For the last decade or so, the question of whether or not to jack up the nationally mandated minimum wage has lurked at the intersection of our democratic government and capitalist economy like a patch of black ice.
It’s a tricky question, to be sure, which is why Congress has consistently detoured around it. The last time the minimum wage was raised was in 2009, to $7.25. The newly ascendant Democrats tried to more than double that — to $15 an hour — with a provision in the latest stimulus bill, but it didn’t fly.
Part of the reason may have been bad timing. The coronavirus pandemic has already mowed down thousands of small businesses, both temporarily and permanently, and many others remain on life support. No doubt, many legislators were understandably leery of the blowback they would get from surviving business owners if wage increases were added to their challenges.
The economic realities of hiring have also been altered, at least for the time being. During a strong economy, offering $7.25 an hour might turn away a lot of prospective employees. Now, though, a reduced number of employers can choose from a larger and more desperate pool of applicants, many of whom have been laid off.
All of these factors made it easy for a majority in the Senate to procrastinate yet again. The prevailing negative argument seemed to be that requiring businesses to pay their employees more might force them to lay off some of those workers to make up the difference, thus negating the benefits that $15 an hour would bring.
Of course, the philosophical divide between Democrats and Republicans on this issue runs even deeper. In a democracy with capitalist underpinnings, should the government tell private companies how to run their businesses?
The debate might be framed this way: Is our government an “it” or an “us”?
Those who come down on the “us” side would argue that in a democracy, it is assumed that the government will use the public money with which it has been entrusted to fulfill — as much as possible — the basic needs of the citizens who provided that money.
The counter-position is that government is only a basic mechanism designed to handle what individuals cannot, which means carrying out large infrastructure projects and protecting us against crime at home and military threats from abroad. Virtually everything else should be up to us, to be orchestrated in large part by the capitalistic marketplace.
The minimum wage seems to fall somewhere in between. It’s on the books but rarely enforced. Some states already require more — the minimum wage is $15 in Washington, D.C. — others tend to look the other way when employers pay even less, such as to undocumented immigrants forced to settle for anything they can find.
Democrats see the myriad individuals struggling to eke out a living as their core constituency. Republicans, for the most part, represent the business sector.
On several occasions in our recent history, however, dramatic changes followed overwhelming evidence that the freedom to run a business as the owner sees fit was impinging on the rights of a large swath of society. The Jim Crow laws not only kept many African-Americans in poverty but vastly limited their options on everything from where to work to where to eat to what seat to take on a bus. The American With Disabilities Act was passed because asking businesses to spend a little money to make their buildings accessible seemed a fair tradeoff for improving the daily lives of millions.
It’sIt’s hard to argue that every American worker shouldn’t earn enough to keep him or her above the poverty line. The concept that high unemployment is good for business because it increases the labor pool is too dark and Ayn Randian to be adopted as policy.
Remember, also, that it is the government that is required to shell out billions in unemployment payments.
During the current minimum wage debate, many Republican legislators employed the strikingly irrelevant “I was paid minimum wage back when I was in high school, and it worked fine for me” argument. This ignores the difference between a 17-year-old saving up for college or date night and a desperate single mother or father with three mouths to feed. Or how inflation has chewed away at that high school wage in the intervening years. When what you have left after paying basic bills is virtually nothing, a few dollars can make a significant difference.
Logically, raising the minimum wage would increase consumer spending, generate more tax dollars and probably reduce crime. At the same time, some businesses would undoubtedly suffer, perhaps fatally. Many of them pay entry-level workers the minimum wage not because they are scrooges, but because it’s all their balance sheets tell them they can afford.
The bridge here would have to be the government. In his most recent pitch to Congress, Sen. Bernie Sanders did suggest that the wage increase might be phased in over a few years. He also proposed a program of tax breaks.
One weakness of Big Government is that it tends to adopt a “one size fits all” policy.
The first stimulus payout, for example, was barely enough to momentarily chase the wolf from the door for many Americans, while others no doubt spent it on smartphones or other luxuries that only benefitted Amazon.
In the minimum wage case, there are plenty of large corporations that could double entry-level salaries with little or no ill effects (they might have to give slightly smaller bonuses to executives). Many of these already receive significant tax breaks from federal, state, and local governments, which gives those governments some leverage. No wage hike, no more tax break.
Meanwhile, businesses on the razor’s edge of survival could apply for relief. If it’s accepted, the federal government would either make up the difference for each worker or provide the business with a more significant tax write-off.
Using taxes as the fulcrum would eliminate the need for government to enforce the new normal with an intrusive army of “minimum wage police.”
Of course, a government-funded health care system would take a big load off the many large and medium-sized companies that currently pick up the tab for employee health plans, saving far more money than an increased minimum wage would cost.
Don’t expect Congress to go there any time soon, either.
*This article has been updated since first publication to represent a late development on the minimum wage debate.*