Mar 29, 2015

March 29, 2015: Minimum Wage; Maximum Myth, Dog-Eared Objections, Into the Abyss

About every decade or so, after the minimum wage has lost about 30% of its purchasing power, the Democratic Party proposes to raise the minimum wage in an effort to shore up what is left of the tattered ‘safety net’. Every time the Democrats propose an adjustment, the political wrong drags out its hoary, shopworn, arguments in favor of doing nothing; or, as in the case of a Jeb Bush argue that the minimum wage should be done away with altogether, with workers relying instead upon the tender mercies of their capitalist benefactors.

First, they contend that the minimum wage benefits mostly teenage workers or workers who are not really in the workplace and who can afford to work for less. In fact, according to the United States Department of Labor, "88 percent of those who would benefit from a minimum wage increase are age 20 or older, and 55 percent are women" (1)

Secondly, opponents of the minimum wage can reliably be expected to trot out the old bromide that establishing a ‘false floor’ on the cost of labor costs the economy jobs. It follows, according to these lights, that increasing the minimum wage will cost millions of jobs, the kind of jobs most desperately needed by the lower classes. In fact, "a review of 64 studies of minimum wage increases found no effect on employment." Additionally, according to the Department of Labor,

"more than 600 economists, seven of the Nobel Prize winners in economics, have signed onto a letter in support of raising the minimum wage to $10.10 by 2016." (1)

Thirdly, opponents contend, the federal requirement puts an undue hardship on small businesses and they cannot afford to pay additional wages. Accordingly, it is widely predicted every time an increase is proposed that main street will shed a fraction of its workforce if the Liberals have their way. The facts are otherwise. According to the Department of Labor "A June 2014 survey found that more than 3 out of 5 small business owners support increasing the minimum wage to $10.10. Small business owners believe that a higher minimum wage would benefit business in important ways: 58% say raising the minimum wage would increase consumer purchasing power. 56% say raising the minimum wage would help the economy. In addition, 53% agree that with a higher minimum wage, businesses would benefit from lower employee turnover, increased productivity and customer satisfaction." (1)

Fourth, the argument is presented that increasing the tipped wage for restaurant workers would be detrimental to the industry. This argument has historically been persuasive as when Herman Cain, former Republican candidate for President, headed the lobbying effort the last time the Federal Government raised the minimum wage. Cain signed off on a compromise getting his industry to support an increase in exchange for an understanding that Congress would not impose such an increase on his industry. As a result, the non-tip federal minimum wage lingers at a meager 2.13 an hour, a standard set in 1991 which demonstrates the historically low standard set for the industry.

It transpires, however, that this objection to raising the standard is likewise bogus. The Department of Labor informs us that, in California for instance,"employers are required to pay servers the full minimum wage of $9 per hour - before tips. Even with a recent increase in the minimum wage, the National Restaurant Association projects California restaurant sales will outpace the U.S. average in 2014." (1) : and, when San Francisco required employers to pay its workers 10.74 per hour--"before tips"–the industry has reported subsequent job growth. (1)

Sixth, opponents contend that minimum wage earners are typically part-time employees. Wrong again, about 53 percent of minimum wage earners are full time workers.

Seventh, raising the minimum wage is bad for the economy. In fact the minimum wage has been raised 22 times since it was established in the 1930's and real GDP has increased.

These are a few of the old, tired, dog-eared objections trotted out every time the nation puts the minimum wage on the ‘front burner’. None of these arguments hold water but the idiot-wrong can be relied upon to dig them up and drag them out for public consideration nonetheless.

Of late other objections have emerged, belittling the effort by Congress to enact a remedy. One encounters, for instance, the objection that only 3.6 million workers are eligible, so raising the benchmark wouldn’t have much impact and is, therefore, a waste to time–time better spent by this Rescumlican congress repealing ObamaCare for the umpteenth time; or energy better spent shredding the social safety net.

The Scums have a point here, not because the workers in this country have become so affluent as to marginalize the impact and importance of the measure; not because we have witnessed a wholesale movement in the labor force from lower to middle class. Indeed it is quite the contrary poverty is on the increase. The fact that so few, relatively, fall within the margins covered by minimum wage protection is a product of several factors

First, there are whole industries and millions of workers in this country who have never been protected by the Fair Labor Standards Act, the law which established the minimum wage. Farm workers, for instance were never covered, and restaurant workers were placed in a sub-wage category as noted above.

Secondly, there has been a trend in this country over the last decades to move millions of workers off the payroll altogether under the so-called 1099 heading. This is a provision in the labor and tax code allowing a company to hire an ‘independent contractor’ wherein the worker/employee works for a wage, usually above the minimum wage, but the employer withholds no local, state, or federal taxes, no social security or medicare withholdings, and no worker’s compensation or unemployment insurance. The "contractor" may indeed work for no other employer, I have seen this situation, and may indeed work 40 hours a week year round. Getting $9.00 an hour instead of $7.00, his employer simply pockets the difference between what he is paying and what he would or should be paying if he had made the contributions. Note here that only a fraction the "savings" in the "cost of labor" previously paid is returned to the worker. This practice is becoming ubiquitous and there are times when working under such an arrangement, as when a property management company ‘out sources’ its entire maintenance operation to so-called "1099 contractors" where work is on a bidding basis, the race to the bottom becomes complete: the "contractor" facing severe competition must pay his own transportation, supply his own tools and equipment, pay his own taxes etc., and often when the checks come in and the man-hours are tabulated the job is done for Less than the minimum wage.

Every day, it seems, we see another turn of the screw. As Congress dawdles and delays, the middle classes are slowly sinking into the abyss while the poor are becoming increasingly desperate. Not only must the minimum wage be raised, but the categories of workers must be expanded to include all those industries not covered. In addition, we must work to eliminate the ubiquitous use, if not outright abuse, of the 1099 provisions in the tax code. Raising and expanding the minimum wage would have the salutary effect of not only stimulating a sluggish economy, lifting the economic prospects of the least among us, but also raise the benchmark for other low-wage jobs, a much needed ripple-effect.



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