By Annette Bernhardt

Raising The Minimum Wage Is A Step Toward Economic Freedom

February 20, 2013 10:48 am Category: Memo Pad 11 Comments A+ / A-
Raising The Minimum Wage Is A Step Toward Economic Freedom

Opponents of a minimum wage increase imagine an economic reality very different from the one millions of American workers experience.

The good news from last week is that President Obama called for raising the federal minimum wage – long overdue and desperately needed for low-wage workers who have seen their real earnings decline during the recovery. The bad news is that his announcement set off a flurry of blogging on the economics of the minimum wage, and, predictably, not a small amount of armchair theorizing.

One particular contribution seems innocuous at first, but in fact frames the issue in an unhelpful and potentially misleading way. In his research roundup last Thursday, Matt Yglesias argued that the best case against raising the minimum wage might be economic freedom:

You’ve got a guy who wants to give someone $8 to do something that’ll take an hour and another guy who wants $8 and is happy to do the thing in exchange for the money. Now Barack Obama’s going to fine them for agreeing to trade $8 for the work? Seems perverse. In the real world, obviously, the perversity of this is greatly mitigated by the existence of formal exemptions and weak enforcement. If you pay a neighbor’s son $10 to mow your lawn and it takes him 70 minutes, you’re going to be able to get away with it even in a world of a $9 minimum wage. Which is probably as it should be.

In this theoretical world, the informal economy is a place where teenagers happily mow lawns and babysit for a little extra cash. But in the real America, we are talking about a large and growing sector of unregulated work, where every day, millions of adults work for sub-minimum wages and no overtime, often in unsafe and hazardous workplaces. Far from peripheral, this sector spans the core industries of our economy, from hotel housekeepers, dishwashers, retail sales workers, domestic workers, and home health aides to janitors, meat processing workers, taxi drivers, warehouse workers, and construction laborers.

And the violations of employment and labor laws are systemic. A landmark 2008 study of more than 4,000 low-wage workers in New York, Chicago, and Los Angeles found that 26 percent had been paid less than the minimum wage in the preceding week, 76 percent had been underpaid for their overtime hours, and 70 percent did not receive any pay at all when they came in early or stayed late after their shift. Also important for this discussion: When workers made a complaint to their employer about wages or working conditions, 43 percent were retaliated against. Not surprisingly, many more never complained in the first place, out of fear that they’d be fired or turned over to the immigration authorities.

So this is not a world where workers are “happy to do the thing” for sub-minimum wages. It is not a world where workers and employers come to the wage negotiation with anything even vaguely resembling the equal power one would need to call it economic freedom. (And how low are we willing to go, by the way? Some have called for states to be allowed to experiment with $5 an hour minimum wages – but why stop there? What about $1 an hour? Or abolishing child labor laws, as a 2011 Missouri bill would have done?)

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Raising The Minimum Wage Is A Step Toward Economic Freedom Reviewed by on . Opponents of a minimum wage increase imagine an economic reality very different from the one millions of American workers experience. The good news from last we Opponents of a minimum wage increase imagine an economic reality very different from the one millions of American workers experience. The good news from last we Rating:

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  • idamag

    Iam expected to pay for value received. Prosperity for a nation is brought about when everyone prospers. Remember those you would like to keep poor are also consumers.

    A person who works hard and goes home tired and hungry should not have to stay hungry.

    Anyone who has been to Biscane Bay, Florida, has seen the yachts with helicopter pads and automobiles aboard. That is fine and we don’t begrudge them unless they stiffed their employees to get that.

  • http://pulse.yahoo.com/_2XQAUUZDVBGZWAL6KWKI3J56LI Blaze Stryker

    There are those among the 1% and their political flunkies who wish to create, promote, and increase economic slavery.

    That’s it. Simple as that.

  • dtgraham

    There are so many good reasons for keeping and increasing the minimum wage that you don’t know where to start. When it was first introduced in 1938, it was meant to eliminate substandard labour conditions and make sure that workers could at least survive on their wages. It also ensured that businesses with integrity that did pay their employees a living wage weren’t being undercut by unscrupulous competitors that paid people next to nothing. Those factors still exist today.

    Two thirds of all employees making minimum work for employers with over 100 employees (large corporations). There is a problem today with smaller businesses–many of whom pay a decent wage–subsidizing these large corporations in the food stamps, medicaid, etc… that their workers use, because of the exceedingly low minimum wage. Think Walmart. That’s unfair and immoral.

    The minimum was never pegged to inflation. If it would have been, and had kept pace with inflation over the last 40 years, it would be $10.55 today without any increases. One must remember that the economy has dramatically shifted. The core of the labour market is now lower wage service sector work. This is what’s been growing in the economy for quite some time now. The good paying jobs of yesterday are gone and aren’t likely to return particularly in light of present policies. If this is the new world order, then the piper must be paid if the overall wealth of the nation is to be maintained.

    Look around the world at who has the worst Gini co-efficients. The poorest nations all have tremendously high income disparities between the classes and very low levels of generational improvement in terms of income. It’s no surprise that the nations who do the best in this regard are the richest ones who have the most activist governments that don’t shy from helping people to help themselves. Therefore their wealth is self sustaining in many ways. Check it out for proof, and who these countries are…in both cases. High levels of income inequality hurt a country in so many ways. This is far more than just a moral imperative. It’s also economics.

    • http://pulse.yahoo.com/_KOPKDFAUQPIIRAFI3HEXNMSHLQ Ed

      Walmart does offer their employees assistance in applying for food stamps and medicaid.And BTW, the definition of “Small Business” by LAW is a company of 500 employees or less.

      • dtgraham

        Well isn’t that generous of them. They help their staff to apply for government aid. I’m truly touched. Ya think maybe a corporation the size of Walmart could just pay enough that they wouldn’t need food stamps in the first place? How about medical benefits too. So Walmart wants the public to pay for those things for their workers. You posted that as though it was something admirable.

  • http://www.facebook.com/dominick.vila.1 Dominick Vila

    In addition to moral considerations, which should consider the impact on revenue posed by having a large segment of our population living below the poverty line. Interestingly, the party that reminds us constantly of the fact that 47% of Americans don’t pay taxes (that includes the Pamper brigade and seniors) is the same party that opposes paying millions of Americans a livable wage. Why is it that Scandinavian countries, Germany and Japan can afford to pay their workers livable wages, and remain competitive, and we can’t? I believe the answer to my question is that we are more focused on improving the bottom line for shareholders and CEOs than helping those who produce the goods or deliver the services they benefit from.

    • dtgraham

      Yes it’s also a question of national revenues over time. I’ve seen the studies done on the nations with the highest and lowest levels of inter generational upward mobility. It’s exactly the opposite of the Republican mantra of government holding you back. The countries with the lowest levels of mobility have governments that are less involved in a more activist progressive approach, either through choice or sheer lack of funds. The countries that have the highest levels of generational upward mobility have names like Norway, Finland, and Denmark.

      Marco Rubio said in his SOTU rebuttal that he couldn’t have gone to university without gov’t help, and then generically slammed gov’t for holding people back in his very next breath. He wants to help future generations by denying them the very things that he just admitted helped him personally.

      He also apparently loves Medicare for his mother but yet is on board with Paul Ryan’s ‘good luck granny here’s your coupon’ version of Medicare. These guys are f ‘ing amazing Dominick. It’s breathtaking. Rachel Maddow needs another show on Hubris.

  • nanc35

    I keep reading news articles that infer that those working for minimum wage are teenagers! Not true! The minimum wage is the “normal” wage offered by more and more employers. Some boast they pay above minimum wage when they offer a wage just slightly higher, usually without benefits and often only part time. Unfortunately, raising the minimum wage won’t help unless we also curb the use of part time employees. An employer should be forced to pay a maintenance tax if they over use part time employees, pay minimum wage, and offer no benefits. Those workers have to be maintained by taxpayers and it is only fair to charge those who use their work and skills at less than liveable wages.

    • dtgraham

      That’s true nanec35. The Economic Policy Institute found that 84% of people benefiting from an increase in the minimum wage are over 20. Half that benefit are full time and over 54% have a combined family income of less than $40,000 yearly.

    • jstsyn

      It would help if folks would vote for the politicians that will work for us. Uneducated voters are part of the problem. By uneducated I mean those that don’t look into the politicians background and past voting record. For starters, a politician that only runs down his opponent is not worth voting for.

  • jebediah123

    Forget my previous comment—stick it up your—-

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