2014: Raise the minimum wage and share the wealth of increased productivity with workers

Posted by AzBlueMeanie:

In November 2006, Arizona voters overwhelmingly approved Proposition 202, the minimum wage initiative backed by organized labor. The initiative included a cost of living adjustment (COLA) in subsequent years on each January 1st.

On January 1, 2014, Arizona's minimum wage will increase to $7.80 7.90 per hour. While this is more than the federal minimum wage of $7.25 per hour, it is still well below the earning power adjusted for inflation that the minimum wage would be if it had kept pace with inflation since its peak earning power in 1968. That would require a minimum wage of $10.74 per hour today. Raise The Minimum Wage.

President Obama called for a $9 per hour minimum wage in his State of the Union Address last year. He has since increased that amount to $10.10 per hour, and Senate Democrats have introduced competing bills to raise the minimum wage.

The New York Times reports today, Democrats See Minimum Wage as Key to 2014 Strategy:

Democratic Party leaders have found an issue they believe can lift their fortunes both locally and nationally in 2014: an increase in the minimum wage.

The effort to take advantage of growing populism among voters in both parties is being coordinated by officials from the White House, labor unions and liberal advocacy groups.

In a series of strategy meetings and conference calls among them in recent weeks, they have focused on two levels: an effort to raise the federal minimum wage, which will be pushed by President Obama and congressional leaders, and a campaign to place state-level minimum wage proposals on the ballot in states with hotly contested congressional races. [Hello! Arizona anyone?]

With polls showing widespread support for an increase in the $7.25-per-hour federal minimum wage among both Republican and Democratic voters, top Democrats see not only a wedge issue that they hope will place Republican candidates in a difficult position, but also a tool with which to enlarge the electorate in a nonpresidential election, when turnout among minorities and youths typically drops off.

“It puts Republicans on the wrong side of an important value issue when it comes to fairness,” said Dan Pfeiffer, the president’s senior adviser. “You can make a very strong case that this will be a helpful issue for Democrats in 2014. But the goal here is to actually get it done. That’s why the president put it on the agenda.”

* * *

Mr. Obama and congressional Democrats are supporting legislation that would raise the federal minimum wage to $10.10 an hour by 2015. Mr. Obama is planning a series of speeches across the country focused on improving wages for workers, aides said, many of them timed to coincide with key minimum-wage votes in Congress. Income inequality is also likely to play a prominent role in his State of the Union address next month.

At the same time, Democratic campaign officials and liberal activists — conceding that Democrats face tough prospects in some Senate races — are working to put minimum-wage increases on the ballot next year in places like Arkansas, Alaska and South Dakota. The hope is to stoke Democratic turnout in conservative-leaning states where the party’s Senate candidates have been put on the defensive by the mishandled rollout of the Affordable Care Act.

States with contested House races, including New Mexico, will also see campaigns to bring minimum-wage increases to a referendum next year.

After being battered for nearly two months on the problems with Mr. Obama’s signature health law, Democrats see the minimum-wage increase as a way to shift the political conversation back to their preferred terms.

* * *

Democratic planning on the issue has picked up in recent weeks, as the 2014 elections approach and the need to counter attacks on the health law has grown more urgent.

This month, top aides to Mr. Obama including the economic advisers Jason Furman and Gene B. Sperling, Labor Secretary Thomas E. Perez and the legislative affairs office convened a meeting at the White House complex with an array of liberal groups to discuss the minimum wage. The gathering included representatives from Mr. Obama’s political arm, Organizing for America, unions and progressive groups like Americans United for Change and the National Employment Law Project.

An official from the National Employment Law Project presented a spreadsheet showing which cities and states were pursuing campaigns to increase minimum wages next year, according to a person who attended. The attendees also discussed the potential timing of a minimum-wage vote in the Democratic-controlled Senate.

A representative from the A.F.L.-C.I.O. urged the White House officials to coordinate with Senate Democrats on when to bring the issue to the floor so that the unions could “have time to mount a grass-roots” campaign stirring up support for the measure, an attendee recalled.

“The combination of the state ballot initiatives and at some point a big nasty fight in D.C. that will amplify some of the stuff in the states is going to create a feedback loop that will be really helpful,” said one Democratic official involved in the discussions.

Democrats prize the issue of a minimum-wage increase because it would help address income inequality, which is galvanizing liberals at the moment and is popular with swing voters they will need in next year’s elections.

Sixty-four percent of independents and even 57 percent of Republicans said they supported increasing the minimum wage, according to a CBS News poll last month. Some 70 percent of self-described “moderates” said they supported an increase.

* * *

Liberal strategists would like other Democratic Senate candidates to follow suit, noting that Democrats were elected senators in two conservative-leaning states, Missouri and Montana, in 2006 when proposals to increase the minimum wage were overwhelmingly approved.

The response from Tea-Publicans is what one would expect — Harrumph!

Top Republicans assert that a wage increase would dampen the economic recovery and indicated after Mr. Obama mentioned the issue in his State of the Union speech this year that they had no intention of bringing a minimum-wage increase to a vote in the House, which they control.

“Why would we want to make it harder for small employers to hire people?” Speaker John A. Boehner of Ohio said.

Which is, of course, bullshit. There is actually a well done report by Ronald Hansen in The Arizona Republic (who knew?) that disputes this conservative troll talking point. Minimum wage increase doesn’t kill jobs:

There are plenty of moving parts to consider in weighing the effects of the minimum wage, from creating a disincentive for employers to add new workers to reducing the need for taxpayer-funded social safety-net spending.

But, at the most basic level, there is good reason to think the minimum wage doesn’t kill jobs.

The minimum wage has gone up 22 times since it was instituted in 1938. There is complete seasonally adjusted data from the U.S. Bureau of Labor Statistics available for 21 of those hikes.

In 15 of those 21 cases, the U.S. economy added jobs in the year after the minimum wage went up.

On 11 occasions, it added more jobs after the hike than it did in the year before the raise went into effect.

This alone suggests that raising the minimum wage isn’t an automatic drag on employment growth.

* * *

The economy lost jobs six times in the year after a wage increase; in four of those six, it went from job growth to job losses.

The most dramatic example of job losses came after the July 2008 increase.

In that case, the workforce went from losing 412,000 people in the year before to losing 6.9 million by July 2009.

But that coincided with the depths of the Great Recession, a downturn usually regarded as led by the housing crash and Wall Street meltdown, not a revolt against a 70-cent hourly raise for the nation’s lowest-paid workers.

In October 1939, when the nation was still mired in the Great Depression, the minimum wage went from 25 cents an hour to 30 cents. World War II was getting under way in Europe, but in America the minimum wage hike didn’t stop the nation from adding 1.9 million jobs in the new war-based economy.

In February 1968, a strong economy saw job growth nearly double after raising the minimum wage to its highest-ever inflation-adjusted level of $1.60 an hour. That was worth $10.74 an hour in today’s dollars.

The same thing happened twice more in the late 1990s, when the minimum wage was increased in a two-step process. In both cases, the workforce went from good growth to better growth.

As Hansen concludes, what this suggests is "that whatever the full effects of raising the minimum wage, other factors in the economy probably matter more."

Finally, there is this eye-opening story from Lydia DePillis at the Washington Post today. Britain’s chamber of commerce says corporations should share their new prosperity with line workers. Wait, what?:

John Cridland is not a redistributionist. As director-general of Britain's biggest business lobby group, the Confederation of British Industry, he's lately railed against the Labor party's regulatory agenda, and, around this time of year, usually issues a new year's address condemning new taxes and rules that restrict free enterprise.

But this year, the message was somewhat different: British companies, which are finally returning to health, ought to share their newfound prosperity with the lowest on the totem pole.

“As the financial situation of many firms begins to turn a corner, one of the biggest challenges facing businesses is to deliver growth that will mean better pay and more opportunities for all their employees after a prolonged squeeze," Cridland said, in an speech titled "We need balanced growth that benefits everyone." "The good news is that wages will pick up in the year ahead as growth beds down and productivity improves. But there are still far too many people stuck in Minimum Wage jobs without routes to progression – and that’s a serious challenge that businesses and the Government must address.”

It should be noted that Cridland doesn't support raising the minimum wage, as Labor leader Ed Miliband has proposed.

There's solid economic reasoning behind Cridland's advice that companies pay their workers more. With more money in their pockets, they'll be able to  buy the stuff that keeps businesses in business, creating a virtuous cycle of growth (though of course, it's difficult to establish a direct causal link).

Contrast the CBI's borderline populist approach to that of its American equivalent, the U.S. Chamber of Commerce. As liberals have picked up increasing the minimum wage as a central campaign issue, the business coalition has predictably dug in its heels against it — but with no parallel message that companies fed by a booming stock market ought to voluntarily offer a hand up to their lowest-paid employees. And while the CBI issues reports about creating a system that helps people avoid the "benefits trap" by making work more attractive, the U.S. chamber advises its members to chaperone their low-wage employees onto public assistance programs like housing vouchers and food stamps, as a cost-free way of addressing the business problem of high turnover.

Given that the United States faces similar issues with the bifurcation of its workforce into low-wage earners and the wealthy, the difference in business attitudes is striking.

As i have posted about previously, "Worker productivity has more than doubled since 1968, and if the minimum wage had kept pace with productivity gains it would have been $21.72 last year." See Think Progress, Where The Minimum Wage Would Be If It Kept Pace With The Earnings Of The 1%.

It's time to raise the minimum wage and share the wealth of increased productivity with workers.

Post has been corrected.