Increases in the Minimum Wage Correct Inequalities in Wage Distribution

Capital_in_the_Twenty-First_Century_(front_cover)Kiln     One of my projects for my wor-cation had been to finally finish reading Thomas Piketty’s Capital in the Twenty-First Century.  I had ordered the book from the first notice, read 50 pages, and then just couldn’t see hauling the weight on airplanes.  I even read that Amazon e-book surveys based on noting “underlining” on Kindles and other devices found that the Piketty book was setting new records for how few people actually read the book.  Having finished it and made notes throughout, it’s a shame, because it in fact it really is an excellent book, if you care about equality, citizen wealth, and what’s happening in the world anyway.

            A small example concerns the still raging issue about the critical importance of the minimum wage in creating any kind of equality for lower waged workers.  Piketty is very clear:

Inequalities at the bottom of the US wage distribution closely followed the evolution of the minimum wage:  the gap between the bottom 10 percent of the wage distribution and the overall average wage widened significantly in the 1980s, then narrowed in the 1990s, and finally increased again in the 2000s.

Comparing the US to France, where for a long time that country continued to keep pace with inflation, Piketty notes that,

As in France, changes in the minimum wage played an important role in the evolution of wage inequalities in the United States.  It is striking to learn that in terms of purchasing power, the minimum wage reached its maximum level nearly half a century ago, in 1969, at $1.60 an hour (or $10.10 in 2013 dollars, taking account of inflation between 1968 and 2013.)

            On the other hand Professor David Neumark from UC-Irvine continues to rail against minimum wage increases, but largely these are two ships passing in the night without seeing each other.  Neumark wants to argue, as he does in the Wall Street Journal, recently that the issue is about whether or not the minimum wage reduces poverty, rather than helping achieve wage equality.  These are actually two different issues, as he surely must know, so his argument is all about the apples and oranges and hoping to create confusion.  With a student’s research he makes the case that “…to raise the minimum wage to $10.10 nationally, 18% of the benefits of the higher wages (holding employment fixed) would go to poor families.  Twenty-nine percent would go to families with incomes three times the poverty level or higher.”

            The first response to Neumark still has to be, “so what?”  That sounds like a win compared to where we stand now, dude!  And, as Piketty notes where we are now on wage and capital inequality (and, yes, these are different, too) is comparable to the historic highs ever, and getting worse.

            There really isn’t an honest, factual argument any more for not raising the minimum wage.

Ironically, both Piketty and Neumark come to agreement, even from their different directions, on the fact that moving to $15 per hour or higher could have what Neumark calls “sizable employment losses that would likely result from such a large minimum-wage increase,” and Piketty’s note that, “If the minimum wage were doubled or tripled, it would be surprising if the negative impact were not dominant.”

Either way you cut it, there’s no excuse not to at least bring us up to $10.10 per hour so that we can buy as much with that wage as we could back in 1969, forty-five long years ago.

 

 

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Minimum Wage Increases for Tipped Employees are Critical

tipsLondon    Great news from Seattle as a major US city stepped up and put workers on track to make $15 per hour.  Regular minimum wage workers would see their wages in smaller enterprises go up steadily until 2021 to achieve that level.  Big employers with 500 or more workers, like Amazon, would get there between 2017 and 2018 depending on their health insurance.

Council members said they were going someplace people had never been.  Really, they are only going there first.  Professors asked for comment said they had never studied the impacts of “a doubling of the minimum wage.”  But, as we discussed recently, this is not as radical as the chest thumping presumes.  The current minimum wage in Washington State is not the measly $7.25 federal level but a more robust $9.32, indexed to inflation with annual bumps.  So, going to $15 per hour is a jump of $5.68 over 7 years or 81 cents annually, rather than the annual 70 cents per year increase that we saw with the last federal increase under Bush many long years ago.  No one was foolhardy here.  They kept in line with established precedents and practice in raising minimum wages, they just got there first and led the way, and hip-hip-hooray for them!

Importantly, tipped workers are fully covered in this jump, and given the number of areas around the country where they have been frozen at bare pennies above two dollars per hour for the last twenty-two years, that’s huge in and of itself.  To Washington’s credit tipped employees have been fully covered by the state minimum wage already, joining a select crowd, largely in the West that includes only Alaska, Oregon, Montana, Nevada, California, and, oh, yeah, let’s keep it nice in Minnesota, too, and give Hawaii some props for only being a quarter under the minimum there.

Crazily in an early story on this victory, a bartender in Bellevue was quoted saying that $15 per hour would lower his tips, so he was betting he would still do better in Bellevue with the lower state minimum wage than bartenders would do in Seattle.  How silly?  Like he’s going to stay behind that bar for 7 years to find out?  Or, like bar customers are going to think that their tender or servers getting another 80 odd cents per hour every year aren’t still depending on their tips.  This is the kind of economic analysis that is keeping this guy behind the bar and servicing an exploitative business model in the food and beverage industry throughout the country.

What workers really know is that their regulars tip more than casuals and the home folks way, way more than tourists.  You get good tips for good service from people who care about you and care about the kind of service they get at your establishment.  As long as there are tips, that doesn’t change, only the local tradition and culture in the country, where believe it or not there are places in the world where workers turn back tips as a professional insult, or where wages are seen as decent so the level of tipping is more minor or more American.  Tipped workers in Seattle are always going to do better than tipped workers now in Bellevue and most other places in the country, because they’ll have a higher minimum wage to start with, rain or shine, and weather does matter, and, let’s face it, their regulars make more money in Seattle than the rest of Washington, even Bellevue, and certainly than America, so they’ll always do better, dude.

Recently when the Michigan legislature bit the bullet and raised their minimums to try and take the steam out of a ballot initiative, the head of the Restaurant Opportunities Centers (ROC) continued to clamor that it didn’t work because it didn’t raise up tipped workers.  She’s right and the Bellevue bartender is wrong.  We have to do better across the board here, so that all boats rise when the minimum wage goes up.

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