Let's Have Some Wage Rage
The US Congress recently failed to pass a bill that would have raised the minimum wage, presently at $5.15 an hour, which is about $10,500 a year for a full-time worker. The value of the minimum wage has dropped 20 percent since its last increase in 1997. It's at its lowest value in 50 years.
Jim Hightower reports that there are 7.3 million Americans working for a minimum wage. And 72 percent of them are adults. The average worker brings home more than half the family's weekly income, and a third bring home 100 percent of their family's earnings. Sixty percent of these workers are women, and 760,000 are single mothers.
This is happening in the US, the richest country in the history of the world. Per capita GDP is $41,800, while per capita personal income is almost $33,000, or, for a family of four, $132,000. There are several million millionaires in the US, by various estimates, and Forbes says there are 374 billionaires. Increasing disparities in income have been widely noted. All of this would suggest the possibility, and the desirability, of realizing not only increases in the minimum wage but in the so-called living wage as well. Here we consider both.
Let's look at the reasoning. The usual argument in opposition to an increase in wages is that it would cause a loss of jobs. Yet in the states that have raised the minimum wage, employment has increased. The problem is that the job-loss argument is based on a microeconomic model: if an employer has to pay higher wages he will have to lay off workers. If he is the only employer who is affected, that result indeed would seem plausible. But if a higher wage is mandated for everyone, we must go to a macroeconomic model. That would mean that the increased purchasing power would increase demand and thus employment. The workers affected, by definition, are in the low income brackets and thus would spend every dime of an increase. Obviously, then, a federally mandated increase, rather than a local one, would be the wiser choice.
Interestingly, however, there are some examples of success on a local level. Santa Fe, NM
mandated a living wage in 2004. The sky did not fall in as predicted. With the city's $9.50 an hour wage floor, slated to rise to $10.50 in 2008, Target and Sam's Club are thriving and Wal-Mart is building a superstore. Las Vegas, NV, another example, is also thriving, although it has raised wages through a labor union--the Culinary Workers Local 226 of the Hotel Employees and Restaurant Employees International Union. In January 1, 2004, housekeepers were making $11.40 an hour and tipped hotel employees a $9.60-an-hour base wage. People are buying homes and the economy is booming. It helps that these jobs can't be outsourced.
More examples: Chicago recently mandated a living wage of $10.00 an hour plus benefits of $3.00, but it was vetoed by Mayor Daley because big-box stores were threatening to locate in the suburbs. This illustrates the problem of doing it locally instead of over an entire area. Six states are proposing minimum-wage laws to be voted on in the upcoming election November 7, 2006. In Colorado, where most businesses are located on the front range rather than on the state's boundaries, it well might work. But the issue on the ballot in the state of Missouri might run into problems because of the fact that large cities in that state are on its borders and thus might face competition from businesses in neighboring states. In any case, these and other state and local ballot issues on wage increases will be something to watch, along with those in the 130 or so localities that have already mandated a living wage.
Hundreds of economists, including five Nobel laureates, have gone on record as recommending an increase in the minimum wage. And a great many governments, on various levels, have put in place either a minimum-wage increase or a living wage.
Clearly, low wages and extreme disparities in incomes are issues on the march. What's more, they are issues just made for Democratic candidates.
Jim Hightower reports that there are 7.3 million Americans working for a minimum wage. And 72 percent of them are adults. The average worker brings home more than half the family's weekly income, and a third bring home 100 percent of their family's earnings. Sixty percent of these workers are women, and 760,000 are single mothers.
This is happening in the US, the richest country in the history of the world. Per capita GDP is $41,800, while per capita personal income is almost $33,000, or, for a family of four, $132,000. There are several million millionaires in the US, by various estimates, and Forbes says there are 374 billionaires. Increasing disparities in income have been widely noted. All of this would suggest the possibility, and the desirability, of realizing not only increases in the minimum wage but in the so-called living wage as well. Here we consider both.
Let's look at the reasoning. The usual argument in opposition to an increase in wages is that it would cause a loss of jobs. Yet in the states that have raised the minimum wage, employment has increased. The problem is that the job-loss argument is based on a microeconomic model: if an employer has to pay higher wages he will have to lay off workers. If he is the only employer who is affected, that result indeed would seem plausible. But if a higher wage is mandated for everyone, we must go to a macroeconomic model. That would mean that the increased purchasing power would increase demand and thus employment. The workers affected, by definition, are in the low income brackets and thus would spend every dime of an increase. Obviously, then, a federally mandated increase, rather than a local one, would be the wiser choice.
Interestingly, however, there are some examples of success on a local level. Santa Fe, NM
mandated a living wage in 2004. The sky did not fall in as predicted. With the city's $9.50 an hour wage floor, slated to rise to $10.50 in 2008, Target and Sam's Club are thriving and Wal-Mart is building a superstore. Las Vegas, NV, another example, is also thriving, although it has raised wages through a labor union--the Culinary Workers Local 226 of the Hotel Employees and Restaurant Employees International Union. In January 1, 2004, housekeepers were making $11.40 an hour and tipped hotel employees a $9.60-an-hour base wage. People are buying homes and the economy is booming. It helps that these jobs can't be outsourced.
More examples: Chicago recently mandated a living wage of $10.00 an hour plus benefits of $3.00, but it was vetoed by Mayor Daley because big-box stores were threatening to locate in the suburbs. This illustrates the problem of doing it locally instead of over an entire area. Six states are proposing minimum-wage laws to be voted on in the upcoming election November 7, 2006. In Colorado, where most businesses are located on the front range rather than on the state's boundaries, it well might work. But the issue on the ballot in the state of Missouri might run into problems because of the fact that large cities in that state are on its borders and thus might face competition from businesses in neighboring states. In any case, these and other state and local ballot issues on wage increases will be something to watch, along with those in the 130 or so localities that have already mandated a living wage.
Hundreds of economists, including five Nobel laureates, have gone on record as recommending an increase in the minimum wage. And a great many governments, on various levels, have put in place either a minimum-wage increase or a living wage.
Clearly, low wages and extreme disparities in incomes are issues on the march. What's more, they are issues just made for Democratic candidates.
posted by Gladys at 4:50 PM
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