Passing the Buck on the Minimum Wage

by John Lawrence

A dozen years ago, John Boehner was chairman of the Committee on Education and Labor and I was the staff director for the panel’s Democratic majority.  For five years, I participated in regular planning meetings with Chairman Boehner and the Committee’s Ranking Democrat, George Miller, my long-time employer on Capitol Hill, and Boehner’s staff director, Paula Nowakowski, with whom I had a good working relationship.

Despite deep differences of opinion on many issues before the Committee, Miller and Boehner were able to find common ground and produce major legislation, including the signature legislative achievement of President Bush’s first term, the No Child Left Behind education reform law.  The two congressmen had a friendly and candid relationship based around the proposition that each would tell the other how far he could realistically go in search of a compromise.  

Part of our regular meetings involved Miller proposing areas of legislation in which the Committee should become engaged.  Somehow, with regularity, it fell to me (the resident labor historian of the group) to raise the issue of hearings and legislation  on the seemingly frozen minimum wage whose withering value was leaving millions of workers in deepening poverty.  

Boehner, an old school, small business Republican who entered politics because he was furious about taxes and regulation, good-naturedly dismissed the routine request with a dismissive hand wave.  “Not gonna do that,” he would say.  And he wasn’t kidding.  Boehner refused to consider action on the minimum wage throughout his tenure as chairman, consigning millions of hardworking Americans to years of poverty.

In 2005, I had become chief of staff to Democratic Leader Nancy Pelosi and spent the better part of a year and a half developing and promoting the “6 for ‘06” agenda that Democrats pledged to pass if voters returned them to the majority.  After nine years of Republican neglect, the buying power of the minimum wage had fallen to a 51 year low.  Although there was some initial hesitancy from some in the Senate, Pelosi insisted that an increase in the minimum wage be included as a plank in the “6 for ‘06” platform.  Pelosi prevailed, and the first increase in over a decade was one of the bills passed within the first 100 hours of the 110th Congress under Speaker Pelosi and was signed by George W. Bush.

The embarrassing chasm in income equality coming out of the Great Recession has once again elevated the profile of the minimum wage and the refusal of congressional Republicans, now under the leadership of Speaker John Boehner, to support a modest increase in the seven year old, unindexed wage.  Boehner had no problem approving the TARP legislation that provided hundreds of billions of taxpayers’ dollars to corporate miscreants who had brought economic catastrophe upon themselves, but he drew the line when it came to Congress directing employers to pay their workers enough to help raise them (barely) out of poverty.

Nothing in politics is more effective than an alliance with an unexpected ally, and just such an alliance has recently emerged on the minimum wage question.  Ron Unz, a hardline California conservative, has built a political career around immigrant-unfriendly proposals to cut social services and to promote English-only instruction which have helped the California Republican Party implode into irrelevance.  But on the minimum wage, Unz has become a fervent advocate for a generous increase based on the precise rationale Miller and Pelosi have long employed: why should taxpayers underwrite the inadequate wages of low-pay employers by providing health, food, housing, legal and other financial supports for their employees?

“We have all these low-wage workers who are getting $7.50, $8 or $9 an hour,” Unz explains, “and because they earn such small wages, the government subsidizes them with billions or tens of billions of dollars of social welfare spending that comes from the taxpayer.  It’s a classic example of businesses’ privatizing the benefits of their workers while socializing the costs.”  Right on, Ron!

Unz argues that conservatives should support compelling businesses to pay their employees enough to afford essential goods and services in order to reduce the need for government to provide services, which creates a rationale for government involvement, spending and taxes.  If a conservative’s real goal is to reduce government and spending, then require that employers pay their workers’ livable wages and stop passing the bill on to taxpayers to pick up the essential expenses of life that the employers’ wages don’t cover. 

With the coming of the Season of Charity (and the mortifying news about WalMart asking for contributions to help their employees – sorry, their “associates” – afford a Thanksgiving turkey), the minimum wage has become a hot topic.   Major stories in the New York Times and Washington Post, as well as on the Sunday morning talk shows, focused on the inadequacy of wages and the growing income gap, neither subjects that are likely to change the mind of someone who is ideologically hostile to the government dictating wage rates.  (If the Wal-Mart story doesn’t disturb you, consider McDonald’s advice to its sub-poverty-level employees whom it advises to  reduce stress by singing to themselves and breaking food into smaller pieces.)

But the point Unz makes (and that Miller and Pelosi consistently raised) has the potential to make skeptics think twice about the economic costs of keeping sub-poverty wages in place.  In addition to the issue of requiring taxpayers to subsidize low-wage employers through public assistance programs, Unz also notes the stimulative value of putting more money into the hands of low-income workers who will surely spend rather than save the additional income.  This stimulative effect was also a compelling reason for extending unemployment insurance benefits during the worst of the Recession.

Unz is now sponsoring an initiative for the California ballot that would boost the state’s minimum wage to $12 an hour by 2016.  He will face the same opposition such efforts always do in Congress or other jurisdictions: employers will not hire workers or will fire them; high minimum wage areas will be less attractive to employers than low-wage regions; government shouldn’t be intruding into the “free market” to dictate wage rates.  Such arguments just led Washington, D.C.’s Mayor Vincent Gray to veto a bill to require big box stores like Wal-Mart – which is planning a number of discount stores within the city – to pay a higher minimum wage.  Wal-Mart, displaying its reliably acute sense of public relations, threatened to drop plans for the new stores if the higher wage law were enacted, so Gray folded like a cheap suitcase.  He might alternatively have reminded voters that the Walton family that owns the low-price chain has more money than the cumulative wealth of  40 percent of American families, including those working at their stores who need charity to feed their children.  Indeed, research by the Economic Policy Institute recently concluded that although the wealth of the median American family fell by nearly 40% in the years 2007-2010, the Waltons’ wealth increased from $73.3 billion to $89.5 billion. 

The idea that one family could control such vast amounts of wealth is outlandish enough but when contrasted with the persistent poverty of those on whose labor the wealth is generated – their employees and their contractors’ wages in China – the hostility to paying a decent wage is disgraceful.  As Congressman Miller has pointed out, the average low-wage worker isn’t a high school kid with a paper route (how quaint), but an adult woman for whom the value of the minimum wage has lost a third of its buying power since the 1960s even with periodic increases.  Under the $10.10 an hour wage proposed in the Miller-Harkin bill (belatedly endorsed by the Obama Administration which had proposed a more parsimonious version in last year’s State of the Union), more than 30 million people would receive a pay raise, including 17 million women.  Had the minimum wage been indexed, like Social Security benefits, that 1960’s wage would today be worth $10.56, so the Miller-Harkin $10.10 is in effect a bargain. 

Raising the minimum wage is not exactly socialism run amok.  Many states and even counties, defying the danger of losing investment to skinflint neighbors, have minimum wages above the national level, and some are planning even higher minimums.  Massachusetts is considering an  $11 an hour rate, Montgomery and Price Georges Counties in Maryland are contemplating $11.50, and SeaTac airport in Washington State is discussing a $15 rate.  Voters of every age and income group support an increase as well, by a 65% to 29% overall margin.  Even conservatives support a raise by a 59% to 37% margin.

So where is the barrier to a serious discussion of raising the minimum wage?  You wouldn’t believe it, but it’s House Republicans who are not troubled by pushing low wage workers onto federal benefits, because they favor getting rid of those benefits, too (note the pending $40 billion cut in food stamps)!   Speaker Boehner, who frustrated efforts to raise the minimum wage as chairman a decade ago, hasn’t been moved by the economic studies, the Great Recession, or the opinions of conservatives like Ron Unz.  “When you raise the price of employment, guess what?” Boehner rhetorically asks.  “You get less of it.”   Independent studies do not confirm the job-killing effects of the minimum wage, but one fact is incontrovertible about the minimum wage policy imposed by Republicans: when you pay sub-poverty wages, workers get less of it.  And taxpayers foot the bill.