Economic Fairness: Raise the Minimum Wage

Shortly after President Barack Obama called for raising the minimum wage in his State of the Union Address, members of the Party of No lined up to denounce his proposal.

Republican leaders exposed their class interest as they declared that an increase in the minimum wage—whose real value is significantly below what it was a half century ago—would be bad for business, the economy and even workers. Their party line was also filled with mistruths, distortions and callousness.

In effect, these naysayers are declaring that the minimum-wage workers and others who make up the working poor—around 50 million people—don’t deserve to have a decent standard of living. Maybe that’s only to be expected, considering that the Republican Party’s 2012 presidential candidate, Mitt Romney, wrote off 47 million voters, “the takers,” whom he characterized as social leeches dependent on government generosity outside the GOP voting bloc.

“I don’t think a minimum wage law works,” said Sen. Marco Rubio (R-Fla.).

“I want people to make a lot more than $9,” Rubio said. “Nine dollars is not enough. The problem is that you can’t do that by mandating it in the minimum wage laws. Minimum wage laws have never worked in terms of helping the middle class attain more prosperity.”

U.S. House Speaker John Boehner (R-Ohio), appearing at a news conference with Senate Majority Leader Mitch McConnell (R-Ky.), said increasing the minimum wage would actually hurt the working poor. “When you raise the price of employment, guess what happens? You get less of it,” he said.

“A lot of people who are being paid the minimum wage are being paid that because they come to the workforce with no skills,” Boehner said. “And this makes it harder for them to acquire the skills they need in order to climb that ladder successfully.”

Sen. McConnell launched into an ideological rather than a substantive attack of the proposal.

He described Obama’s address as “pedestrian, liberal boilerplate.” Ignoring the poor’s need for an immediate improvement in their living standard, McConnell said that Obama “spoke of workers’ minimum wages, instead of their maximum potential.”

Rubio’s comments reflected an ideologically driven view that we all will prosper if we allow the free market to operate on its own. But his position falls flat on its face once reality stares you in the face.

As the federal government has allowed the real value of the minimum wage to fall over decades, the invisible hand of the market has clearly failed to boost the pay of workers.

Boehner apparently believes that the minimum wage is bad because it discourages workers from building up their skills. Actually, what’s occurred in the last three decades is that business practices and poor public policy—downsizing, privatization, trade policies that have encouraged the export of U.S. jobs, cutbacks in the public sector, the attack on private-sector unions, technological unemployment, the erosion of the minimum wage and globalization—have combined to eliminate millions of good jobs in the United States. Today, the prospects for U.S. workers are poor because most future opportunities are in low-paying jobs in the social-service sector.

As the debate over the minimum wage unfolds, we should expect conservatives to argue that an increase will hurt small businesses, kill jobs and only helps teenagers.

But these conservative arguments aren’t very persuasive and are a bit misleading:

•Studies about the impact of the minimum on employment aren’t conclusive. But by and large they show that modest increases in the minimum wage haven’t resulted in insignificant job losses. •Two-thirds of low-wage earners work for big companies, which are better able than small businesses to absorb modest pay increases.

•Though teen-agers are commonly identified as minimum-wage workers, a recent Economic Policy Institute report found that nearly 90 percent of workers paid the minimum wage are 20 years old or older. More than a third are married and over 25 percent are parents, according to the report.

No, raising the minimum wage doesn’t amount to unsound public policy.

Raising the minimum wage would be good for economy. It would be a great help to the working poor. Obama’s proposal reflects government’s appropriate role of correcting the injustices of the free-market economy.

So, what are some of the most compelling arguments for raising the minimum wage?

First, economists cite the drop in value of the minimum wage as one of the major factors explaining the declining and stagnating incomes that have walloped the poor and middle class over the past 30 years. Raising the minimum raise would significantly increase the household income of the working poor and attack one of the principal factors driving the erosion of income of nearly everyone by the 1 percent.

Second, the decline of the minimum wage has hurt the standard of living of millions of Americans and immigrants by forcing them to take on second and even third jobs to get by.

Third, the lowering of the minimum wage has hurt the economy by curtailing the purchasing power of the working poor. Compared to higher-income groups, the working poor spend a greater percentage of their increases in their disposable income.

Fourth, raising the minimum wage is a matter of economic fairness. Low-wage workers have especially come out short as economic inequality has risen in recent decades.

The Republican arguments against the minimum wage are particularly offensive given that Obama’s proposal is very modest—even inadequate, according to liberal and leftist critics.

Only 5.2 percent of hourly workers, or 3.8 million workers, are paid minimum wage or less. While the percentage of the work force paid the minimum wage is not that high, the minimum wage provides a benchmark for setting the pay rates of millions of low-wage workers.

The last increase in the minimum wage occurred in 2009. The minimum wage would now be $21.72 an hour if it had increased at the same rate as productivity, according to according to a 2012 study of the Center for Economic and Policy Research.

The CEPR study also found that the minimum wage would be $10.52 an hour if it had kept up with inflation since its real value peaked in 1968. Obama’s proposal would link increases in the federal minimum wage to the rate of inflation.

But apart from the technical arguments in favor of raising the minimum wage, the government should boost it from $7.25 to $9 an hour simply because that’s the right thing to do. As Obama said in his State of the Union Address: “Today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong.”

Why doesn’t the Party of No just have a heart and agree to help out the working poor?

www.thenewcrossroads Posted on February 21, 2013

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