! 14.9 million workers will be making more money! About 10% of those are single parents with children under 18 and most are women. An increase from $5.15 to $7.25 amounts to $2.10 an hour. Let’s say each of these 14.9 million workers work an average of 30 hours per week. That’s an additional $63 per week for each worker for a total of 938.7 million dollars PER WEEK! That works out to a little more than 48 billions dollars per year going in to the tax coffers and being spent on cars and houses and in Wal-Marts and grocery stores. Consider what the numbers would be if some of those 14.9 million workers were making $10 an hour.

4. For the employer, imagine a world where potential workers are not only clamoring to get your jobs, they’re kissing butt to keep them.

5. Somebody figure out for me just how much the Social Security fund will get. Don’t forget, the baby boomers are starting to collect.

6. And since I mentioned Social Security, let’s consider that maybe some of these 14.9 million folks will have a future. We can’t just keep beating down our poor. They’ll eventually be too old to work and then they’ll be a burden on our children unless we allow them to provide for themselves – and their children – now.

7. Debt – I’m guessing here, but I have a vision of the poorest of the poor. Those who can’t pay a medical bill, couldn’t get a credit card and are one paycheck away from being evicted from their rented home. Maybe, a decent living wage would empower them to be more responsible (and I’m not implying that poor people are intentionally not responsible, but having been very poor myself once, I do realize that you do what you have to do even if it means stiffing a doctor) for themselves, which would allow them to be healthier, get some dental work done, build a credit history, buy a home, etc. Okay, I realize this won’t benefit the landlord any, but I wouldn’t mind seeing a few less homeless in my city. And eventually, everyone benefits when there are more healthy buyers for homes.

8. I also realize that raising the minimum wage to $7.25 an hour is not going to pump an “extra” 48 billion dollars a year into the economy. I realize that this money is going to come from somewhere. Have you thought about where? Some of it might come from you. You might have to pay more for some things. But I believe much of it will come from shareholders. People investing money on Wall Street. Think about what less money on Wall Street might do. Well, it will mean that there will be less dollars to invest in businesses. “Oh, that’s terrible!” you say.  Is it terrible? If there are fewer people with fewer dollars buying fewer stock, maybe stock will be priced more in line with its value. Maybe big business will have to be more accountable for their activities – do you remember Enron? Businesses will have to compete harder for investment dollars. I’m okay with that! This might be the economic structure that narrows the ever broadening gaps between executive pay and worker pay. Businesses would have to deserve investment dollars instead of investors clamoring over one another for that next fast buck opportunity. This might mean fewer businesses are being invested in, but I think the time is right for a “quality over quantity” mentality on Wall Street.

I know what you’re thinking! “But what about the small businesses?” Historically, the impact a minimum wage increase would have on small businesses is a major topic of discussion. I am well aware of the fact that small businesses account for the majority of employers. Having been a small business owner myself, I fully understand how this will impact you, the small business owner. Raising the minimum wage to $7.25 an hour would mean a 40% increase in your payroll. Why, this could make you less competitive with the more socially conscience small business down the street that’s already paying their employees $7 an hour.

As I’ve already mentioned, I am also very aware that raising the payroll of small business; which comprise businesses like restaurants, hair salons and country clubs, could mean we pay more for some things. So, I present to you an example: Starbucks Coffee, “the leading retailer, roaster and brand of specialty coffee in the world.” I got that right off their website: www.Starbucks.com. This is a socially conscience company. Not only do they provide health care for their employees, they offer tuition assistance. People line up in droves to pay 3 to 4 dollars a cup for their coffee, espressos, latte and Frappuccinos. They might complain, but they still pay it. I think that one of the reasons Starbucks is so popular, is because it really is a cool place to hang out, and one of the reasons why it is a cool place to hang out is because the workers are happy. When was the last time you drove out of your way to hang out in a McDonalds?

Here’s a quote I copied right off the Starbucks “About Us” page:  “We always figured that putting people before products just made good common sense. So far, it’s been working out for us. Our relationships with farmers yield the highest quality coffees. The connections we make in communities create a loyal following. And the support we provide our baristas pays off everyday. Read more about our unusually human approach to business . . . “

In short, I don’t want to do business with a business that is not able to pay a decent wage, so I don’t care what happens to you . . . and that includes you, Wal-Mart and Target.

As a Republican, I believe in small government, which translates into fewer laws. I don’t want “big brother” telling me how to live my life. Unfortunately, having fewer laws requires a great deal of trust. We have to trust business owners to pay a good wage, just like we have to trust our neighbor to clean up after their dog. Unfortunately, these things don’t always happen and the results can be pretty crappy.

So, the next time you hear someone crabbing about the Democrats wanting to raise the minimum wage or you see William A. Niskane in a Wal-Mart, ask ‘em what they think moving 48 billion dollars a year from shareholders to wage earners could do for our economy. Or better yet, call your Congressperson and insist on a Federally Mandated Minimum Wage increase.

Thanks for reading.

The Liberal Republican