Top 5 Reasons Why Raising the Minimum Wage Is Good for You and Me
Photo Credit: shutterstock
Stay up to date with the latest headlines via email.
In recent months, a number of states have again taken the lead on measures to raise the minimum wage. Massachusetts is moving toward a minimum of $10 per hour. Other measures are on the table in New York, Illinois, New Jersey, Connecticut and Missouri. Meanwhile Sen. Tom Harkin, D-Iowa, is pressing for the federal minimum wage to rise to $9.80 per hour by 2014.
This is far more sensible policy than symbolic nods to the left through gimmicks such as the so-called Buffett Rule, which might raise new revenues from the mega-wealthy through taxes, but will likely amount to very little because gazillionaires can hire clever accountants to help them get around it. No, we need policies that clearly do something for hard-working people who have been clobbered by a financial crisis they didn't create.
Here are five reasons why we should cheer for working America getting a raise.
1. Good for Families: According to economist James Galbraith, raising the minimum wage would raise the incomes of 28 million Americans. Women would particularly benefit because they tend to work for lower wages than men. As Galbraith sees it, raising the minimum wage is family friendly policy:
“With more family income, some people would choose to retire, go back to school, or have children, making it easier for others who need jobs to find them. Working families would have more time for community life, including politics; Americans would start to reclaim the middle-class political organization that they once had. Because payroll- and income-tax revenues would rise, the federal deficit would come down. Social Security worries would fade.”
2. Good for Economic Recovery: To get the economy back on track, spending power has to be in the hands of those who actually spend in the real economy. That means regular people, not the super-wealthy who tend to hoard wealth or invest in financial products. The minimum wage story is not just a story about income inequality, but rather it’s about an elite that has hijacked the economic system and made it work less productively than before while redistributing more of what is working to themselves.
The problem with our economy today is that the growing gap between the real wages and productivity has violated the traditional relationship between real wages and consumption. So if the productivity of each worker is rising strongly, yet that worker’s capacity to purchase (the real wage) is lagging badly behind – how does economic recovery which relies on growth in spending sustain itself?
Which is why policy should be more directed toward programs that increase the minimum wage and less of discredited neoliberal “trickle-down” economics. Trickle-down economics is largely counterproductive because it shifts more resources into the hands of those who have less propensity to spend and keep the economy moving.
3. Helps People Get Out of Debt: During the early part of the post-war period, particularly the 1950s and 1960s, entrepreneurship was more concerned with building productive capacity and putting workers to work actually making useful things as opposed to creating financial Frankenstein products like credit default swaps.
As our economy has become increasingly directed toward Wall Street and the so-called FIRE (finance, insurance, real estate) sectors, more wealth has migrated to the top 1 percent. On top of that, real wages have increasingly lagged behind the growth in productivity. It is also clear that hours worked and persons employed in the “productive” sector have been in decline over the last few decades.
Prior to the 1970s, when flawed neo-liberal ideas started to gain prominence, the growth of real wages largely tracked productivity growth, which meant that as the productive capacity of the system expanded, the capacity of the workers to maintain consumption standards out of wages also grew in proportion. There were high incomes produced, but these typically came from success in building things and spreading the gains (somewhat to workers).