Myths and facts about the minimum wage
The recent Sonoma City Council decision to authorize a study on raising the city minimum wage came as a pleasant surprise. It shows that the national momentum for raising the minimum wage to parity with the living wage index is spreading out from its base in the major metropolitan centers. “The Fight for $15” is breaking out in many central cities in the U.S., sponsored by a broad coalition of labor unions, social justice advocates, and religious denominations. City Manager Carol Giovanatto told the council that several cities in the Bay Area currently have a minimum wage ordinance, including San Francisco, Berkeley, Oakland, Richmond and San Jose. I commend council members Steve Barbose, Laurie Gallian, and Ken Brown for authorizing this study.
Even though the California state minimum wage went from $8/hr to $9/hr in July, the national minimum wage remains stuck at $7.25/hr in the Washington Congressional deadlock. This lack of action on the federal level has prompted action on the state and local level. Nationally, 23 states and D.C. have minimum wages above the federal minimum wage. Progressive economists like Paul Krugman and Robert Reich have made a strong case that the ongoing economic sluggishness would be alleviated by raising the wage floors for workers. Reich states: “The real job creators are not CEOs or corporations or wealthy investors. The job creators are members of America’s vast middle class and the poor, whose purchases cause businesses to expand and invest.”
The city of Seattle rattled the country with their passage of a $15/hr minimum wage, to be phased in over several years and then indexed to inflation. This was a bold statement that channels the pent-up frustration of millions of low-wage workers who simply cannot make ends meet on the miserly national minimum wage and whose lives and social relationships are blighted by constant economic insecurity. The core policy defect of the national minimum wage is the failure to index for inflation and a baseline that is well below a living wage standard, thus requiring a big political battle every time the wage is raised. This defect has made the minimum wage a highly partisan issue, because every time the issue surfaces it is re-litigated on the same well-worn political and ideological turf. It is a truly Sisyphean task for economic justice advocates.
Indexing to a reasonable baseline would take this issue off the table as a political wedge issue. That baseline is obvious to me: the minimum wage should be set at the living wage rate (a number that can be empirically determined and regionally adjusted). The living wage rate is calibrated to the cost-of-living index, and set by what annual income in a region is sufficient for a full-time worker to support his or herself without having to resort to government social services or private charity.
The City of Sonoma already has a Living Wage ordinance in place since 2004, which is currently set at $15.76/hr. The ordinance was the result of an eighteen month full-spectrum organizing campaign by the Sonoma County Living Wage Coalition and its community allies. To be clear, the ordinance is limited to city workers and businesses that have major contracts with the city. That is a relatively small percent of the total workforce. A city-wide minimum wage would be another order of magnitude greater in terms of the number of workers benefited. Sonoma would blaze a new trail in the municipal minimum wage arena, since the cities that have adopted higher standards to date have been large metro centers that are their own economic center of gravity. Ideally, the minimum wage rates would be enacted regionally so that it does not create perverse incentives for employers to game the system. I predict that this will be the main counter-argument from its opponents.
This issue of the effects of minimum wage increases is one of the most closely studied economic topics in the field and the verdict is in: raising the wage floor increases economic vitality, reduces demand on social services and welfare transfers, decreases stress-related medical and mental health problems, and has only a marginal effect on employment in the service sector jobs that dominate the low-wage sector. The Center for Economic and Policy Research (CEPR) released a 2012 study that found that the United States led all wealthy member states of the Organisation for Economic Cooperation and Development (OECD) in percentages of low wage work. CEPR concluded that the U.S. minimum wage was “too low to reduce the share of low wage work.” Economist Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, has demonstrated that federally mandated wage increases dating back to the 1950s have not produced negative employment effects. Contrary to the constant Fox News driven conservative talking point that minimum wage jobs are just for teenagers and entry-level workers, Bureau of Labor Statistics data show that roughly half of all minimum wage workers are over 25 years old.
We need to get real about the social fact that very large segments of the population rely on low-wage service sector jobs to take care of themselves and their families. It’s not just teenagers and housewives earning a little extra cash for fun money. It is in our shared interest as a society to validate the core value that full-time work should be rewarded with a living wage. I have advocated in previous columns for a national full-employment policy, funded by reforming the plutocratically rigged U.S. tax system, that guarantees that anyone who is willing to work will be put to work doing the much-needed tasks of infra-structure upgrade to 21st century standards, home energy retro-fitting, environmental remediation, childcare and elder care.
Since the private sector alone is clearly not capable of producing a full-employment economy, then it is the proper role of government to secure this great societal good. It is socially combustible to have such a large percentage of our citizens with only a tenuous connection to the workforce. The dignity and sense of social responsibility that steady, secure employment provides would do more to raise our quality of life than any remedial social welfare programs. The America that I want to live in will find a place to employ the skills and talents of every citizen. No one would have any reason to not be working, if they choose to do so. We can make that our reality. It will require stern political will and a paradigm shift in how we envision the economy. Raising the minimum wage is a step in the right direction.
