[Vision2020] $20 Hamburgers if Minimum Wage is Raised? See answer below

[Scott Dredge]

In general, I'm in favor optimally raising the minimum wage but am against 'minimum wage = living wage'.

Date: Thu, 30 Jan 2014 11:52:36 -0800
From: ngier006 at gmail.com
To: vision2020 at moscow.com
Subject: [Vision2020] $20 Hamburgers if Minimum Wage is Raised? See answer	below

See attached PDF file to see the figures.Support Idaho Minimum Wage Hike



An
organization called RaiseIdaho is collecting signatures for a petition to raise
Idaho’s MW to $10.10 on January 1, 2018. 
Please add yours at www.raiseidaho.org/files/
76280198.pdf. Print more copies and
get your friends and colleagues to sign as well. 

Idaho has the dubious distinction of having the highest percentage of minimum wage workers in the
entire country. Idaho has also experienced the largest increase in the
number of people using food stamps. The two are obviously related. Idahoans are not lazy; they are simply not
paid enough to put food on their tables. If Idaho raised its minimum wage, 25%
of Idaho workers would get a much needed pay hike, and they would be less
reliant on government assistance.

 

Bill Sali and the Law of
Gravity

 

In January 2007, during the
debate on raising the federal minimum wage to $7.25, former Idaho Congressman Bill
Sali embarrassed himself by proposing legislation to repeal the law of gravity.
Market ideologues are so blinded by their “pure” economic theory that they
routinely ignore overwhelming evidence that government intervention in the
economy is not always bad. As the
evidence below shows, insisting on a completely free labor market and keeping
workers at the lowest possible wages do not always grow the economy. Nor is it healthy for
society as a whole. 

Facts about the Minimum Wage (MW) 

It’s not just young fast food workers who
earn it. According
to the National Employment Law Project, 40 percent are now 25 years or older, with the average
being 29, and 36 percent have children. Nearly two out of three MW wage earners are women and of those,
more than half are older than 24. A great majority of tipped workers are women;
and the federal MW for them has been frozen at $2.13 for 20 years.

Raising the MW does not hurt
economic growth. In the states that have raised their MW, there has been,
according to the National Employment Law Project, a total increase in Gross State
Product (GSP) of $619 million. Idaho Governor “Butch” Otter boasts about Idaho’s economic growth,
but our Washington neighbors, with the nation’s highest MW, have produced a
much higher GSP per capita. In fact, six states with the highest MW have the
highest GSP per capita. Most of the states with no MW, or just the federal rate,
have the lowest GSP per capita. The ideologues are disproved.

A Higher MW stimulates the
economy. In
July 2007 the MW went to $5.85/hour, and consumer spending rose $1.7 billion.
In July 2008 the new MW of $6.55 added $3.1 billion to the economy. The current
$7.25 went into effect in July 2009, and consumers spent $5.6 billion over the
next year. 

In 2011 Congress failed to act on President Obama’s plea to boost
the MW to $9.50; and, according to a study by the Federal Reserve Bank of
Chicago, at least $60 billion over two years was lost to the economy at a
critical time for its recovery.

According
to the Economic Policy Institute, a MW of $10.10, which President Obama has now
mandated for federal contract workers, would add $22 billion to the economy and
produce about 85,000 new jobs. According to a study done by the Restaurant
Opportunities Centers United, 58 percent of America’s working poor would have
been lifted out of poverty if a $10.10 MW had been enacted in 2011.

A higher MW moves people out of poverty
and off government assistance. Kai
Filion of the Economic Policy Institute sates: “One of the biggest problems
during a recession is the decrease in consumer demand. When consumers cut back
on spending, employers respond by cutting back on jobs. Reducing the wages of
already low-wage workers will only make this problem worse, and will hurt those
who are least well off.” Why should businesses risk the loss of customers so
poor that they cannot buy their goods?  

Kurt A. Gardiner at the Huffington
Post explains that increased consumer spending “will have a ripple effect
throughout the economy (this is known by economists as the multiplier effect),
unlike, say, tax cuts for the nation’s wealthiest.” Gardiner continues: “Raising
the minimum wage by just $2.85 an hour to $10.10 would push nearly 5 million of
the working poor out of poverty and would push many of them off government
assistance programs, which they still qualify for despite working full-time
jobs.”

Businesses will not fail if they raise wages. Since the Reagan administration, real wages have
been flat, and the federal MW would be $10.71 if it had been pegged to
inflation. In stark contrast, corporate profits and the stock market are at an
all-time high.  If the MW had grown at the same rate as wages for the top 1%, it would now be $28.34 per hour.


In his recent state-of-the-union speech, President Obama
challenged America’s businesses to give their employees a raise. They can
afford it, and it is only fair to do so. If they would pay their employees a
living wage, then a government mandate would not be necessary. Businesses
should also add paid sick and maternity leave as well, because many states are
starting to require it.

A higher
MW does not kill jobs. An article published in the Review of Economics and Statistics
demonstrated that job growth in states with higher MW is almost the same as
those with the federal MW of $7.25 or lower. The University of Chicago’s Booth School of
Business—dominated by freemarketeers—has done a survey of 38 leading economists.
The response was—by a four-to-one margin—that the positives of raising the MW
outweigh the negatives. Right-wingers who say that hamburgers would cost $20
are, as usual, in La-La-Land. See below
for what a Big Mac costs in Australia, which has the highest MW in the world.

Raising the MW wage does not
reduce teen employment. Three university economists have done an in-depth study of this
claim and have found that it is not supported by the facts. (See www.irle. berkeley.edu/working
papers /166-08.pdf.) Igor Volsky of Think
Progress reports that “in 2009 researchers conducted a review of 64 minimum wage
studies published between 1972 and 2007 measuring the impact of minimum wages
on teenage employment and when they graphed ‘every employment estimate
contained in these studies (over 1,000 in total), weighting each estimate by
its statistical precision, they found that the most precise estimates were
heavily clustered at or near zero employment effects.’”

Minimum Wage in Brazil and Australia

As
America’s middle class shrinks, it is growing, sometimes, dramatically, in
other countries. Brazil, for example, has reduced its poverty rate from 40
percent 2001 to 25 percent in 2009, and 52 percent of Brazilians can now call
themselves middle class. The socialist government just announced an
unemployment rate of 4.6 percent, an historic low. One of the drivers of this
remarkable success was a dramatic rise in the MW.

At
$16.37 per hour Australia now has the highest MW in the world. It was one of
the few countries that sailed through the Great Recession with nary a hiccup.
Its current growth rate is 2.4 percent (compared to the U.S. at 1.8 percent)
and its unemployment rate is 5.8 percent. This was all achieved under a Labor
(read Socialist) government. And
according to Rep. Markwayne Mullin
(R-OK), an Australian Big Mac should cost $20, right?  Wrong, it costs $3.75. 

600
Economists Support $10.10 MV

In a letter to congressional leaders, 600 Ph.D.-holding
economists urge them to increase the federal MW to $10.10. Here is an excerpt:
“The weight of evidence now show[s] that increases in the minimum wage have had
little or no negative effect on the employment of minimum wage workers. . . . Research
suggests that a minimum wage increase could have a small stimulative effect on
the economy as low-wage workers spend their additional earnings, raising demand
and job growth, and providing some help on the jobs front.”


 
  
  Poll shows 71 percent in favor of Higher
  MW
   
  A January 8, 2014 Quinnipiac poll showed
  that 71 percent of those polled supported raising the MW by 71 percent. Even
  a majority of Republicans agreed by a margin of 52-45. The pollster gave the
  following options and results: 18 percent wanted a MW higher than $10.10; 33
  percent was in favor of  $10.10; 18
  percent desired a rate higher than $7.25, but not $10.10; and 27 percent
  opposed a MW increase.
   
  The following figure shows that if the MW
  was indexed to worker productivity, it would now be $18.67/hour. Since the
  Reagan administration the most productive workers in the world have been
  cheated of results of their hard-earned labor.  Many companies have been buying back their
  own stock rather than investing their profits in the economy.
  
 





 

The next figure demonstrates
that in none of the states are MW workers able to earn enough in a 40-hour week
to afford a 2-bedroom apartment. (Even
the “best” states require working 70 hours.) That is the reason why parents
in these families are now working 3-4 jobs. 
They have no money to pay for day-care and preschool possibilities are
limited, especially in the Red States, where most of the MW workers live.

 




 

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