It’s time for a raise
With awareness of historic levels of inequality in the U.S. continually increasing, talk -- and action -- on raising the minimum wage is frequently in the news.
On the progressive side -- which we support -- as of April 8, 34 states are considering increases to the state minimum wage this legislative session, according to the National Conference of State Legislatures. At the federal level, President Obama seeks to raise the minimum wage from $7.25 per hour to $10.10 per hour by 2015. The Republican-controlled House will almost certainly not go along, however.
In Oklahoma, where the minimum wage is $7.25 per hour, the governor signed a bill earlier this month banning cities and towns from raising the minimum wage. Needless to say, there is also no plan to raise the state minimum wage there, either. Five states do not have any minimum wage at all: Alabama, Mississippi, Louisiana, Tennessee, and New Hampshire, which abolished its state minimum wage in 2011, though it still recognizes the federal minimum wage.
The usual argument is that increasing how much workers are paid will cut jobs, though most studies refute this. Since people at the lower end of the economic spectrum have to immediately spend what they make, raising their low wages pumps more money immediately into the economy, helping business.
Though it is a myth that modest increases in minimum wages "kill jobs," we do have sympathy with smaller businesses which would rather a minimum wage increase be phased in over a period of years. What we don’t have sympathy with are the huge corporations -- usually retail or fast food -- which make enormous profits and pay their workers as little as possible. In many cases, these members of the "working poor" need government or private assistance to meet basic needs.
In Vermont, a minimum wage boost has been at the top of the agenda of both the Legislature and Gov. Peter Shumlin. The current level is $8.73 an hour, which is itself third-highest in the country.
Gov. Shumlin, apparently inspired by President Obama, proposed phasing in an increase to $10.10 by 2017. Connecticut and Maryland have already taken this approach.
The Vermont House countered by seeking to raise the minimum wage to $10.10 by next year. The Senate version would incrementally lift the rate, currently at $8.73 an hour, to $10 by 2017 and then up to $10.50 by 2018.
It also would set the hourly wage for employees who get tips at half of the minimum wage.
We agree with a 2013 column by Nobel Prize-winning economist Paul Krugman that raising the minimum wage too high -- say $20 per hour -- would create a lot of problems.
"But that’s not what’s on the table. And there are strong reasons to believe that the kind of minimum wage increase the president is proposing would have overwhelmingly positive effects," Krugman writes. "First of all, the current level of the minimum wage is very low by any reasonable standard. For about four decades, increases in the minimum wage have consistently fallen behind inflation, so that in real terms the minimum wage is substantially lower than it was in the 1960s. Meanwhile, worker productivity has doubled. Isn’t it time for a raise?"
The minimum wage is one of the most studied topics in economics, and the evidence "points to little if any negative effect of minimum wage increases on employment," Krugman writes.
So the good news in Vermont in all these minimum-wage-increase proposals is that there seems to be near-universal support in the Legislature to raise the minimum wage closer to something on which working people can live. It’s time for a raise.
~ Mark E. Rondeau
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