The minimum wage debate too often gets mired in a discussion of immediate cost to small business. Groups like the Chamber of Commerce frame the issue within this context: Businesses have a limited amount to spend. Increasing the cost of a hour of work, therefore, means they will be able to pay for fewer hours. This, they say, will lead to fewer jobs and fewer working hours for those who are working.
It’s a neat argument — based to a degree on reality — but it’s also a sham. It attempts to recast business owners self-interest in an altruistic light. The poor, low-wage worker. She’s the one who will suffer. What else can I do?
It’s also counter-productive, as David Dayen points out in The L.A. Times. Raising the wage floor — i.e.., the minimum — is “not harmful, but actually critical in the current economy,” he writes.
Fast food restaurants have been engaged in what Dayen calls a price war, pushing menu items designed to attract low-wage consumers but that generate almost no profit. Restaurants say they need these “value”deals to be competitive, which “suggests that purchasing power at the low end of the economy has become so corroded that sellers must fall over themselves to offer prices that barely enable them to make a profit,” he writes.
So businesses cut costs — which makes investors happy, but leads to stagnant wages, especially at the low end of the spectrum.
Wall Street investors encourage companies to cut labor costs; record profits have resulted, with more national income going to the ownership class. Most of the gains since the recession have come at the high end. While low-wage workers are finally seeing some boosts — mostly from minimum wage increases — lack of housing affordability and cost of living rises in areas like health care continue to put them behind.
We can call this the WalMart conundrum. WalMart and other low-price retailers are affordable options — often the only affordable options —for low-income and working class families, but this affordability comes at the cost of their own incomes. WalMart and its ilk keep prices low by suppressing wages and by limiting hours. The bulk of its workforce is made up of part-timers, meaning the company does not have to provide healthcare. His leaves many of these workers seeking public benefits — which essentially is a socialization of low-wage work.
The clear solution, both for workers and the businesses they frequent, is to raise wages. Henry Ford figured this out more than 100 years ago. Reckoning that consumers and the workforce were one and the same, Ford sought to cycle more money through the economy, increasing the likelihood that people would purchase his cars. He also wanted to lower labor turnover and retraining costs by giving workers an attractive These aims doubly resonate for minimum-wage jobs. Turnover costs are enormous in fast food and other low-wage sectors. And the correlation between higher salaries and sales is arguably greater in restaurants and retail than for auto assembly lines. Paying people more becomes practically an imperative in an economy so dependent on consumer spending.
In New Jersey, the minimum wage is now indexed to inflation, which means it ticks up annually. But its base was far too low to make the kind of economic impact needed. As New Jersey Policy Perspective pointed out in December,
The new minimum wage still falls very short of what it takes to get by. In fact, it covers just 41-57% of the basic household budget for a single adult full-time worker with no children.
And make no mistake, he bulk of workers earning the minimum are not high school kids. NJPP reports that four of five minimum wage workers are 20 or older, nearly half work full time and another third work 20 to 35 hours a week. More than half are women and one in five are parents.
I’ve interviewed a lot of workers, a lot of businesses, labor unions, the Chamber, and others over the years in an effort to get a better understanding of the wage issue. There is merit in both sides’ arguments, I think, but only if you severely proscribe the terms of your argument. In this case, the public debate over the wage has been narrowly framed to exclude human rights questions and to embed the rights of profit over all else. Small business owners are just as much at the whim of corporate America as low-wage workers, are being sacrificed in similar ways to ensure that the record profits we’ve been witnessing continue their growth unabated and without any real effort to share the wealth.
Minimum wages, as they’ve been conceived to this point, only nibble at the edges. Even $15 an hour is too low in a state like New Jersey. Housing costs alone will eat almost half of the $30,000 a year the $15 wage would generate.
One potential solution is a guaranteed minimum income –or essentially paying people for being citizens. We have a form of this in place, if you think about the array of social safety net programs designed to offset economic deprivation — various forms of welfare (WIC and TANF, general assistance), food supports (SNAP), utility aid, healthcare, etc. These are based on the idea that government can (should) soften the blow for those chewed up and spit out by capital. A guaranteed minimum income takes these disparate aid programs, simplifies them and makes them universal.
I don’t pretend to have the details or to view basic income as a panacea. But it is worth discussing — which I invite readers of this post to do in the comments or on Twitter. Just make sure you tag me (@newspoet41).