No, a Fair Wage Is Not a ‘Free Lunch’

 

(AP Photo/Rogelio V. Solis)

In this July 24, 2017 photograph, Otibehia Allen, a single mother of five, peers outside her rented mobile home in the same isolated, low-income community of Jonestown, Miss., where she grew up among the cotton and soybean fields of the Mississippi Delta. She works 30 hours a week at barely over minimum wage. 

The U.S. Chamber of Commerce has long used its ample power and influence to convince economists, politicians, and influencers that raising the minimum wage—and enacting any other policies that benefit workers—will be an unequivocal job-killing, robot-creating catastrophe that devastates the very people those bleeding-heart liberals are trying to help.   

They’ve done a very good job of turning that threat into mainstream economic gospel (though the Milton Friedman wing of the economics profession didn’t require any persuading). That increasing the minimum wage will create untenable levels of job loss, leaving workers on the margins of the workforce without a foothold, has become a matter-of-fact policy assumption among not only conservative Republicans but many liberal economists as well.

The tentacles of trickle-down logic—tax cuts and deregulation for the rich and powerful and wage suppression for everyone else—are far-reaching.

So it’s disappointing—though perhaps not entirely surprising—that The Washington Post’s Catherine Rampell, who is typically one of the more thoughtful and progressive voices in the paper’s opinion pages, has taken a big gulp of the trickle-down Kool-Aid.

In her latest column, Rampell derisively likens the notion that workers should be paid a $15 living wage and that more workers should qualify for overtime pay to that of a “the free lunch.” In doing so, she not only bends over backward to gratuitously embrace trickle-down arguments. She simply ignores the facts, eschewing an appreciation of just how tilted the playing field is against workers. Rampell writes:

Progressives generally support better labor protections, including policies meant to provide higher wages, more predictable working hours, increased bargaining power, and greater access to paid family leave, sick leave and overtime. And given the raw deal that workers get so often, these are all policies that I generally support as well. 

But lately, as Democratic leadership has increasingly embraced the far-left impulses of its base, I’ve become convinced that the left needs to think harder about the unintended consequences of such benevolent-seeming proposals. 

In isolation, each of these policies has the potential to make workers more costly to hire. Cumulatively, they almost certainly do.

Rampell accuses “lefty politicians and policy wonks” of being unwilling to grapple with these purported realities because of political inconvenience, zeroing in on two specific progressive labor policies: a $15 federal minimum wage and doubling the salary threshold for overtime pay. She then goes on to ignore the work of progressive policy researchers who grapple with these matters every day.

A former economics reporter for The New York Times, she centers her critique of a $15 minimum wage on a recent study from researchers at the University of Washington that claimed Seattle’s incremental minimum-wage increases, most recently to $13 (on its way to $15), led employers to cut low-wage employees’ hours, lowered earnings, and killed jobs.

However, she completely fails to mention how seriously flawed this study is—a matter that has been thoroughly highlighted. The Economic Policy Institute’s Ben Zipperer and John Schmitt found that the report “suffers from a number of data and methodological problems that bias the study in the direction of finding job loss, even where there may have been no job loss at all.” The UW researchers’ estimates of job loss in reaction to the city’s minimum-wage increases were far outside the bounds of what most research has found. Secondly, the study did not account for businesses with multiple locations, ignoring the effects on chains like Starbucks and McDonald’s, and biasing its findings toward small independent businesses. Lastly, the report failed to account for Seattle’s booming economy. The researchers claimed that the minimum-wage increases led to large gains in higher-paying jobs, implying those gains came at the expense of low-wage jobs. It’s much more likely that the city’s tight labor market (unemployment there has fallen to a meager 3.3 percent) is forcing employers to pay workers more for previously low-wage work. Nor does Rampell acknowledge another study on Seattle’s minimum wage from the University of California, Berkeley that found that things are going largely as expected—and came out around the same time as the UW study.

Rampell then goes on to cite how in poor states like West Virginia, Arkansas, and Mississippi, the median wage is less than $15 and that enacting a $15 federal minimum would apply to more than half of the jobs in those states—and at least a quarter of the jobs in all states.

“That might seem like good thing. Why wouldn’t you want to improve the living standards of as many people as possible?” Rampell writes. “The answer: You won’t actually be helping them if making their labor much more expensive, much too quickly, results in their getting fired.”

This insincere concern-trolling ignores key policy details. Nobody is saying that the federal minimum wage should double overnight. The congressional Democrats’ minimum-wage legislation, the Raise the Wage Act, proposes to incrementally phase in a $15 federal minimum until it reaches that level in 2024—six years from now. That provides ample time for businesses to adjust.

Make no mistake: $15 an hour in 2024 will still be bold policy, as Jared Bernstein and Ben Spielberg have explained. By 2024, the new minimum would be worth about $12.50 in today’s dollars, benefiting about 30 percent of the workforce. At that point, the minimum wage would be 60 percent of the median wage. The highest it has ever been was back in the late 1960s, when it was 50 percent of the median wage and the minimum wage was at its peak purchasing power.

At a time when the minimum wage is at one of its weakest points in history, ambitious policy solutions are clearly needed. The pay gap between workers and CEOs has risen from roughly 20 to 1 in the 1960s to roughly 300 to 1 today. And as a paper published last December by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman documents, the pre-tax income growth of the bottom 50 percent of Americans, which had increased by 102 percent between 1946 and 1980, increased by a bare 1 percent between 1980 and 2014, while the income of the wealthiest 0.001 percent, which had increased by just 57 percent from 1946 to 1980, grew by a mind-boggling 636 percent from 1980 to 2014. That’s a disparity that might more productively engage Rampell’s intellectual energies than fretting over the “free lunch” of hiking the minimum wage.

 

RAMPELL ALSO GOES AFTER President Obama’s overtime rule, which was on the verge of doubling the salary threshold for employees to qualify for overtime pay, from $23,660—a figure set in 1975—to $47,476. It would have made millions of employees who put in more than fulltime hours eligible for overtime—that is, until a federal judge blocked it and President Trump left it to die.

Rampell is wary of what she calls an “abrupt increase,” instead voicing support for a more tempered increase to $33,000, a level that Trump’s Labor Secretary Alexander Acosta has insinuated might be tenable. But again, Rampell fails to mention that when President Gerald Ford last updated the overtime salary threshold in 1975, it was valued at about $58,000 in today’s dollars. Since then, its coverage power has withered away. Thanks to a George W. Bush-era loophole, companies will often turn hourly workers into salaried workers, paying just above the threshold so they are forced to work exorbitant hours without overtime pay. Less than 10 percent of salaried workers have automatic overtime protections.

Of course, Rampell’s column quickly won praise from prominent figures in conservative and centrist economics and political circles, gleeful to see a liberal columnist use the Post’s soapbox to not only embrace their talking points without nuance or scrutiny, but also liken these progressive policies to a “free lunch.”

Rampell gives credence to the venerable insight of Michael Strain, director of economic policy at the American Enterprise Institute, who says that many “thoughtful, well-meaning people on the left seem to be looking for a free lunch.” By that, Rampell says, progressives think these policies will have all winners and no losers.

Except that’s one hefty straw man. Nobody is arguing that a $15 minimum wage or more robust overtime protections will be without cost. On the contrary, the point of these policies is to restore the balance between powerful corporations making exceedingly high profits by skimming labor costs and the workers who are earning less and less for their efforts. So yes, it will cost employers to treat their workers fairly. That’s not a bad thing.  

If Rampell wants to talk about a free lunch, she should write about the one that parasitic employers have been eating for decades as they pay workers poverty wages that are ultimately subsidized by taxpayer-funded assistance programs.

Instead of pontificating about how a higher minimum wage and greater access to overtime pay would hurt low-wage workers, Rampell would do well to write about how these workers are already hurting. Otherwise, Rampell is paying lip service to the strategies that trickle-downers use to obscure and obfuscate, and that employers and their financial backers use to exploit. 

Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.

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