Why the Minimum Wage Should Be Increased
It could do more than anything to reduce the income gap in this state.
Today, there are demonstrations at fast food restaurants across the nation. Organizers expect there will be one-day strikes in 100 cities and protest activities in 100 additional cities, with Milwaukee and Madison on the list of 200. The protests are demanding minimum pay of $15 per hour, which might be hard to accomplish, but the strikes also raise the issue of the minimum wage, which is long overdue for an increase.
The minimum wage in Wisconsin is $7.25, the same as the federal rate. In real, un-inflated dollars, that has declined drastically from 1968, when it stood at $10.60 an hour, or 55 percent of the median full-time wage, as University of Massachusetts-Amherst economics professor Arindrajit Dube has written. By contrast, the current minimum wage of $7.25 equals just 37 percent of the median full-time wage. To restore the value of the minimum wage so it equals 55 percent of the median full-time wage would mean raising it to $10.78.
President Barack Obama has proposed hiking it to $10.10. That may sound high, but it’s normal in Canada, where the minimum wage is $10 or higher in every Canadian province except Alberta ($9.95).
Voters overwhelmingly support such legislation. As Dube writes, “over three-quarters of Americans, including a solid majority of Republicans…support raising the minimum wage to either $9 or $10.10 an hour…voters in red and blue states alike have consistently supported, by wide margins, initiatives to raise the minimum wage…Since 1998, 10 states have put minimum wage increases on the ballot; voters have approved them every time” — by 71 percent of Florida voters and 68 percent of Nevada voters, both passed in 2004.
This is a no-brainer platform plank for a Democratic opponent to Gov. Scott Walker. Odds are a huge majority would favor increasing the minimum wage in Wisconsin.
Once upon a time, the minimum wage was seen as something mostly affecting teen worker, but not in today’s economy. A recent analysis by the Economic Policy Institute shows more than 88 percent of workers earning the minimum wage are older than age 20.
The median age of fast-food workers is now 29 and is 32 for women, who make up 65 percent of all such workers. And 36 percent of the fast-food workers 21 or older have children to support. Most of these parents are women. This is an issue that should have huge resonance for women.
The Nation magazine spotlighted the story of Milwaukee worker Mary Coleman, who works at a Popeye’s in Milwaukee for $7.25 an hour. “Coleman, 59, lives with her daughter, who has a heart condition, and her two grandchildren. She also relies on food stamps to make ends meet…’I’m tired of working for $7.25,’ Coleman says. “I can’t take care of my household, I can’t even take care of myself.’”
Industry officials say only a small percentage of fast-food jobs pay the minimum wage and are largely entry-level jobs. But the other workers can’t be earning much more, given that the median hourly wage for fast-food workers nationally is $8.94 an hour. Take Austin, Texas: there about 28,275 fast foot workers are employed in that city, with a median wage of $8.83.
The classic argument is that raising the minimum wage will lead employers to cut employment. Drube’s study concluded that a hypothetical 10 percent increase in the minimum wage would affect employment in the restaurant or retail industries “by much less than 1 percent; the change is in fact statistically indistinguishable from zero.”
“Existing research, he adds, “suggests that if you raise the minimum wage by 10 percent, you can expect the price of a $3 burger to rise by a few cents, which is enough to absorb a sizable part of the wage increase.”
Of course, a ten percent increase would raise the minimum wage only to about $8 (which would certainly help workers). What would be the impact of jumping it to $10?
Wall Street Journal columnist Al Lewis points to Australia, where fast-food workers already make about $15 an hour. “Only some of this higher cost of labor is passed on to consumers. The rest is absorbed by using more technology than people, and demanding more productivity from the fewer people they pay this higher wage.”
Lewis suggests companies are cutting their own throats by keeping wages so low: “Last week, I asked readers why they don’t shop much anymore, and, voilà, my email box overloaded with missives from folks who said they can no longer afford it. (Read through scores of these tales on my blog, tellittoal.com.)… Retailers and restaurateurs know the story well. They’ve been warning that the consumer is weak.”
Corporate boardrooms have fallen into the habit of rewarding executives for slashing employment and wages. Perhaps the classic example of this mentality has been a Walmart store’s decision to ask employees to donate to a food drive for its own needy employees, which brought the company tons of negative publicity.
But you can also help a company’s bottom line by driving sales and revenue. Workers who earn a decent wage will have more to spend, and those at the bottom end are most likely to convert any new money made into consumer purchases. They might also feel better about — and be more loyal to — their employers.
Business writer Rick Newman has suggested that raising the minimum wage will actually help companies by reducing employee turnover and improving their performance. And all businesses would be in the same boat, since all would have to pay the minimum wage. On balance, he argues, “It might do more good than harm.”
The simple act of raising the minimum wage would have a huge impact on the growing income gap in America. “The evidence suggests that around half of the increase in inequality in the bottom half of the wage distribution since 1979 was a result of falling real minimum wages,” Drube writes.
The average fast food wage of $8.94 an hour equals $18,595 annually. That’s barely above the federal poverty line for a family of three, which is $17,916. Restoring the real dollar value of the minimum wage would have a huge impact on these families, and would help move this state and this country back towards a less brutal time, when it was patriotic to care about those who have less.
State Sen. Kathleen Vinehout (D-Alma) has hired a campaign staffer, thus moving closer to challenging former Commerce Secretary Mary Burke for the Democratic nomination for governor. She told the Eau Claire Leader-Telegram: “Every day I seem to be getting closer and closer to making the decision to run for governor.”
Some Democratic leaders clearly prefer to anoint Burke and fear a primary could be divisive. Burke’s most important advantage is presumed to be her personal wealth, but it’s still not clear how much she is willing to spend. There may well be an opening here for Vinehout. The average Democratic voter, I suspect, would not favor a coronation of one candidate by party insiders.
Either way, it appears Walker will face a woman opponent, who will be in a perfect position to argue for an increase in the minimum wage, and to argue that Walker opposes a measure which most voters favor because it buttresses his conservative credentials as a Republican candidate for president.