By Dave Johnson
If the 1968 federal minimum wage had kept pace with inflation it would be $10.75 today. But it is only $7.25, an amount so low that many full-time workers need government assistance such as food stamps, Medicare, etc., just to get by.
There is a bill before Congress and endorsed by President Obama that will raise the minimum wage to $10.10 an hours and “index” it to inflation in the future. That means the wage will increase as inflation increases so it never falls behind again. Meanwhile there are reports that President Obama is considering using executive action to raise the minimum wage for employees of federal contractors.
Corporations like Walmart and McDonalds like the current situation of really low wages at the bottom because it puts more into the pockets of those at the top. So the corporate/conservative machine is grinding out propaganda against raising the minimum wage. Here is a look at six of the most common propaganda points they’re trying to trick us with.
1. Myth: Only teenagers make the minimum wage.
There may once have been a time when most people who earned the minimum were teenagers in starter jobs. But times and the structure of our economy have changed for the worse. According to the Economic Policy Institute, “87.9 percent of those affected nationally by increasing the federal minimum wage to $9.80 are 20 years of age and older. The share of those affected who are 20 or older varies by state, from a low of 77.1 percent in Massachusetts to a high of 92.4 percent in Florida (and 93.9 percent in the District of Columbia).” Also, “more than a third (35.8 percent) are married, and over a quarter (28.0 percent) are parents.”
Notably, 49% of people making the minimum wage are adult women.
2. Myth: A minimum wage is “government interference” that just distorts the market. If there are lots of people looking for work, then wages should fall.
The problem with this myth is that we live in a consumer economy and a consumer economy does better when more people and businesses have more money to spend. In other words, the economy rises and falls based on how much demand there is for the goods and service that our companies provide.
When the economy slows and people are laid off this increases the supply of people looking for jobs which causes wages to fall. As wages fall, demand falls because people have less to spend and the economy slows even more. So even more people get laid off, putting even more downward pressure on wages. This can become a death spiral for an economy.
This is why government action is so important. A minimum wage provides a floor to how low wages can fall. Every business watches out for itself and lowers wages when they can. But when every business is lowering wages it hurts every business. So while all businesses are engaged in the task of watching out for themselves government has to be there to watch the big picture and step in when necessary.
A second problem with this short-term market thinking is that it gives businesses a financial incentive to use their influence to push policies that keep unemployment high, thus forcing down wages. Senate Republicans filibustered the Bring Jobs Home act and the American Jobs Act as just two of more than 400 filibusters in recent years, helping to keep unemployment high. Companies that are fighting what they call “government interference” so they can continue to pay low wages are cutting their own throats because they are really causing their own customers to have less to spend.
3. Myth: Raising the minimum wage costs jobs.
This is one place where conservative ideology is clearly refuted by looking at what actually happens. When you have states next to each other, and one raises the minimum wage while the other does not, you can compare the results.
It might seem obvious to people that raising wages will cause companies to hire fewer people. But not when you think it through. Well-run companies employ the right number of people to handle the demand for the goods or services they produce. They don’t just have extra people sitting around reading the newspaper, who they will lay off if they have to pay a couple dollars more an hour.
Picture a store with only one cashier and 20 people in line. Pretty soon people get impatient and leave. A sensible manager is going to put the right number of cashiers at the checkout lanes to handle the number of customers in the store.
In Australia the minimum wage is $16.68 and the unemployment rate is 5.8%. In the U.S. the minimum wage is $7.25 and unemployment is down to 6.7%, but is falling largely due to people leaving the labor force because they just can’t find work. This is not to say that the unemployment rates in Australia and the U.S. are different because of the difference in the minimum wage, but it does show that the high Australian minimum wage has hardly crashed Australia’s economy.
4. Myth: Raising the minimum wage hurts blacks, Latinos, fill in the blank.
Many conservatives play a propaganda trick by claiming that raising the minimum wage hurts the very people liberals want to help. Fox News’ Art Laffer called the minimum wage the “Black Teenage Unemployment Act.” At far-right Townhall, Walter E. Williams claimed that “increases in the minimum wage at both the state and federal level are partially to blame for the crisis in employment for minority young adults.”
This claim uses a core misconception as its underpinnings, that increasing the minimum wage costs jobs. Since (fill in the blank) group faces high unemployment, raising the minimum wage shows you are a hypocrite because all you are doing is costing (fill in the blank) jobs. But this is as false as saying that raising the minimum wage takes away jobs.
5. Myth: Raising the minimum wage hurts small businesses.
Conservatives like New Jersey Governor Chris Christie say that raising the minimum wage would hurt small business owners. The truth is that most minimum-wage workers do not work for small businesses. According to Think Progress: “The majority (66 percent) of low‐wage workers are not employed by small businesses, but rather by large corporations with over 100 employees.” Also “The three largest employers of minimum wage workers [are], Walmart, Yum! Brands (Pizza Hut, Taco Bell, and KFC), and McDonald’s.”
Last February, BusinessWeek debunked the “hurts small business” claim, writing, “a growing number of small business advocates support a hike.”
“That includes dozens of business groups and networks composed primarily of small business owners such as the Main Street Alliance, the National Latino Farmers & Ranchers Trade Association, and the Greater New York Chamber of Commerce. ‘Our women [business owners] who pay a living wage have an advantage over their larger counterparts who don’t,’ says Margot Dorfman, chief executive officer of the U.S. Women’s Chamber of Commerce, an organization with 500,000 members, three-quarters of whom are small business owners. ‘Whether Obama’s proposal is high enough or the time frame is fast enough is the question.'”
The should-be-obvious reason? “If the customer base is undermined because wages are so low, they feel it directly.”
Job Fear Drives Terrible Policies
Jobs are scarce so people are afraid. Worried people fall victim to myths like these. Robert Reich writes about this, describing the “benefit to the business class of high unemployment, economic insecurity, and a safety-net shot through with holes. Not only are employees eager to accept whatever job they can get. They are also unwilling to demand healthy and safe environments.”
Except this does not just apply to people in red states, it applies across the country.
“The wages of production workers have been dropping for thirty years, adjusted for inflation, and their economic security has disappeared. Companies can and do shut down, sometimes literally overnight. A smaller share of working-age Americans hold jobs today than at any time in more than three decades.
People are so desperate for jobs they don’t want to rock the boat. They don’t want rules and regulations enforced that might cost them their livelihoods. For them, a job is precious — sometimes even more precious than a safe workplace or safe drinking water.”
Raise the Minimum Wage
Here are a few points about a higher minimum wage that aren’t myths.
The minimum wage of $7.25 isn’t even the real minimum wage. Most people do not know that tipped employees work for a minimum wage of $2.13 an hour, where it has been stuck since 1991. This means that the tips you give are not really a little extra to take home, they make up the wage these workers live on.
The National Low Income Housing Coalition studied how many hours minimum-wage employees have to work per week in each state just to rent an apartment and still be able to survive. West Virginia was lowest at 63 hours. Hawaii was 175 hours. California, Maryland, New Jersey, New York and Washington, D.C. were all over 130 hours. (See this chart.)
Raising the minimum wage boosts employee productivity and retention, which lowers the costs associated with employee turnover. Boosting employee morale also boosts customer satisfaction. This is one more reason that raising the minimum wage helps businesses.
Raising the minimum wage increases the buying power of low-wage workers. It puts more money in the pockets of people who can then buy things at local stores, which increases demand, which drives businesses to hire more workers. This is a beneficial cycle that lifts everyone. and it’s the opposite of the death spiral described above.
Raising the minimum wage lowers government safety net costs because fewer people will need food stamps, etc. It is estimated that lifting the minimum wage to $10.10 would lift 4.6 million people out of poverty.
A lower minimum wage is actually bad for business and our economy in the long term. Cutting wages eats up the seed corn of an economy. So why do so many businesses fight raising the minimum wage? Because in the short term, cutting wages can boost quarterly profits a bit, which can increase the pay and bonuses of executives. It doesn’t necessarily matter to them if this eats away at employee morale, increases retention costs and erodes the customer base over the longer term. In the long term they’ll be rich and they’ll be gone.