Minimum Wage Fight Distracts from Job Market Woes
During last week’s State of the Union, President Obama called on Congress to raise the federal minimum wage from $7.25 to $9 per hour. This is the kind of low-hanging fruit that political careers used to be built upon, but in Washington today every issue is a struggle of titanic proportions. President Obama’s commonsense proposal was met with raucous applause in Congress, before being summarily and roundly chastised by the Republican Party and its media affiliates.
Fighting back against increasing the minimum wage is political suicide for the Republican Party. Their claim that raising wages would cost jobs is not only unsupported by the evidence it also completely misses the point.
The large majority of minimum wage employees work for big companies with sunk employment requirements. McDonald’s, for example, requires X amount of cooks and cashiers. Federally mandating that those workers may earn no less than $9 per hour is not going to cause mass layoffs. McDonald’s needs those employees. McDonald’s also does just fine, profit-wise, in the rest of the developed world where minimum wages are much higher than the United States.
In the short term, increasing the minimum wage will cut a small portion out of the profit margin of enormous companies. This is precisely why, as The Huffington Post reports, big business and the politicians they bought and paid for are against the idea. That tiny fraction of lost profits could mean that corporate executives would have to rent a megayacht for their summer holiday instead of buying one outright.
President Obama knows that increasing the minimum wage is popular, and he knows that it doesn’t harm the economy. It puts more money into more pockets and helps people who are struggling to eat struggle a little less. We raised the minimum wage in 2007 and it didn’t ruin the economy or cause mass layoffs (unless you blame the financial meltdown and global recession on the Fair Minimum Wage Act of 2007).
In the long term, the wage increase will be eaten by inflation and passed along to consumers anyway. This is the real heart of the matter. It is one thing to raise the bare minimum standard of living, it is another thing entirely to lift everyone’s standard and sustain that change. This country will be better off with a $9 per hour minimum wage than with a lower rate, but these aren’t the jobs upon which the economy is built. Minimum wage workers are not the ones whose entire livelihood might get picked up and shipped to China at a moment’s notice.
Politicians always talk about the “middle class”, but they rarely do anything that actually helps middle class Americans. A vibrant middle class drove our economy through its boom period after WWII. Hardworking people had good jobs with strong benefits and opportunities for advancement. The country, and its economy, grew stronger than ever before. When you allow those jobs to flow overseas and you let companies cut benefits to save their own profits the country and economy stagnate.
So-called “Middle Class America” has been stagnant for decades. Real earnings, adjusted for inflation, are still stuck in the 1980s. The manufacturing jobs that once offered a pathway to prosperity are all but gone and more leave every day. Yes, absolutely, raise the minimum wage. While you’re at it, why not take concrete steps to end out-sourcing?
President Obama has talked about taking away incentives that allow companies to shift jobs overseas for four years. The Republicans have stood in his way at every turn, but he hasn’t exactly tried to break them on the subject either. The White House needs to propose strong reforms that will protect jobs today and create jobs tomorrow. If the Republican Party stands in opposition (it will), the White House needs to use the bully pulpit to force their hand.
There was a time when fighting to protect domestic industries, and domestic industrial workers, was a central political issue. After decades of hollowing out our manufacturing base and shipping jobs to the cheapest available foreign market there will soon be nothing left to fight for.
Rather than expending political capital wrangling Republican support for a bill that helps minimum wage workers avoid starvation and homelessness, the president ought to be building coalitions to revitalize our manufacturing economy. Instead, his policy proposals will likely be bogged down by the same opposition party obstruction that characterized his first term. We will be lucky to get an increase of the minimum wage out of this Congress. As such, hope of a comprehensive manufacturing policy may be little more than fantasy.