$15 an Hour August 2, 2013August 1, 2013 BOREALIS In the Keep Hope Alive department, comes this headline yesterday: WheelTug Wins ATW Magazine 2013 Eco-Technology of the Year Award. Those of us who’ve bought the Borealis lottery ticket (as I used to think of it, though by now the odds seem a little less long) — with money we can truly afford to lose — may see this as one more inch in the long road forward. THE MINIMUM WAGE Have you watched or read the President’s Chattanooga speech? “A Better Bargain for Middle Class Jobs” — I plan to post the transcript Monday. We’ve made a ton of progress since 2009. But there’s so much more we should do — the infrastructure investments, so compellingly — but also raising the minimum wage. The President wants to raise it over the next three years from $7.25 to $10.10 an hour. But what would that do to business? Walmart’s low-wage policy has produced everyday low prices for consumers — and wealth for the Walton family nearly equal to the collective wealth of the bottom 50 million American families combined, according to this must-read article. Think about that for a second. Or perhaps for 50 million seconds. Got the picture? Okay: so, according to that same article, if Walmart paid all its employees a minimum of $12 an hour — not quite 60% what Costco pays its average employee — and if all that wage-hike got passed through to consumers, with none of it affecting Walmart’s profits . . . which as an occasional Walmart shareholder I wouldn’t terribly mind — Walmart prices would rise barely 1%. So the $10.10 President Obama is calling for would have an even tinier effect. Truly not the end of the world for America’s shoppers. A few weeks ago, I offered “The Capitalist’s Case for a $15 Minimum Wage” — Nick Hanauer being that capitalist. Many of you replied with thoughtful concerns. Patrick Johnson: “I am wary of the government setting the price of anything, including any specific good or the price of labor. The market is generally the most efficient at setting market clearing prices. When government tries to do it, they frequently get it wrong resulting in gluts or shortages.” ☞ Wary is good and appropriate. The question is: would raising the minimum wage to $15 (and then indexing that to inflation) be a net positive, as capitalist Nick Hanauer argues? I think he makes a strong case that it would. Drew Bubser: “Hanauer’s statement . . . ‘If the minimum wage had simply tracked U.S. productivity gains since 1968, it would be $21.72 an hour — three times what it is now’ . . . is a canard. Most productivity gains have been in manufacturing, farming and transportation, not the low-wage sector. A more honest index would be the inflation rate, where in 1968 the minimum wage was $1.60, resulting in a 2013 minimum wage of $10.71.” ☞ I agree. I thought this was an unnecessarily aggressive piece of Hanauer’s argument. I wish he had qualified it with some acknowledgement of your point. Then again, (a) even $10.71 is still more than the President and H.R. 1010 call for (the more so when you add in the next three years’ likely inflation, which will make for an even bigger gap between the proposed $10.10 and the likely by-then $11.75 or so inflation-adjusted 1968 number); and (b) to the extent the nation has become more productive, why shouldn’t even its least-skilled citizens share in that success? No one is saying the guy who trims a CEO’s hedge or makes the hotel bed of a vacationing software engineer or cleans the toilet of plant manager should get paid as much as the CEO or the engineer or the manager. But don’t even the poorest members of our society, with the worst, most unpleasant jobs, contribute to our happiness? I really appreciate not having to clean my own toilet or make my own hotel bed or trim my own hedge. (Note to self: get a hedge.) Douglas Kretzmann: “Here in Oz [Australia], the minimum wage is indexed to the age of the worker. So a 16-yr-old earns about US minimum wage, but after the age of 20, the minimum wage is also a living wage, about $17/hour with paid annual leave and sick leave. For casual employees who don’t get leave, the rate rises. Non-standard hours (outside of 8am-5pm) also raise the rate. My nephew working part-time at Ikea gets $23/hour, which covers his living costs while he completes advanced degrees in electrical engineering and physics. This strikes me as a remarkably humane way of managing the minimum wage — I’d like to see the US emulate this. Dream Big!” ☞ Ah, but won’t companies go out of business if they have to pay higher wages? Or just replace workers with machines? And what about inflation? Walmart might be able to manage $12 an hour — see above — but $15? These are crucial questions, so the first answer would presumably be to phase in the increases to Hanauer’s proposed $15 gradually, to give the economy time to adjust; and the second answer would be to note the distinction between minimum-wage jobs in industries where we compete globally (of which, Hanauer says, there are relatively few) and minimum wage jobs that can’t be outsourced. In the latter case, so long as all the fast food places (say) have to pay their employees more, no one fast-food restaurant would find itself at a meaningful disadvantage. Fast-food places as a whole might be disadvantaged relative to supermarkets (or to simply eating less*); motels might be disadvantaged relative to staying with friends (or to couch surfing — here! or even here! — or to staying home** — but what if Hanauer is right? What if greater prosperity at the bottom of the ladder led not just to less suffering, less grinding poverty, less despair — but also to a more vibrant economy? (As in the old notion of Henry Ford’s paying his workers enough so they could afford to buy what they were making.) What our Republican friends seem to want is an economic race to the bottom for all but a privileged few: kill the unions, kill the minimum wage, raise interest rates on student loans . . . but cut taxes on the rich, pay CEO’s whatever their interlocking boards of directors decide they’re worth (354 times their average employee last year, according to this, up from “just” 42 times in 1982) . . . and it will all work out for the best. But maybe not. Maybe a vibrant middle class lifts boats — including yachts — better than an ever more powerful plutocracy. (One of the funnier bits in BUYER AND CELLAR*** has Alex making a reference to having to take your shoes off at the airport and Barbra simply staring back, uncomprehending. Why would you have to do that?) This is the point the President has been making for years — it’s more effective to build an economy from the middle out rather than the top down. It’s the point of Nick Hanauer’s “job creators” video. And it’s why his proposal for a $15 minimum wage may not be as far-fetched as it sounds. *Eating less: good for your health, good for you budget, good for placing less strain on the planet. ** The staycation! The virtual meeting! — also good for your budget and the planet. *** Full disclosure: yada yada yada. Go see it.