Bare Minimum

I need a research assistant. I’ll pay you $725 a week. Assuming your performance is good the first year I’ll drop your weekly pay to $702. The next year it’ll be $688, and then $678. In year five your pay is $667, and if you hang in with me for a decade, I’ll reward your loyalty and performance with weekly pay of $611. What an opportunity! Interested? 

As job offers go, this is insanity, a deal nobody would take. But it is precisely the logic (and the arithmetic) of our stagnant minimum wage. A person working at the federal (and Tennessee) minimum wage of $7.25 in 2010 would find themselves in 2020 earning the equivalent of $6.11 an hour in 2010 dollars. In purchasing power terms, given inflation that isn’t zero (it’s low but not zero) a stagnant wage is a declining wage, and so a stagnant minimum wage is a declining minimum wage.

This eroding wage floor is worth keeping in mind as we bear witness to the current wrangling in DC over whether to increase the federal minimum wage – a thing so patently overdue that it ought to be as easy to accomplish as renaming a post office. But even post offices sometimes set partisan hair on fire, so we shouldn’t be surprised that elevating a minimum wage that hasn’t budged since 2009 is a heavy political lift.

It’s worth pausing here to acknowledge the legions of economists and libertarians who would prefer there be no minimum wage laws at all. These folks regard a mandated wage floor as an unwelcome restraint on the ability of responsible humans to enter into voluntary agreements. For them, an unregulated labor market is the path to a prosperous free society. This is the same logic that would solve racism by doing away with discrimination laws and solve health care by leaving it entirely to the market. These may be intellectual excursions that make for diverting thought experiments, but given past experience and public opinion they can’t be taken seriously as public policy.

So that leaves a few camps in the actual policy debate over the minimum wage. Front and center for raising it quickly and substantially are the Progressive Caucus in Congress and Fight for $15 activists. In the naysayer camp are conservatives who see a minimum wage hike as a job and opportunity killer (notwithstanding pretty good evidence that it does neither to any significant degree).

Those two positions may feel like much of the familiar left/right polarization that gets nothing done. But on this issue, which should be easy, the basis for action involves middle ground occupied by non-crazy types who buy into the need for a hike, but pose legitimate questions about it: how much, how fast, and how widespread?

The how-much question has been anchored by the idea of a $15 wage for a while now. Bernie Sanders proposed a $15 federal measure back in 2015. While it came off then as an aggressive play in the run-up to the 2016 primaries, by 2019 a $15 measure had become sufficiently mainstream to draw 30 Senate co-sponsors. It’s a nice round number, but there’s nothing magical or essential about $15. If swing-district and swing-state Democrats in a closely divided Congress think $13.50 instead of $15 keeps them in office, I’m fine with $13.50.

The how-fast question matters because nobody is proposing doubling the minimum wage all at once. The provision that was in the Biden rescue package would lift it quickly to $9.50, and reach $15 in 2025. It would also phase out the tipped minimum wage (currently an astonishingly paltry 2.13/hour) by 2025. If a slightly slower roll will cool Joe Manchin’s jets, then I’m okay with letting him have one.

Receiving less attention is the how-widespread question: should the minimum wage be the same everywhere given how much costs of living vary? It isn’t an absurd question, and of course the minimum wage right now isn’t the same everywhere. While the federal wage has been stuck at 7.25 since 2009, that is the operative minimum wage in only 20 states (including Tennessee). 

Some might see this a reason to leave the federal minimum wage alone: states are perfectly free to raise it within their borders to suit their individual economies, and a majority actually have (some through referendum, which alas is a nice thing we are not allowed to have in Tennessee). This argument might have a touch of merit if the federal wage actually drifted up with inflation, at least keeping pace with the cost of living.

But as recently and presently configured, the minimum wage is not just a poverty wage, it is in real terms an eroding poverty wage. Its meager level and its ongoing erosion make two alarming statements about us as a society. First, we see the value of those among us who perform legitimate full-time work as not justifying a minimally dignified wage. And second, we see the value of that work, and the worth of these individuals, as appropriately declining: less this year than it was last year, and less last year than it was the year before. We say to minimum wage workers: you aren’t just worthless, you are also worth less.

And let’s dismiss for good the argument that if you raise the minimum wage some employers won’t be able to sustain payroll, costing us jobs. If your business model depends on paying poverty wages that are declining in real terms over time, you need to raise your prices, or cut some costs, or adjust your compensation elsewhere, or take fewer profits. If you can’t do that and still be sustainable, you have no business being in business.

Raising the federal minimum wage is utterly sensible and long overdue, and commands wide popular support. There aren’t many no-brainers to be found in our hyperpolarized political climate. This is one of them.