Los Angeles raised its minimum wage this week from $9 an hour to $15 over five years. The City Council voted 14-1 for the most significant victory so far to help low income workers. Almost half of the city’s work force earns less than $15 an hour, so the impact will be major.
Seattle and San Francisco have also set their minimum at $15, and that level is being debated in Kansas City, Washington DC and New York.
I have long supported raising the federal minimum wage from its absurdly low level of $7.25, which enables a full-time worker to earn only $15,800 a year. No one who works full-time should be poor.
This is certainly a Scriptural position. “The righteous care about justice for the poor, but the wicked have no such concern,” asserts Proverbs 29:7.
In January I praised 21 states who raised their minimum above the U.S., as “deserving applause.” State minimum wage hikes meant nearly four million Americans enjoyed more income according to the Economic Policy Institute. In fact, 29 states with 60 percent of the population now earn more than the U.S. minimum.
Usually, it is not that much higher - $8.75 in New York State, for example.
No wonder the middle class has been shrinking. Those who earn between $35,000 (50 percent above poverty) and $100,000 have fallen by 10 percent since 1967. Some did move into upper income levels. However, the Great Recession pushed others into poverty. High-paying blue collar jobs have shrunk.
The bottom line: median household income, on average, has fallen 9 percent since 2000.
Therefore, it is essential to raise the minimum wage which has been frozen at $7.25 for seven years. President Obama has proposed that it should rise in three annual steps of $0.95 to $10.10, which is less than it would have been if the 1968 minimum had been indexed to inflation.
However, a Republican-controlled House has never considered it. Now that Republicans also control the Senate, federal action seems hopeless.
Yet a Pew Poll reported 73 percent of the public approve a raise to $10.10.
The support crosses party lines, with 91 percent of Democrats, 74 percent of Independents and 53 percent of Republicans approving Obama’s proposal.
Predictably, most business leaders oppose any raise. The Los Angeles Chamber of Commerce says the increase could turn the city into a “wage island,” pushing businesses to nearby places where they can pay less to employees.
Stuart Waldman, president of the Valley Industry and Commerce Association, argues, “A lot of businesses aren’t going to make it. It’s a great that this is an increase for some employees, but the sad truth is that a lot of employees are going to lose their jobs.”
Is he right? Well, consider the impact of raising the federal minimum to $10.10.
The Congressional Budget Office, a non-partisan think tank of Congress, estimates that 16.5 million low-wage workers would directly benefit from the proposed federal increase.
In addition, another 8 million workers who are slightly above the minimum, would also enjoy a pay hike.
With how many lost jobs? A half million, says CBO. That’s about .03 percent of total employment and only 3 percent of the 16.5 million who would be directly affected. About 900,000 who are currently poor would be lifted into the middle class.
Many conservatives claim that those getting the minimum wage are teenagers working at McDonald’s. In fact, 88 percent are adults, more than half are female and most work full-time. The wealthiest families, however, lose under the proposal. Their income drops .4 of 1 percent or $700 for families earning $180,000 due to reduced business profits and slightly higher costs of goods.
The CBO analysis is in line with the thinking of most economists. A 2013 survey by the University of Chicago’s Booth School of Business found that “leading economists agreed by a nearly 4 to 1 margin that the benefits of raising and indexing the minimum wage outweigh the costs.”
For example, Paul Krugman of Princeton notes that “The minimum wage is one of the most studied issues in all of economics. U.S. experience, it turns out, offers many 'natural experiments’ here, in which one state raises its minimum wage while others do not. And while there are dissenters, the great preponderance of the evidence from these natural experiments points to little if any negative effects of minimum wage increases on employment.”
Therefore, it is time for Congressional Republicans to show compassion for the millions on or near the $7.25 minimum wage.
(Michael McManus is president of Marriage Savers.)