Feb 21, 2013 - Issue 505

Bump Up the Minimum Wage
A Moderate but Meaningful Step to Tackle Inequality

Bookmark and Share

On February 6, the New York Times reported, “The Chinese government issued a long-awaited plan on Tuesday to narrow the gulf between rich and poor, offering broad vows to lift the incomes of workers and farmers and choke off corrupt wealth but few specific goals to rein in the nation’s wide inequality.” On the same day, the Financial Times reported on the front page of its print edition, “China has unveiled a plan to narrow the gap between the country’s rich and poor, aiming to lift 80 million people out of poverty by 2015. The government has pledged to increase minimum wages to 40 per cent of average salaries, boost spending on education and public housing, and force state - owned companies to give more of their revenues to the public.”


The New York Times story didn’t mention the minimum wage


Wonder what goes on here?


The Times’s account said by the Chinese government’s measure of income inequality, China’s is “slightly higher than levels of inequality in the United States, where income disparity now stands as one of the highest among advanced industrial nations.”


A fly on the wall near the New York paper’s editorial desk could perhaps discern why the proposed 40 percent minimum wage increase was left out of the story. It’s not that it’s unimportant. There are millions upon millions of low wage workers in China and their lives would be greatly enhanced if they were paid a little more.


The Chinese action is in keeping with steps being taken in a number of countries where despite economic advances, inequality continues to grow, and where policy makers have decided that one way (not the only way) to even things out a bit is to legislate a rise in the minimum wage.


On February 7, Zwelinzima Vavi, general secretary of the Congress of South African Trade Unions, told a mine industry collective bargaining conference, “You must continue to fight for decent pay. But at the same time I want to appeal to you to join the fight to beat poverty through decent pay for all workers. Low pay is not helpful to an economy. As the research on food requirements shows, workers who are paid starvation wages do not buy. And if millions of workers have no purchasing power, then production suffers. If production suffers, then jobs are not created. So we have to use our collective strength as a Federation to persuade our government that a radical shift in wage policy is needed. We have an excellent example to draw on in the form of Brazil, where radical increases in minimum wages have resulted in job creation.”


“This country is now scarred by staggering inequality,” Nation magazine editor, Katrina vanden Heuvel, wrote almost a year ago. “In 2010, the last year figures were available, the wealthiest 1 percent captured a staggering 93 percent of the income growth, while most Americans fell behind. One way to address that kind of inequality is to bring down the top - through progressive tax reform and curbing the perverse compensation schemes of CEOs and big bankers. Another is to bring up the floor, by empowering workers to gain a fair share of the rising productivity and profits they help to produce. One step in doing that is to raise the floor under the most vulnerable workers.”


In his February 13 State of the Union address, President Barak Obama said, “We know our economy is stronger when we reward an honest day’s work with honest wages. But 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. That’s why, since the last time this Congress raised the minimum wage, nineteen states have chosen to bump theirs even higher.”


“Tonight, let’s declare that in the wealthiest nation on earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour.”


It would have been better had Obama stuck by his original proposal of a $9.50 minimum wage, made when he was still running for President. Or, better still, as Ralph Nader has proposed, a $10 figure that would have been just as easy to sell to the public and no more likely to draw the ire of the Chamber of Commerce and the National Restaurant Association. Furthermore, economist Jeanette Wicks-Lim makes a good case in the magazine Dollars and Sense that the minimum wage could be increased 70 percent to $12.30/hour, with no adverse effects, and benefiting millions of workers and their communities.


We will be hearing omens of dire consequences if the minimum wage is increased. There will be assertions that businesses will be jeopardized, that entrepreneurship will be hampered, that jobs will be lost. There will even be assertions by some that minority youth job prospects will be curtailed, made by people who have suddenly been gripped by passion for their welfare - this by some of the same people who once tried to sell the ridiculous notion that African Americans have no stake in Social Security. (I always said to them: if I’d tried selling that idea to my grandmother she’d have sent me into the yard to get a switch. Try telling the black and brown kids at Burger King that a rise in the minimum wage won’t improve their lives and that of their communities and you would probably get a similar reaction.)


As the New York Times noted this week, women represent more than half the estimated 18 million people receiving something at or near the minimum wage and Hispanics make up 25 percent.


“So while we’ll all the old arguments and counter arguments are being trotted out once again, I urge folks to remember: analysis of the historical record shows that increasing the minimum wage has its intended effect of raising the earnings of low-wage workers who need the raise without harming their employment prospects,” writes economist Jared Bernstein. “It won’t transform the labor market or rebuild the middle class, but it is a vital if small part of the connective tissue that used to bind even our lowest wage workers to the more broadly shared prosperity that has eluded them for decades.”


“Clearly, in an economy where for decades growth has failed to reach our lowest wage workers, it’s time to raise the wage floor to ensure that low-wage workers have a decent shot at a fair wage,” writes Bernstein. “Raising the minimum wage mostly benefits adults, and especially working women: Around 60 percent of workers benefiting from a higher minimum wage are women, and few are teenagers - less than 20 percent.”


According to data released by the White House, says Bernstein, “raising the minimum wage helps parents.” The average worker who would benefit from a rise in the minimum wage to $9 an hour brought home 46 percent of his or her household’s total wage and salary income in 2011.


And then, there is the other argument about raising the minimum wage, the question that lies at the heart of most of today’s mainstream debate about the economy: what’s good for the nation?


“Not even the very wealthy can continue to succeed without a broader-based prosperity,” economist Robert Reich blogged February 8. “That’s because 70 percent of economic activity in America is consumer spending. When most Americans are becoming poorer, they’re less able to spend. Without their spending, the economy can’t get out of first gear. That’s a big reason the recovery continues to be anemic.”


“Almost a quarter of all jobs in America now pay wages below the poverty line for a family of four,” wrote Reich. “The Bureau of Labor Statistics estimates that over the next decade, seven out of 10 growth occupations will be low-wage - like serving customers at big-box retailers and fast-food chains.”


“At this rate, who’s going to buy all the goods and services America is capable of producing? We can’t return to the kind of debt-financed consumption that caused the bubble in the first place.”


As the Economic Policy Institute’s President, Lawrence Mishel put it, “The president’s support for a higher minimum wage is a welcomed opening to the policy conversation that’s needed about getting wages growing again, after stagnating for the last ten years among both college and high school graduates. The proposed increase will benefit 21 million workers and increase wages by $22 billion by 2015. This will not only boost wages but facilitate greater job growth by increasing spending by low-wage workers.”


On February 14, the Los Angeles Times featured the comments of entrepreneur. Selwyn Yosslowitz, co-founder of the California restaurant chain Marmalade Cafe, with 600 workers in 10 locations, who said it was a bad time to raise the rate. He told the paper that “he already feels beleaguered by higher costs from Obama’s healthcare overhaul.” He went on to say that should the minimum be raised “he may have to repeat what he did in 2007 when California’s minimum wage was hiked to $8 an hour, You increase your menu prices and you reduce hours,” he said. “People who come in normally at 9 o’clock in the morning, you try to get them to clock in at 9:30 and save half an hour. We also stopped hiring people. You can’t stay in business if you don’t.”


The story also carried a comment by one of Marmalade’s employees, 32-year-old Alejandro Serbin who earns California’s $8 minimum wage, plus about $35 a day in shared tips. Serbin says a dollar raise would help. “It’s so much different for me, because I have a family I have to support. The rent is high. I have to pay bills, insurance.” Serbin and his wife, said the report, who works as a cook, have a 3-year-old and pay about $1,000 a month in rent, not unusual for Los Angeles. He said most of the minimum-wage workers he knows have two or even three jobs.


But there is still more to the Marmalade story.


As a rule, bosses have the incentive to work employees for as long as possible for as little pay as possible. This has become especially true for companies linked up with private equity firms, as businesses paying low wage increasingly are.


In 2006, Marmalade Cafe & Catering sold a large stake in its chain to a private equity firm. “It was a smart way to hook up with someone who could complement our business and provide a source of funding,” Yosslowitz told the Los Angeles Times. The paper noted at the time that, “Southern California is home to scores of fast-growing small companies, and private equity firms are taking notice. These investment firms gather money from institutions and wealthy individuals and plow it into promising companies capable of outsized returns.”


How do you deliver “outsized” returns? One way is to cut workers’ hours and write smaller paychecks.


The irony of this is that it’s not at all clear whether the people who wait tables at Marmalade will even get a wage increase as the President is proposing. The Federal minimum wage for “tipped employees” is $2.13.


Reps. Donna Edwards (D-Md) and Rosa DeLauro (D-Conn) plan to introduce the bill into the House of Representative that would increase the minimum wage for tipped workers to $5.50 almost immediately. Edwards, a former restaurant waiter, held a press conference February 14 at which she said, “I know that when I waited tables, I didn’t just do it because I needed some extra change. I did it because I had to pay my rent, I did it because I had to make sure I had food in my refrigerator, I did it because I needed transportation to get back and forth to school.”


It was wrong, she said, “to not know from one night to the next how much I was going to make because I relied on tips.”


It will be said that what the President proposes is not enough. Some scribes have all ready expressed this brilliant conclusion. True enough. But the House of Representatives is unlikely to agree to any increase in the minimum wage and the crazy Republicans in the Senate might just filibuster any proposal about it brought before them. “It’s time to force the issue,” vanden Heuvel wrote last May. “Let voters see where their legislators stand. Activists should call on every legislator to join a discharge petition once the bill is introduced. We’ve seen who supports tax cuts on the wealthy and billion dollar subsidies to big oil. Let’s see who supports raising a minimum wage so a full-time worker can lift his or her family out of poverty.”

BlackCommentator.com Editorial Board member and Columnist Carl Bloice is a writer in San Francisco, a member of the National Coordinating Committee of the Committees of Correspondence for Democracy and Socialism and formerly worked for a healthcare union. Other Carl Bloice writing can be found at leftmargin.wordpress.com. Click here to contact Mr. Bloice.