It's time to raise the minimum wage

AFL-CIO American Federationist, The, March 21, 1987 by Jay Mazur

How much of a stimulant would a higher minimum be? That depends on how much the minimum is raised. But, just for the purposes of illustration, let us play with one scenario that begins by adjusting the minimum wage so that its buying power is back to where it was in 1968, when it could buy what it now takes $5.04 to buy. This would mean an increase of $1.69 an hour. Now, to be conservative in our calculations, let us assume that the worker does not work full weeks but averages about 27 hours a week instead of the standard 40 hours. The average weekly earnings would be increased by $45.63. Now, to continue in our conservative reckoning, let up suppose that this worker is employed only 34 weeks out of the 52. The annual average increase would be $1,551.42 a year. If that adjustment is applied to the 14 million people whose earnings move almost directly with changes in the minimum then buying power in the United States would be increased by $21.9 billion.

There is another compelling reason why raising the minimum would benefit the nation as a whole. The relief rolls would be lightened. At present many of those working at the minimum are receiving welfare payments--legitimately. Lifting the minimum would reduce the tax burden.

There is a final reason why something resembling a "living wage" would be beneficial to America. Such earnings would provide an incentive to be more productive. Who could possibly be inspired to make a real effort for a wage that yields no more than a welfare payment? If America is to improve its "productivity," its output per worker, it must think of incentives for the millions of wage and salaried people who now toil for pay that is not sufficient to meet poverty standards.

FREE MARKET MYTH

In the face of all these positive and compelling reasons to lift the minimum wage, what is the argument for setting the minimum wage at zero? "Objections to a statutory floor under wages are grounded more in free market theory than in empirical evidence," comments Sar Levitan, director of the George WAshington Center for Social Policy Studies.

The principle that government should have no role in setting a floor under wages, that there should be no legal minimum, is based on the belief that the way in which "the market" sets wages is the way things ought to be--a latter day lapse into laissez-faire.

That theory holds that to raise the legal minimum price of labor above the productivity of the least-skilled worker would mean that fewer would be hired.

The argument has been the stock response of employers from the beginning of time. "I can not pay you more than you are worth." And who determines the worth? The employer.

Once workers organize into a union or once the government legislates a higher wage, however, employers have somehow managed with the higher wage. The ways are obvious: a) pass on the cost to the consumer; b) reduce the margin of profit; c) introduce more efficient methods of production so that unit costs do not rise even as wages do; d) where the wage raise is widespread--as in the case of the minimum wage--take advantage of the expanded market by lowering profit per item while increasing overall profits by enlarged sales.