What’s in your wallet?

The minimum wage debate

By Sarah Sidlow

It’s been about three years since the “Fight for $15” became a thing.

In case you missed it, it’s the most recent movement calling for minimum wage hikes across the country. It was also a hot topic on the campaign trail (is that finally over?) and you’ll probably be hearing about it in the next administration. In fact, since the rallying cries first rang out, the minimum wage has been raised in a lot of states and municipalities.

But efforts to raise the minimum wage on the federal level have historically faced trouble in Congress.

In 2014, President Obama and congressional Democrats pressed to increase the federal minimum wage to $10.10 an hour. It didn’t happen. And then, Vermont Senator Bernie Sanders said, “Let’s try for $15!” Also, no. FYI: The federal minimum wage is $7.25 an hour.

For some, the idea of a one-size-fits all minimum wage is troubling. America is a big mother, they say, and the costs of living vary greatly from state to state and city to city. If the point of a minimum wage is to establish a “living wage,” it doesn’t make sense that the same number be applied to a small city in Texas and, say, a really big, really expensive city like Los Angeles.

According to 2016 National Conference of State Legislatures numbers, 26 states and D.C. already have minimum wages higher than the current federal minimum, 29 if you count states where big business minimum wage is over but small business is not  (shout out, Ohio).

Plus, opponents claim, there could be seriously detrimental consequences to raising the federal minimum wage. For one, it could eliminate jobs. If businesses must pay entry-level employees more money, then they must hire fewer of them as well, or consider replacing some workers with robots or computers (would you like fries with that, beep beep?). In 2014, the Congressional Budget Office told Obama that his proposed $10.10 wage would reduce total employment by about 500,000 workers.

Some of those opposed to a federal bump argue that the minimum wage should be a motivator for working Americans to work harder, buckle down, and propel themselves to the next level—socially and financially (American Dream, anyone?). They argue that by consistently raising the minimum wage, there’s no incentive for employees to take that next step.

But many say the minimum wage in America is far from a “living wage.”

Currently, there are about 1.3 million people in the U.S. working at the current federal minimum wage of $7.25. After federal taxes and deductions for Social Security and Medicare, those employees make about $12,000 a year—also known as the threshold of poverty for a single person.

Lots of people see this as an obvious problem. With that kind of income, it’s nearly impossible to pay rent, take care of children, or pay for an education. To many, this signals a time for change. To some of the other points listed above, they also say, “phooey.”

Some economists claim that increasing the minimum wage wouldn’t have an impact on the number of workers a company can hire because the difference would come from major companies’ stockpile of profits and CEO salaries. It won’t make your hamburger more expensive, they argue, nor will it reduce the number of people who can give it to you—it simply means Ronald McDonald himself might take a little less to the bank. Moreover, our minimum wage is way lower than most other developed countries, and also there’s a thing called inflation that tells us it should probably be higher than what it is.

There are layers upon layers of questions surrounding the minimum wage debate: how do history, culture, and economics inform our decisions about the future? And at what level—community, state, or federal—should those decisions be made?

In Columbus, Ohio Senate Democratic lawmakers recently blocked Senate Bill 331, passed by the House, which would have left it up the state, not cities, to decide on ballot issues like minimum wage, paid family leave, and, of course, puppy mill sales. (It also managed to fit in a ban on bestiality.)

Reach Dayton City Paper forum moderator Sarah Sidlow at SarahSidlow@DaytonCityPaper.com.

 

Debate forum question of the week: Should the federally mandated minimum wage be raised to $15?

 

Raising wages, lives

By Lela Klein

We absolutely must raise the minimum wage, and if you ask me, the demand for $15 is fair and reasonable. It’s no secret that Americans are working harder for less. According to the White House, the value of the minimum wage has fallen by nearly 20 percent since 1981, meaning minimum-wage earners today have far less buying power than their ’60s and ’70s counterparts. Our wages have failed to keep pace with our skyrocketing productivity (how much we produce per hour in goods and services).  The Economic Policy Institute notes that in the last four decades, productivity rose 73.4 percent nationally, while the hourly pay of non-supervisory workers basically stagnated—increasing only 11.1 percent.

An increase in the minimum wage would be good for the economy, leading to upward pressure on wages generally. Although only a small share of Americans make the minimum wage, the Brookings Institution estimates that a statutory increase would raise wages for up to 35 million workers (that’s 29.4 percent of the workforce). And economists at the Federal Reserve Bank in Chicago concluded that putting more money into the hands of low and moderate-income people (who are more likely to go out and spend it) would stimulate our economy.

Detractors argue that raising the minimum wage will have unintended consequences: McRobots serving your burgers, people slacking off in low skill jobs instead of advancing, and layoffs or unemployment caused by increased labor costs.

The good news on that last one is that we have mounting evidence that minimum wage hikes have only a marginal effect on employment rates.  In 2014, Seattle became the first city to raise the minimum wage to $15/hour.  It did so incrementally, over 6 years (which, by the way, is the method that proponents of the $15 minimum wage—including me—support).  A study by the University of Washington this summer compared post-increase Seattle to a “synthetic Seattle” with no increase (using an aggregation of neighboring zip codes with similar economic trends where the minimum wage stayed the same).  The researchers found that low-wage workers in Seattle saw pay increases, and employment rates and hours increased, as did overall earnings.  Now, the Seattle area was booming in this time period, so not all of the positive impact can be credited to the law. But significantly, compared to the “synthetic Seattle,” the researchers found only a minimal decline in employment (an average decrease of 4 hours per quarter). The UW team also failed to find evidence of price increases as a result of the law.

The McRobot argument against the minimum wage is my personal favorite. My love of Jetsons imagery aside, the truth is, automation is and will continue to grow as fast as technology allows.  Sadly, it’s fair to assume (in most cases) that your boss would replace you with a robot, if she could. Will a wage increase make technology marginally more competitive with human labor?  Maybe.  But you can bet McDonalds will replace any human with a machine that it can, whether the minimum wage increases or not. There are all kinds of reasons unrelated to wages that employers are eager to replace humans with technology. Robots make fewer errors, and don’t call in sick or try to unionize. (Westworld, Season 2: The Union Drive?)

In some ways, I find the McRobot argument itself makes a strong case for an increased minimum wage.  Like it or not, the nature of work in advanced economies like ours is evolving. Even those U.S. manufacturing jobs that have survived globalization are faced with the threat of elimination from automation and 3-D printing technology. We’re told driverless trucks are on the horizon and Amazon has piloted a store with no checkout line, where cameras and AI (artificial intelligence) replace cashiers.  Our jobs are changing fast, and we can’t rely on bygone notions of what a “good” job is or should be. Automation should make our lives as humans better, not worse. No one knows what the jobs of the future will be, but we can make sure that any job pays a living wage.

People in the streets fighting for $15 are not just fast food workers.  They are home care workers, adjunct professors, daycare providers, and others.  Nine out of 10 low-wage workers are over age 20.  Over half are women, they are disproportionately people of color, and 28 percent have children. According to Oxfam, a global charity organization, 40 percent of workers making under $15 an hour are living in or near poverty, and 10 million depend on food stamps to feed their families. Any American who works for a living—scientist, teacher, janitor, or the guy who asks if you want fries with that—should be able to keep her family housed, fed, safe, and healthy. It’s time to raise the wage.

Lela Klein is a labor lawyer, a native Daytonian, and a mother of two who lives in the South Park Historic district. She is currently working on an initiative to create more worker-owned businesses in Dayton, to drive economic growth from the ground up. Reach her at LelaKlein@DaytonCityPaper.com.

 

Job-killing economy

By David H. Landon

Currently, one of the most heated discussions in labor and employment negotiations is that of the minimum wage and where it might be headed. There are many who are demanding a substantial increase in the minimum wage. They argue that any job should provide what they term a “living wage” to its workers. To achieve that “living wage,” they are demanding that the minimum level of hourly compensation be increased to $15 per hour, which is more than double the current federal rate of $7.25. Those proponents argue that the annual wage of $15 per hour, which equates to an annual salary of $31,200, could support a family.

In most states, state law sets the minimum wage at a higher rate than the current federal minimum wage law. For instance, in Ohio, the minimum wage is $8.10 per hour. In Ohio, this applies to workers 16 and older working for employers with annual gross receipts of at least $297,000.

On the other side of the issue are many experts who contend that such a dramatic increase in the minimum wage would cripple many small companies and stall the very tenuous 2 percent pace of economic recovery from which the United States has been limping along. This is a simple matter of supply and demand economics. The more something costs, the lower the demand for that product. Many who support the huge increase believe that the owners of the company would simply raise prices to cover the increased labor costs. The danger is to small businesses, which cannot easily pass along the increased costs and stay in business. This increase will cost us entry-level jobs. It’s a job killer.

An axiom of economics is that a demand curve slopes downward. If you raise the price of something, then people will buy less of it. When they buy less, obviously profits are affected. The end result is that the company must either reduce its workforce or raise its prices in order to stay in business. Whatever side of the political aisle you stand, and however much you’d like to improve the life of your fellow man, there’s no getting around this basic rule of supply and demand.  Small, incremental increases in the minimum wage over longer periods of time can be absorbed by employers. From 1970 through 2016 (46 years), the minimum wage increased from $2.25 an hour to $8.10 an hour. Those incremental increases were absorbed by the economy. But an increase to $15 per hour over the next five years is something very different.

Here’s where the confusion seems to be rooted: providing a minimum wage to low-skill workers was never intended to create opportunities for a worker to earn a “living wage” in exchange for his or her labor. The economics for the employer simply doesn’t work. The cost to an employer can’t exceed the value of the service that the employee brings to the employer. The guy doing the fries at McDonalds cannot bring $120 per eight-hour day of value to the employer. The food business employs around 50 percent of all minimum wage earners in this country.

It’s estimated that 85 percent of all those employed at the minimum wage are teenagers living at home, young adults who live alone or with roommates, or married adults working with a spouse who also works. In addition, the Department of Labor reports that less than 15 percent of all minimum wage workers are single parents. And those individuals are already eligible for the Earned Income Tax Credit, ironically a benefit that is lowered with increased income.

An article in U.S. News and World Report makes the point that the loss of entry-level jobs restricts those in poverty more directly than any other class of workers. This article goes even further to point out that a higher federal minimum wage is only one more regulation that ultimately hurts the poor more than it helps them. The food service industry would be disproportionately impacted by such increases, with the least potential for increased productivity needed to economically justify those increases.

The economics of a low paying job mean the company can accept the lower productivity and absorb the increased training costs of a new employee. The important payoff to the company is the number of employees who will quickly learn their jobs and begin the process of moving up to the higher paying jobs within the company.

Most fast food operations, for example, are managed by workers who started off as part-time and minimum wage employees. An article in The Washington Post points out how more than 85 percent of all Walmart managers started in similar minimum wage positions. In other words, it is more the job of a company to provide upward mobility and opportunity than to focus on creating lifetime positions at the minimal levels of compensation.

For an entry-level EMT working in the Miami Valley, there is a range of starting salaries of $14.25 to $17 per hour. This proposed increase to $15 would in some instances pay the low-skill fast-food fryer more as an hourly wage than the EMT worker who has been to school and trained to save your life. With all due respect to the french fry guy, the only way he could save your life is to refuse to sell the fries to you in the first place.

David H. Landon is the former Chairman of the Montgomery County Republican Party Central Committee. He can be reached at DaveLandon@DaytonCityPaper.com.

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Sarah Sidlow
Reach DCP editor Sarah Sidlow at SarahSidlow@DaytonCityPaper.com.

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