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Minimum wage DE - Pinwheel Empire

Minimum wage DE

submitted 2 months ago by in Daily Empire

Just a few words on the minimum wage, which comes up a lot in the comments. Especially given the current baseline of a federal wage of $7+ per hour with only a few jurisdictions slightly higher, I am extremely pro minimum wage increase and believe it should be a political priority for liberals. That’s because it’s a good idea on policy grounds and an extremely good idea for organizing workers. Let’s get into it:


Generally the first objection to a minimum wage increase is that it will have negative knock-on effects, primarily in that it will increase unemployment for low wage workers and will increase costs for small businesses to the point where they are no longer viable. The answer to both these objections is basically, it depends basically on the wage level and unemployment rate of the local area where you’re proposing the increase. In the face of a mandated wage increase, companies basically have three options: hire less people, raise prices, or accept lower profit margins. Though the extent to which they do each of these things will obviously vary, the impact will generally be decided by the employment environment and the relative wage environment. In a low unemployment situation, increased automation and decreased hiring will probably see the displaced employees finding different jobs. Conversely, in a high unemployment environment, layoffs will lead to more people being involuntarily unemployed. Overall, the minimum wage increase will tend to slightly to moderately increase unemployment, so that tradeoff should be prominently considered by policymakers.

The wage environment will likewise have a big say in how the increase goes over. Where the median local income is quite high, prices can easily be raised since more affluent consumers aren’t likely to change behaviors over a 10% increase in the cost of coffee. The net effect will basically be a small transfer of funds from higher earners to lower earners. However, where the minimum wage approaches the median, the wage hike has two negative consequences: first, the minimum wage constitutes a much larger increase since it begins to affect a larger subset of employees. Second, local consumers will be sensitive to resulting higher prices. This may result in a contractionary cycle where companies can no longer afford to pay their employees the mandated wages, and laid off employees no longer have disposable money to spend, which would hamper economic growth. In other words, while you can generate better outcomes for lower wage workers with a higher minimum wage, you can’t use it to destroy the 1% or end income inequality. From some wonks, this means the minimum wage shouldn’t be a high priority. The thinking goes that since the minimum wage is less effective as a policy prescription than progressive taxation and social programs, it doesn’t make sense to emphasize it. I disagree.

Political concerns

One of the biggest issues the Democrats have had since Obama was elected is failure to understand the political implications of policy changes. Obama’s philosophy always seemed to be that good policy would create its own coalitions. But people don’t read white papers in deciding who to vote for. The look at slogans and decide based on what party matches their identity. As Hillary Clinton learned and Democrats have been griping about for years, the people don’t vote on a scientific assessment of self or national interests. That’s why while the substantive argument for the more progresssive tax system or a UBI is strong, it’s not going to be the basis for a movement. People don’t identify with the government for it’s ability to write checks to people who don’t work (except the old) and marginal tax rates are to attenuated to make sense. The minimum wage makes a great focal point left wing organization for a few reasons.

First, increasing the minimum wage is popular. This needs almost no further explanation but is crucially important (obviously).

Second, the minimum wage is a policy associated with making sure people who work hard get compensated reasonably. Even if it wouldn’t be effective in actually allowing McDonalds workers to live in San Francisco, putting the issue before people causes them to identify as workers and against corporations. It reminds them how management will scrimp and save to the point of paying clerks $8 when corporate profits are at an all time high. So it’s a good message that gets people thinking on the right terms for Democrats (do I identify as a worker or as a plutocrat?)

Third, the minimum wage laws take advantage of the Democrats’ greatest structural advantage: their political stranglehold on America’s biggest and most productive cities. This has been painted as a weakness in terms of the electoral college where running up the score in LA and New York has no benefit. But the flip side of that is at a local level every company in America wants to do business in big cities, and Democrats can use their political power to extract something from this.

Next steps

To be clear, a higher minimum wage is not an endpoint for efforts to address wealth and income distribution issues. But for the reasons above, it’s a good organizing focal point and creates a strong and universal message. Once people have organized around minimum wage increases, that energy can be directed at different, related causes. One example of this is the effective public relations campaign against Starbucks’ unpredictable scheduling for employees. Another is the good work done in attempting to make sure home health workers qualify for overtime. While these micro-level victories aren’t going to tear down the 1%, they provide tangible victories, and bolster the ground organization which for too long has been forsaken on the Left in favor of white papers and wonks. Only when the big ideas of the white papers along with the concrete victories that can be won by grassroots organizing can work together will progressive economic change be advanced beyond its infancy. And to ensure the activists can grow stronger, the wonks should let the minimum wage come to the foreground.

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