Minimum Rage: Implications of the Wage Debate
This minimum wage debate is a tough one. You know, is $4.25 an hour enough for those burger-flippers out there, or should we make 'em really fat and sassy by upping it to $5.15 an hour, as President Clinton has proposed and the House of Representatives has passed? In California, we will have a chance to vote in November to raise the state minimum wage within two years to $5.75 an hour. With today's minimum wage at an inflation-adjusted 40-year low, the good people in the United States Senate (annual salary for members of Congress: $133,600) are still at loggerheads over what to do for folks who make less in a year than a senator makes in a month. Besides, the conventional wisdom in this cynical election year is that none of this has anything to do with real people living on the minimum wage. It has been largely explained by most commentators as a ploy by Bill Clinton to put Bob Dole on the defensive. (Those with a taste for ancient history will note that when the Democrats controlled Congress during the first two years of the Clinton presidency, there was no White House push for a new minimum wage standard.)But there are real people out there making sandwiches, cleaning bedpans, answering telephones and scraping by, just barely, on wages that are unrealistically low. A recent study by the National Low Income Housing Coalition found that one in three of the working 18.8 million low-income renter households nationwide can't afford the national fair market rent for a two-bedroom apartment of $543 a month. The study further found that a minimum wage household would have to make 2.5 times the current minimum -- about $10.44 a hour -- just to stay even with rents. In the study, New York was the least affordable state in the country; California ranked seventh.Another study, sponsored by the Annie E. Casey Foundation, found that one-third of the 15 million poor children in the United States have at least one parent working full time, usually at or close to the minimum wage. That parent, the study found, is spending about 21 percent of the family income on child care alone. Richard Rothstein of the Economic Policy Institute has written that from 1979 to 1989, real median wages declined by 3.9 percent. By 1994, median wages had dropped another 3.1 percent. Seventy percent of American workers had lower hourly wages in 1994 than in 1979 or 1989, according to Rothstein.Then there is the evidence of our eyes. We know things aren't getting better because we can see the homeless among us, the forlorn figures standing on street corners with their "will work for food" signs. And please, none of that crap about how "those people" choose to live "that way."But the unease is not just among the poor. There is a constant chatter in the air about the middle-class feeling pinched, squeezed and uncertain. Pat Buchanan and his nativist rhetoric scares the hell out of Republicans and Democrats alike because his fat-cat bashing strikes a very real chord with too many people. Regardless of how you feel about Buchanan -- and he is one weird and scary cat, a dangerous proto-fascist in the making, if you ask me -- chances are you feel like you might be getting screwed. To borrow a page from interpersonal therapy, go with it. Trust that feeling. Just because you're paranoid, as the old joke goes, it doesn't mean someone isn't out to get you. Things are getting better, we are told, the stock market is soaring. Yet we feel worse. The minimum wage is just part of the picture.The dean of liberal establishment economists, John Kenneth Galbraith sees the disquiet as a natural result of government policy. Critiquing current attitudes in the American Spectator magazine, he wrote, "There is a common ground on economic policy that now stretches, with differences only of degree, from the radical right to Bill Clinton. Across the spectrum, all declare that the main job of government is to help markets work well. On the supply side, government can help, up to a point, by providing education, training, infrastructure and scientific research -- all public goods that markets undervalue. But when it comes to macroeconomic policy, government should do nothing except pursue budget balance, and leave the Federal Reserve alone."What I take that to mean is that government sees its job as helping the rich and leaving the rest of us alone. Am I being too harsh? Consider this: Corporate CEOs in the United States, have seen their compensation rise in the last 25 years from about 35 to 157 times the entry wage for American workers. Corporate profits this past year were up a record 31 percent, and yet wages remain largely stagnant.And, of course, mass shit-canning -- uh, "downsizing" -- is still the darling of Wall Street merger and acquisition gurus. Speaking of which, we continue to enjoy the weird good-news-is-bad-news-thing in the stock market. In March, the U.S. Labor Department announced what sounded like a good thing, that a healthy 705,000 jobs had been created in February. But no, that's not a good thing; that might be an inflation thing, and so the stock market did a bad thing and dived. Am I the only one scratching my head about the fact that good news for real people is bad news for investors?LABOR PAINSAccording to an analysis by the Washington-based Economic Planning Institute, "The only families able to achieve any income growth between 1989 and 1993 were the best-off 5 percent of families. Moreover, median family income fell four years in a row after 1989, the longest income decline in the post-war period." Another respected economist, Lester Thurow, argues that the actual jobless rate in the United States is at least double the official 5.5-6.5 percent we see quoted. "Properly calculated, our rate of joblessness is well into double digits," Thurow said in the American Spectator in April."No wonder workers have no bargaining power to get their share of an increasingly productive economy. ... In the fall of 1995, America's official unemployment rate was hovering around 5.7 percent. But like an iceberg that is mostly invisible below the waterline, officially unemployed workers are just a small part of the total number of workers looking for more work. If we combine the 7.5 to 8 million officially unemployed workers, the 5 to 6 million people who are not working but who do not meet any of the tests for being active in the workforce and are therefore not considered unemployed, and the 4.5 million part-time workers who would like full-time work, there are 17 to 18.5 million Americans looking for more work. This brings the real unemployment rate to almost 14 percent."Thurow says the villain is the ongoing 25-year war against inflation that has led to high interest rates and great returns in the stock market. That's the same war that opponents of increasing the minimum wage cite as their reason for wanting to hold the line.As I see it, if we ever reached anything approaching full employment, the bargaining power would begin to shift away from business owners and toward labor. That would mean higher wages -- much higher. Heck, it might even cut into those compensation packages enjoyed by our CEOs.But according to Thurow, there is not much chance of that happening anytime soon. Beginning with Ronald Reagan's firing of striking unionized air traffic controllers during his first term, the gloves came off. "Some capitalists certainly plotted to kill America's labor unions," says Thurow. Following Reagan's actions, "a deliberate strategy of de-unionization" began, leading to an entire industry in pro-business, anti-union consultants and a steep decline in the percentage of unionized workers to the current figure of about 15 percent of the total workforce."The living standards of the broad middle class have remained in continuous decline despite the robust aggregate performance," writes economist Lawrence Mishel. "This recovery has demonstrated that improved competitiveness, productivity and overall economic growth do not necessarily translate into improved incomes for most families."Mishel says that the median family income fell each year from 1989 to 1993, the last year for which the Census Bureau has released family income data. This was the only time in the postwar period that incomes fell four years in a row and the first time that incomes fell during the first two years of an economic recovery. By 1993, the median family's income was down $2,700, or 7 percent, from its 1989 level of roughly $40,000.IT'S A KATHIE LEE THINGWhy is this happening? Lawrence Mishel again: "Workers -- union and nonunion, college- and non-college-educated, white-collar and blue-collar -- have lost bargaining power relative to their employers. Corporate America today has the power to respond to increased domestic and global competition by cutting labor costs. Public policies have generally accommodated or reinforced this effort, by failing to pursue full employment, fair trade, higher minimum wages or renewal of the labor movement."In other words, it's a Kathie Lee thing. Pert, twinkly and smarmy, Kathie Lee Gifford was shocked and teary-eyed recently to learn that some of her Kathie Lee line of clothing for Wal-Mart was being produced by Honduran children making 30 cents an hour. But she is hardly alone. In the search for low wages and docile laborers, companies have moved millions of well-paying industrial jobs offshore. From Haiti to Bangladesh, San Salvador to Jakarta, workers are paid several cents an hour to make everything from underwear for JCPenney and high-tech sneakers for Nike to kiddie pajamas for Sears.We know it's going on. We don't like it. And there is almost nothing we can do about it. It's called the global economy, stupid, and if you don't own the factory, chances are it's not making you rich regardless of where you live. Seen another way, a study of the California economy by the office of the state controller determined that in the post-recession state economy, job growth has been primarily in low-wage service jobs and high-wage executive positions. Overall there has been more job growth at the lower end of the wage scale, the report stated, and an overall decline in jobs with wages in the $30,000- $80,000 range.Jobs in so-called "declining industries," principally manufacturing, are being replaced by lower-paying service sector jobs, according to the controller's office, with the result that income gaps in the state are widening between rich and poor.FAIR PLAYWith polls showing a solid majority of Americans at all income levels supporting an increase in the minimum wage, I suspect that what is going on here is just a case of fair play. Think of it: If most of us feel like we're getting screwed, who could be getting it worse than the guy at the bottom? A full-time minimum wage worker in the United States makes about $8,500 a year. Throw in whatever other benefits you can -- food stamps, welfare, tax credits -- and you still come out well below the federal poverty line of $15,600 for a family of four.If the wage is raised to $5.15 an hour in 1997, that would make up only half of the ground that was lost to inflation during the 1980s, according to the Center on Budget and Policy Priorities. A minimum wage of $5.15 an hour in 1997 would be 15 percent below its average purchasing power during the 1970s, after adjusting for inflation. If the minimum wage were to have the same purchasing power in 1997 as it averaged during the 1970s, it would need to equal $6.07 an hour, nearly $1 an hour higher than the proposed level.When you strip it away and look at the amounts of money here and consider what things really cost in this country, the reality of life at the bottom is pretty sobering. Divide that $8,500 up and see what it will buy. That's $680 a month. Subtract rent, food, insurance, transportation, clothing and health care and it's pretty obvious there isn't much left, if any.Or look at it this way. Almost everybody agrees that the way out of poverty is through education, but the costs of getting a college education have been rising astronomically in recent years, even at state institutions. A piece in the June 20 Sacramento Bee put it in perspective, noting that a family with a 9-year-old child today should start salting away $456 every month right now if they want to send the little one to the University of California in the year 2005. If you're looking at Stanford, raise that figure to $1,290 a month. Even a California State school would cost you $345 a month if you start today.Now, those figures are nothing to Microsoft founder Bill Gates, I suppose, since he pulled down $13 billion last year, according to Forbes magazine, but it might make the rest of us shiver. Add to that the need to plan for retirement, worry over eroding health care benefits, the possible bankruptcy of the Social Security system, and the pressing need baby boomers are feeling to care for their aging parents, and there is little wonder that the much-touted robust economic performance of recent years isn't translating into inner harmony in the heartland.So the talking heads in punditland tell us the voters are still pissed off and apathetic about the coming election. Well, as the saying goes, duh! The minimum wage is about the only issue that has come close to addressing, really addressing, the economic insecurity of the nation's workers.The GOP is busy arguing about abortion, trying to decide if they are going to be completely intolerant on the issue or only mostly intolerant. They are selling us the Whitewater illusion as if it were some kind of threat to the life of the republic, and they still want to talk family values as if being upright, moral and born-again would get your local janitor more than that $4.25 a hour. The Democrats, meanwhile, go along agreeing with the Republicans on just about everything and waiting for Dole to implode. Hell, the guy's so old, maybe he'll have a stroke before the election and Clinton will be able to walk away with it. Am I missing something here? I have yet to hear anybody on either side of the aisle talk about anything that addresses real fears, real anxieties. I think our voting public may be ready to hear honest talk about real stuff. California Gov. Pete Wilson tried to ride to the White House on the backs of illegal immigrants and criminals, thinking that panic over Mexican hordes and belief in the death penalty was enough to take him to the top. Much to the credit of the American people, it didn't even get him as far as New Hampshire. But nobody seems to have learned the lesson.With the silly season fully upon us, we can look forward to a summer of pandering to the right and finger-pointing. The Christian Coalition's Ralph Reed lecturing America on what his troops want. New York Sen. Al D'Amato posturing about Whitewater. Ross Perot just being Ross Perot. Bob Dole being "a Kansan, a man," and Clinton pretending to be a Republican. Yeccchhh!Oh, c'mon, gang, do the right thing. Raise the minimum wage. But don't stop there. Let's hear a plan to address the economic insecurity of the vast majority of us. Let's talk about health care, education costs and mass layoffs. Let's hear some ideas. Who knows? Maybe there could still be a place in American life for political reality.