Here is an idea the House Majority Leader Eric Cantor needs to consider if he wants Republicans to stand up for the struggling American worker: Raise the minimum wage. The American Conservative published an intriguing piece by Ron Unz back in November advocating a minimum wage of $12. Cantor would be helped by reading it. In the article, Unz lays out why conservatives should favor such a move. Unz includes many arguments normally associated with “liberal” pundits about the direction of the American labor market and the type of jobs being created during this century—mostly low wage. And, he accurately argues why raising the minimum wage would not really effect America’s global competitiveness. He even points out how WalMart lobbied for the most recent increase of the federal minimum wage back in 2005 because it would boost the earnings of its customer base.
This week, the New York Times gave a powerful editorial that President Obama’s team should take as its charge for setting a new course to guide America's workers away from their precarious position to a safer and stronger recovery. An important item in the charge was to raise the minimum wage, lifting the floor of wages and workers with it.
Raising the minimum wage is vital to restore a sense of national purpose when it comes to the recovery. This recovery has been very uneven; with some states lagging behind others; some groups suffering more than others; and wages stagnating for all. Today, 20 states (including the District of Columbia) have higher state minimum wages than the federal minimum. On Jan. 1, seven states automatically adjusted their state minimum wages up, because they are indexed to inflation or other measures. In Washington State, the minimum wage is now at $9.19 an hour. But, carnival workers who are exempt from the federal minimum wage have no wage protection in South Carolina, a state with no state minimum wage laws. These extremes in America are tearing apart our nation, dividing us along some lines that are almost ancient and regional. New meaning is coming to being in a Red State or a Blue State. If President Obama wants to bring Americans together, he will need policies to lift us all to the United States.
The federal minimum wage was born out of the caldron of the Great Depression. It came about because the unregulated labor market had pushed wages too low to sustain the demand needed for full employment. To put the brakes on the sliding share of national income going to America’s workers, the Fair Labor Standards Act codified the 40 hour workweek, brought a halt to child labor and established a floor to wages. Now that we have again endured a long slide into record low wage shares of national income, a labor market with workers deliberately misclassified as “independent contractors” to skirt labor standards, it is time that this generation act to add its contribution to advancing a more perfect union.
The federal minimum wage stands at $7.25; frozen since 2009. In inflation adjusted terms, it is slightly below where President Clinton boosted the wage in 1997. Backed by new research spearheaded by the current chair of President Obama’s Council of Economic Advisers, Alan Krueger, Clinton raised the minimum wage to $5.15 an hour. Today it would be $7.39, had it been indexed for inflation. If it remained 40% of the average wage, as it was in 1997, it would be $8.13 an hour today.
But, that level of earnings would have been illegal back in 1968. The minimum wage in 1968, in nominal terms, stood at $1.60 an hour, but in today’s dollars, that would be equivalent to $10.34 an hour. So, what does this say to the millions of Americans working below $10.34 an hour today—in a land that is far richer than the America of 1968—that we would allow our labor standards to leave them unprotected? The federal poverty level for a single-parent family of three was $18,498 in 2012. An American working full-time, year-round in 1968 could not make less than the equivalent of $21,507 today, easily ahead of the poverty line. Today, unfortunately, a full-time, year-round minimum wage worker would get paid $15,080, well below the poverty level. Why, in a country that has more than doubled its total output per person (GDP per capita) in that period—from $20,573 to $43,238—would we move from a poorer country that outlawed poverty for working people to a doubly richer country that condones the oxymoron of “working poor?”
This is why Unz was on the right track in talking to conservatives. Don’t even Republicans believe that hard work should pay? Don’t even Republicans believe that a rich nation ought to be able to afford at least what a poorer nation could afford?
But, if even a Republican could agree that hard work should pay, doesn’t that mean that President Obama needs to fight now, and fight hard to leave his mark on history as to his response to the Great Recession by restoring value to American work? And, shouldn’t his legacy be to go one step further, to ensure that America always treats work fairly?
The president can do this. He can join every elected president since Franklin Roosevelt (with the sole exception of Ronald Reagan) to pass a raise in the minimum wage. That act would put him in the company of Richard Nixon, George H.W. Bush and George W. Bush. So, to have a real legacy, he should raise the minimum wage to half the average wage, a relationship it held historically in the post-World War II era when, from 1946 to 1979, the incomes of all Americans moved together. And then he should index the minimum wage to half the average wage to insure that going forward, as the income of America advances the status of every one who is willing to work hard moves with America.
Had we indexed the minimum wage to half the average wage, then the minimum wage would today be $11.89 an hour. The gap between that wage and $10.25 highlights why workers would prefer to have their wages tied to the average wage and the productivity growth of the American workforce. And, imagine the challenge, if you earn the minimum wage, of getting your boss to agree to a raise from the minimum to get you to the average wage of all workers? Moving the minimum and average together makes that task easier.
But, more importantly, imagine if solving poverty were reduced to the problem of getting someone a job—any job. I think even a conservative would believe that was right.