The Facts on Raising the Minimum Wage

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Pedro Rodriguez, right, talks with Andrus Reyes as they participate in a demonstration on a Burger King parking lot as part of a nationwide protest supporting higher wages for workers in the fast-food industry and other minimum wage jobs in Boston, Thursday, Dec. 5, 2013. (AP Photo/Stephan Savoia)

Pedro Rodriguez, right, talks with Andrus Reyes as they participate in a demonstration on a Burger King parking lot as part of a nationwide protest supporting higher wages for workers in the fast-food industry and other minimum wage jobs in Boston, Thursday, Dec. 5, 2013. (AP Photo/Stephan Savoia)

Conservatives should be on the front line of the battle to raise the minimum wage. Work is supposed to make one independent, but with the inflation-adjusted federal minimum down by a third from its peak, low-wage workers depend on billions of dollars in public assistance just to make ends meet. Just this week, Rachel West and Michael Reich released a study conducted for the Center for American Progress that found raising the minimum wage to $10.10 per hour would save taxpayers $4.6 billion in spending on food stamps.

And even if you break your back working in today’s low-wage economy, it’s exceedingly difficult to raise yourself up by the bootstraps; it’s all but impossible to put yourself through school or save enough money to start a business if you’re making anything close to $7.25 an hour.

But those predisposed to defending the interests of corporate America – including retailers and fast-food restaurants – oppose any increase. That’s tough given that 73 percent of Americans – including 53 percent of registered Republicans – favor hiking the minimum to $10.10 per hour, according to a Pew poll conducted in January.

So those opposed to giving low-income workers a raise offer a number of claims suggesting it would be a supposedly bad idea. Unfortunately for their cause, all of their arguments fall apart under close scrutiny. Here are the ones deployed most frequently.

“It’s a monstrous job-killer”

Big business conservatives crowed when a recent report by the Congressional Budget Office (CBO) projected that a hike to $10.10 might cost the economy 500,000 jobs – never mind that it would have raised the incomes of around 17 million Americans. But a number of economists disputed the CBO finding. One of them, John Schmitt from the Center for Economic and Policy Research, studied years of research on the question, and found that the “weight of that evidence points to little or no employment response to modest increases in the minimum wage.”

We also have real-world experience with higher minimums. In 1998, the citizens of Washington State voted to raise theirs and then link future increases to the rate of inflation. Today, at $9.32, the Evergreen State has the highest minimum wage in the country – not far from the $10.10 per hour proposed by Barack Obama. At the time it was passed, opponents promised it would kill jobs and ultimately hurt the workers it was designed to help.

But it didn’t turn out that way. This week, Bloomberg’s Victoria Stilwell, Peter Robison and William Selway reported: “In the 15 years that followed… job growth continued at an average 0.8 percent annual pace, 0.3 percentage point above the national rate. Payrolls at Washington’s restaurants and bars, portrayed as particularly vulnerable to higher wage costs, expanded by 21 percent. Poverty has trailed the U.S. level for at least seven years.”

“It will hurt mom-and-pop businesses”

Another argument is that it would disproportionately hurt small businesses – giving the Wal-Marts of the world an unfair advantage over mom and pop. But a poll of 500 small business owners from across the country released on Thursday undermines that talking point. The survey, conducted by Greenberg Quinlan Rosner Research for Small Business Majority, found that small business owners support a hike to $10.10 per hour by a 57-43 margin. Eighty-two percent of those surveyed say they already pay their employees more than the minimum and 52 percent agreed that if the wage floor is raised, “people will have a higher percentage of their income to spend on goods and services” and small businesses “will be able to grow and hire new workers.”

“Major costs will be passed along to consumers”

Opponents also claim that higher wages would mean significantly higher prices and that those cost increases would effectively eat up whatever extra earnings low-wage workers ended up taking home. But a 2011 study conducted by Ken Jacobs and Dave Graham-Squire at the UC-Berkeley Center for Labor Research and Education and Stephanie Luce at CUNY’s Murphy Institute for Worker Education and Labor Studies estimated that raising the minimum wage to $12 per hour – two bucks more than what’s currently on the table – would increase the cost of an average shopping trip to Wal-Mart by just 46 cents – or around $12 per year. And another paper published last September by economists Jeannette Wicks Lim and Robert Pollin estimated that a hike to $10.50 an hour would likely result in the price of a Big Mac increasing by only a dime, from $4.50 to $4.60, on average.

If the minimum wage had kept pace with inflation since its peak value in 1968, it would now stand at $10.74 per hour. With the share of our nation’s output going to workers’ wages at an all-time low — and inequality on the rise — it’s easy to understand why the idea of raising it to $10.10 is so popular. And despite opponents’ dire warnings, there’s really no good reason that we shouldn’t do so.

If you agree, you can here to let your representative know that you support a raise for the working poor.

This post has been corrected.

Joshua Holland is a senior digital producer for BillMoyers.com. He’s the author of The Fifteen Biggest Lies About the Economy (and Everything Else the Right Doesn’t Want You to Know about Taxes, Jobs and Corporate America) (Wiley: 2010), and host of Politics and Reality Radio. Follow him on Twitter or drop him an email at hollandj [at] moyersmedia [dot] com.
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  • Anonymous

    Say bye-bye to the entry-level job. Why hire a kid fresh out of high school without plans for college, when you can hire a long-term unemployed (thanks, BHO) college grad, who might even have some actual work experience, and is likely to be able to read and do math? At $10.10 – $15 / hour, and employer can make that choice. At $7, the skill level goes down in the applicant pool, allowing for a genuine pathway for the unskilled worker to gain experience.

  • William Smith

    imagine a college grad not understanding simple math every dollar that low wage employees of high profit companies receive in taxpayer money is a dollar that that goes into another wealthy pocket how is this not theft

  • JA

    So you’d be fine with companies having wages like $2/hr or $4/hr if they were allowed to set their own wages?

  • Anonymous

    As opposed to the unpaid internships at radio stations and congressional offices? Sure I would.

    The workforce is VOLUNTARY, not compulsory. If you don’t want to work for $4/hr, then don’t. If the incremental value for adding another employee doesn’t exceed $4/hr, then don’t hire more staff.

  • Poz

    A minimum guaranteed income is a better, more efficient path to abolishing poverty.

  • NotARedneck

    “It’s a monstrous job-killer”

    Right wing criminal scum”:

    Let’s get this straight, very straight! Paying $5 to $7 dollars an hour (and $2.13/hr. in the restaurants and fast food joints) is not paying people for a job worked. It is providing slaves with most of the funds that they need to stay alive – relying on the tax paying public to foot the bill for the rest.

    This is clear evidence of corporate criminal activity.

  • Larry Berry

    Can we knock off the catch phrase “entry-level” job. Many of your minimum wage jobs want and at least prefer experience. My very first job at Mcds, I got passed over for being hired 3 times because they really wanted “people with experience”. Those min wage jobs also look at work history and want someone who stayed at their last min wage job for a long period. So they are not temporary jobs either. They want you to be there for many years, and want you to have been at your last min wage job for many years.

    And so far as “entry level” in the idea of moving up? Of those jobs areas, after the “entry level” there was the store manager and 2 assistants who were all on salary. Beyond that even the other managers were min. wage jobs, just a few more cents per hour. So out of those hundreds of “entry level” people 3 of them could “move up” when the other 3 that currently held the manager and assistant manager titles died. Oh and the ones higher up the corporate ladder than those 3 were not hired from within from the “entry level”. So it is also not entry level in the sense of “you’ll move up”.

    And the idea that min wage jobs are “fresh out of high school” is another myth. And the idea that it’s only a recent development (or “was never meant to be…..”) of not only being high schoolers at min. wage jobs….. I have pictures (Wish we could post pictures here) of old black and white pictures of the McDonalds and Burger King crews from ages past…….. All full grown adults (entry level my ass). Entry level is just the latest catch phrase that is nothing but a lie. I do give you credit for switching the argument to “fresh OUT of high school” since you got owned after the “min wage jobs are only for high schoolers” comments got shot down with “Yeah because mcdonalds didn’t used to open until AFTER school got out”. That argument didn’t last so you found a new catch phrase.

    In summation. Minimum wage was never just a wage for kids. Adults have been working min. wage jobs since the beginning. And worked them all their lives (not “entry level”). Minimum wage jobs were not as often stated “never supposed to support you”. Minimum wage jobs were always meant to support you. They were supposed to be the minimum amount needed to support you. It wasn’t supposed to be “If you want to make a livable wage, get a higher education”. It was supposed to be that minimum wage was the minimum livable wage and if you wanted to DO BETTER you needed a higher education, not a higher education JUST to make a livable wage.

  • Judas

    Cutting foods stamps would also save tax payers 4.6 billion. Why do we assume its the governments job to pay people? The government shouldnt be in the business of providing a middle class lifestyle to anyone.

    If you need the government to legislate what you pay is, you are probably being overpaid. Sorry, but thats the facts.

  • Carol

    I never thought I would hear someone equate using food stamps with being in the middle class. I hardly see giving someone $140 a month to buy groceries is lifting them out of poverty and pushing them into the middle class. Judas…an apt user name. You are selling out your fellow man with this attitude.

  • Anonymous

    What a miserable subhuman you are.

  • Anonymous

    Psst – this is already going on, without raising the minimum wage. Most minimum wage jobs are now held by adults. Most teenagers can’t find work. Most college kids in technical fields can’t find work in their area of expertise.

    An increase in the minimum wage would be a boon to those who are working. It would result in a populace with more disposable income in their pockets, increasing demand for the purchase of goods and services. The minimum wage has also been raised several times in the past, and has NEVER resulted in the nonsense you’ve uttered above. Good try though, shill.

  • patti livernash

    my Aunty Grace got a nearly new blue Kia by
    working part time from the internet. look at this now J­u­m­p­9­9­9­.­ℂ­o­m

  • Rob Eddy

    I would assume that is sarcasm.

  • Anonymous

    I see you’re relying on the tripe that paying people to spend money is what drives an economy. That basic miscomprehension of how economies work and grow eliminates anything you say from consideration.

  • Anonymous

    But working for the outfit that can only offer $4/hr is not compulsory…..and, in fact, the same goes for working for anybody (else) at all.

    Nice try, however, pretending that a need to be self-sufficient somehow equates to being forced to labor for starvation wages.

  • Anonymous

    “Many of your minimum wage jobs want and at least prefer experience.”

    You’ve just (unwittingly) proven my point.

    A minimum wage can make it too expensive for an employer to hire inexperienced staff at that rate.

    [Aside, where do you imagine working that you cannot get a job with a new employer once you've gained experience and are more-broadly marketable?? Who says that you must remain with that first employer forever?]

  • Christian Harris

    If I had a job like that I would go find another one or at least use it to rack up my cash and attend school to get my GED so I can get a higher education. Just saying…

  • Christian Harris

    They’re paid 2.25 an hour because they get tips, much of it untaxed and all they really have to split it with is the buss boy. The average waiter walks out with $100-$125 a day, and on the average weekend $300-350. Get your facts straight, it is hard work, but it’s not like you DON’T get paid for your work.

  • Christian Harris

    I don’t think poverty will ever be “abolished”. There will always be those who cannot work.

  • Christian Harris

    Yes, most jobs are held by older people today. It is already hard for teenagers to find jobs, because so many college grads can’t find them and they end up at these jobs struggling to pay off student loans. I think they should raise the minimum wage, but not so much that people get comfortable at their jobs and never want to find work anywhere else.

  • Christian Harris

    Yes, it is true that the majority of these jobs are held by people struggling to make ends meet.

  • Christian Harris

    See, this is where I start to disagree. It not like that job is the ONLY place you can work. I get what Spara is saying-if you don’t like what the company pays you then leave. My problem is when there aren’t enough jobs and that seems to be the only one you can get and it pays you nothing but diddly squat.

  • NotARedneck

    “I see you’re relying on the tripe that paying people to spend money is what drives an economy.”

    Of course. Why pay them at all? They’ll just waste it on the necessities of life. The speculator class can make better use of it driving up the Dow and real estate prices in mid town Manhattan.

    If they are lucky and work for a “good” employer, every afternoon, they can feed themselves from the food not consumed in the boardroom!

    Shill!

  • NotARedneck

    Crack and heroin are less addictive than having employees work for as little as possible. It funds so many nice things for the 1%. Lots of cash floating around and competing to buy speculative assets. No nasty surprises, hard work and risks like when you actually have to invest and produce something. It is so easy and this is what addicts the wealthy to this exploitation.

    Like Sparafucile, they will say anything to keep this advantage for themselves. No lie is too embarrassing.

  • Anonymous

    Oh, good one! Good, at least, at proving that you cannot counter the fact that PRODUCTION is what drives economies forward (not consumption).

  • Anonymous

    Well, economic reality has defied the “common sense” many people think they have for centuries.

    What is empirically undeniable, though, it is that ONLY production, and specifically, continuous improvements in production, that advances an economy, and increases wealth (often for all involved).

  • Anonymous

    When there “aren’t enough jobs”, hiking the minimum wage makes the job scarcity WORSE, not better.

  • Anonymous

    If you raise the minimum to $10.10, I can’t figure out what happens to someone who, over the years, has worked hard and is now proud to be making $10.25. Do they now suddenly “slip” into the minimum wage zone again?

    Secondly, I can’t see how it would make people’s lives more comfortable if there are no controls on prices or rents, like there are in Europe. The powerful myth under the idea of raising the minimum wage is that rents and prices will “magically” remain stable, and forces won’t seek to extract the extra income and take it OUT of productive use. Landlords are the perfect example. They do no productive work and employ few people but take in huge sums of money monthly. And as individuals they can’t consume enough to assist economic growth, so their contribution is tiny relative to their volume. And if I were a landlord, used to living off my tenants, why would I not raise rents if they were uniformly earning more, if there was nothing to stop me?

    Frankly, without some kind of control on prices and rents, raising the minimum wage seems like a perfect way to reward landlords for raising rents, and to destroy the middle class further as the ”minimum wage zone” wraps itself around more people. It’s actually a really sneaky way to help the rich get richer while more workers get extracted from.

  • Anonymous

    You forgot to factor in the predatory forces that would be continually seeking to extract the extra money people would be earning. First off, more money circulating doesn’t keep prices down. More money = more demand = upward pressure on prices. The system also does little to protect landlords from raising rents to get some if not all of the pie. And rents by definition are extractive and non-productive. In Europe, high minimum wages only work because they also have controls on prices and rents.

  • Anonymous

    Exactly. Inflation also runs the risk of our creditors wanting to dump their bonds as they become increasingly worthless, sending the dollar into the crapper. If we choose to go down this path, the only way to make it work would be to also control prices and rents, so that the increased earnings can actually be enjoyed, invested, etc, rather than extracted. However, instead of a centrally planned economy, I think there are simpler ways to tie business owners and landlords, whose incentives are opposite, together. For example, the formula could be, if rents rise, wages have to rise to match — and if wages want to stay down then rents have to stay down to match. $7 an hour would be plenty if rents were $200 per month. And none of this really needs to be micromanaged. Just tie business owners and landlords together. Require a formula where wages and rents/prices have to rise and fall together. Simple.

  • Anonymous

    Raising the minimum wage will cause more money to circulate. Increased demand = increased prices, the impact of which will be felt by those whose wages have risen. It will also give incentives to landlords to raise rents thus extracting more money from productive use. $7 an hour would be plenty if rents were $200 per month. A minimum wage rise is no guarantee of higher prosperity unless prices and rents are also controlled. Without those controls, it risks sinking everyone, except the elite, into the minimum wage zone. If you really want to address inequity, instead of nickle & diming the poor, luring them with the myth that the 1% will stop speculating and extracting, create a national maximum income where all income over, say, $100M is taxed at 100%. Also require the business owners & landlords to be accountable to each other. If prices or profits rise, wages would have to also, and vice versa.

  • David Garfinkel

    Well, there are obviously a lot of amateur economists on the forums. Why don’t we put down our guns here and just see what happens in those areas where the minimum wage is being legislated higher. Check back in 3 years or so and let’s pick this up then. Ultimately I would hope we all agree that someone who does a hard days work should be able to afford food, shelter and basic health care at least with some opportunity for improvement right? That’s the American way. To me, worrying about what’s going to happen to the person who’s making $10.25 now is a relatively small concern. Some argue better pay will offer more stability and ability for personal and general economic improvement. Others counter it will cost jobs and raise costs. We’ll see. Personally, if I have to pay an additional few percentage points at places knowing the people working there are making a better life, I will be happy to do that.

  • rp

    Wrong!… in AZ at least. Servers/wait staff get taxed 8% on everything you eat and drink! If they don’t keep track of their own sales and tips, then they have to take their employer’s sales! This is why it is so cruel to stiff your server. (So if you get someone who sucks, s/he probably is new so tip them at least the 8%.)

    By the way, busboys get paid minimum wage + tips while your waitress gets paid $2.25 an hour, and hopefully, she will get tips.

  • Starbuck Severin Avon

    I was in a law firm where the staff hadn’t gotten raises in four years. During that time, my rent went up annually, food prices went up, gas prices went up, car insurance went up, my electric bill went up, my phone bill went up, my cable bill went up. The portion I paid toward my health insurance went up, as well as the deductible and co-pays, while the level of coverage dropped.

  • Rbnlegend

    Where do you live that rent is somehow stable? A very few locations in the US control rent, but in most places, it’s entirely up to the landlord. The rent has been going up 5% a year for a long time, while wages have been stagnant.

  • Sam Ward

    Inequality on the rise? No. I have seen equality everywhere, and when people are completely equal, they are somehow still inequal? We are all created equal, but bad choices can change that. There is not discrimination in pay today. When you apply for a raise, the boss doesn’t look at a color code ranging from pale to pitch black and say “you are brown, you don’t get a raise”. The law and Constitution has been changed to allow everybody to do good equally. Marissa Mayer is the CEO of Yahoo-and she’s a woman, I don’t see inequality there. Sorry, that was a rant I’ve had about this for a while.

    Secondly, I don’t understand. I’m being told that if the minimum wage is raised, somehow no workers will be laid off, prices will not go higher, and no business will be hurt. Reality check: basic common sense should dispense this illusion. If you raise the prices on something-workers, in this case, it must be paid for with something. When the economy isn’t doing well, and businesses are hurt, workers are laid off. This is because they can’t afford them. Yet somehow raising the cost of hiring workers won’t have any effects here. We need to balance the wage with the costs of raising it, and concentrate on alternative ways to raise wages and keep companies alive.

    Now I understand your argument. If workers are paid more, they will give more back to the business that pays them, or another business nearby. This is not always the case. Higher pay to workers doesn’t mean they will turn around on their break and give more back to their company. Let’s take McDonalds as an example. They employ over a million workers-let’s just take a million workers here. 7.25 is the current wage. 1,000,000*7.25=7,250,000. Now let’s raise it to the proposed here. 1,000,000*10.10=10,100,000. Now let’s take it to the newly proposed 15 dollar wage. 1,000,000*15= 15,000,000. The new wage increases the strain on McDonalds by almost 2.1. This has to come out somewhere, take Forbes word if you won’t take mine, they tried to prove a higher wage would be good, but they proved my point: “The cost of a Big Mac–AT LEAST TO CONSUMERS–probably wouldn’t go up at all. Why? In order to remain competitive with rivals on price, the company, as economist Adam Ozimek pointed out earlier this week, would probably find a way to keep overall labor costs in check, MOST LIKELY BY REDUCING THE NUMBER OF WORKERS AND INTRODUCING MORE AUTOMATION–think ATMs in the banking industry.)” What was that? reducing labor costs by phasing out workers? Excuse me?

    Now I’m not against filling the unemployment gap with ATMs, but why replace the working people in order to make work better? That’s like taking guns from law abiding citizens to reduce crime! Oh wait… they do that too…
    And if they don’t do that, they will have to raise prices on their services. That may be the only solution in order to keep good wages and keep companies alive. I’m not against paying an extra dollar on a burger. But not all will be so content. Now with McDonalds some might say “yeah! We never liked ‘em anyway!” (they are the most hated company in the nation), but what about that old Jack’s gas station down the street? I already hear people going “we don’t need to pay that much for gas or candy at the corner store, just go to a Walmart!-so big companies grow and small companies suffer more? I thought we didn’t want that? What about the people who don’t own millionare companies? What about that smaller burger place down the street that is hardly getting by as it is? Do you think they can possibly afford that? These economics I’ve mentioned make sense, there is no getting around it. Furthermore, by increasing the wage, you make competition harder. If there are workers who want to work more, and are willing to work for less, but the wage is the same, how will workers compete? Millions of workers have all the traits needed to do a minimum wage job, that’s why it’s minimum wage. When workers are equally qualified and can’t be paid less, this gives the employer the opportunity to choose favorites. You wanna talk about inequality? How about choosing the employee based on a personal bias when both work for the same wage?

    Bottom line (after all this): The money paid will come out somewhere, and it won’t be good for consumers when it does.

    What can we do, then? Well, there is a problem to be solved, but it isn’t with minimum wage (mostly). Minimum wage is meant to be a starter’s job. If the minimum wage is enough for a starter, that’s all it should need. If there are grown men and women doing minimum wage jobs, that points to a bigger problem: education. If people are getting to be near thirty and still need a job at McDonalds, that means they have no other skills to offer. This means they learned none. It’s a vicious cycle. They have kids, and can’t pay for good education because they didn’t get one. I don’t have the answer to this problem except to take it even farther and say that maybe it extends to the home and how people are being raised, but I’m not a parenting psychologist, so I don’t know for sure, and that would be getting way off topic.

    Basically, balance. If we raise the minimum wage, there will be repercussions.
    This has gone on way too long, I’ll just post it to my blog as a new post.