Friday, June 6, 2014

The Minimum Wage Question

The morning news reports that we have finally reached the level of employment left behind in the Great Recession that began in 2007-08.  More needs to happen for job creation to accommodate those entering the workforce, or in it and looking for work.  But what bothers me more is the question of what kind of jobs are being created.  Most, it seems, are in the service sector, frequently part time, and without benefits.  Those are not the jobs we lost, and it means that real wage growth has not only stagnated but has been in stagnation for several decades.  At the same time we are told that we are a consumer driven economy that cannot flourish unless consumers are willing and able to buy, which they can’t do if they don’t have decent paying jobs.

Raising the minimum wage has been proposed as one part of the solution, only a part to be sure, but an important part.  Mere talk of it has generated predictable opposition from the usual suspects who claim that any raise will cost jobs.  That is undoubtedly true at some level, but experience shows that we are unlikely to reach that level, at least nationally.  The current national minimum of $7.25 has not been adjusted since 2009, and, according to the Congressional Research Service, it would have to rise to $10.69 to equal the purchasing power that it had in 1968, the high point in minimum wage purchasing power.  

What if we didn’t want to reach the high point?  For the twenty years between 1960 and 1980 the minimum wage tended to be between 45 and 50% of average private sector wages.  What if we aimed at that?  It would mean a current minimum of between $9.14 and $10.15, so it seems to me that a $10 minimum wage would be very reasonable, if not fair.  Washington State, where I live, is not far off with a statewide minimum of $9.32.

So here’s a question.  Can a $10 minimum wage worker in the service sector add enough value to the product or service offered to make them a better investment that a $7.25 worker?  I think the answer is yes given a couple of conditions.  First, management has to be good enough to figure that out, and there are enough cases of big box store and fast food outlets who have done it to make a good case for it.  Second, management that is good enough is something better than lazy, ignorant management that treats employees as disposable cogs in a disposable machine.  Third, some managers need to be more honest about whether they add enough value to be worth their own salary.  That’s not likely to happen, but it should. 

Since so many new jobs are part time or temporary, and not likely to offer benefits, the next problem has to be the two pronged need for health insurance and retirement savings.  For all of the public blathering about the ACA (Obamacare), it is a reasonable, affordable, and workable start to bring all Americans under some form of health insurance.  Retirement is another matter altogether.  The specter of a generation of part time minimum wage workers, with no retirement savings of their own, trying to survive on Social Security is not an attractive one.  It would help to take the cap off of FICA taxes. At least that would shore up the financial integrity of the system.  Beyond that, it might not be bad to borrow an idea from the right wing and encourage some small percent of income to be privately but securely invested.




1 comment:

Sandi said...

Good ideas here, Steve. How we ALL contribute to the strength of the economy is something that needs attention, let alone seeing the fairness of increasing pay for minimum wage workers.