From Linda C: “I read the column you had in the Parade Magazine [about trying to get off the credit-card debt treadmill] and am wondering if there is another system that works more efficiently for the ‘working poor.’ I have two credit cards and have about $5,000 plus about $3,000 in student loans. I am a single mother of two children. The only debt I have on credit cards is medical and auto repair. I make about $18,000/year and have no insurance benefits. I live in Montana, land of low wages, high rent and too many people for every job. We have a couch and sofa (picked up in alleys), a kitchen table, beds and a desk. We have no television, no stereo, no entertainment budget and I have come close to paying off my debt on several occasions. Then, a medical situation will come up that costs $50 to $5,000 and we are denied service unless we can pay the bill. The same with the car, which I need to continue to work. I save like a mad person, only to have that wiped out and a debt on the credit card that I work hard to pay off again. I actually believe that the closer I get to paying a card off, the more likely one of the children is going to get sick or need dental work or the car is going to have a problem. I know I am not alone with this problem, especially in this area. Is there any hope that we’ll ever be able to live like others — to save for things we would enjoy instead of making payments to credit card companies for basic life needs? I feel like I’m working for nothing and I’m tired. I have been in this battle for 11 years and I have an excellent credit record.”
A.T.: What are the answers? Obviously, it would help a lot if Linda had a working spouse. But in the real world, not everyone does. If good folks like Linda have such a struggle, are the rules of our game somehow out of whack?
On the one hand, the rules of the game are no longer set entirely by us. It is a global game, and our wages in some jobs can’t be set irrespective of what someone in another country is willing to work for. But are we really going to drive off to China to buy our fast food if the minimum wage were raised here from $5.15 to $6.15, as the Democrats proposed and the Republicans recently rejected? (And did raising the minimum wage from its long-stuck level of $4.25 to $5.15 in 1997 really wreck our economy or throw hundreds of thousands of low-income people out of work as the Republicans who fought it feared?)
But some of it is entirely local. One of the first things President Clinton did, over great opposition from the other party, was raise MY taxes smartly in order to provide the “earned-income tax credit” — for people like Linda, members of the working poor.
Some people who earn $500,000 or $2 million a year consider income redistribution a terrible thing. But today’s somewhat higher on-the-best-off tax brackets have not wrecked America’s economy. And, while I hardly favor anything much above today’s rates — please! no! big mistake! — it must be noted that even the 90% top tax bracket under Eisenhower and the 70% top rate under Messrs. Kennedy, Johnson, Nixon, Ford and Carter did not entirely kill our economy. Growth rates and productivity gains back in many of those years were very healthy indeed. (Yes, I know, with oil deals, real estate depreciation, etc., essentially no one actually paid 90%. But still. That was the rate.)
Raising the minimum wage “could actually have an adverse impact upon our economy” and could cause unemployment “that hurts the low-income workers the hardest,” Republican Minnesota Senator Rod Grams said when asked about hiking the floor to $6.15 an hour. (That’s $12,300 a year for someone who works a full eight hours a day, five days a week, 50 weeks a year.) It was his compassion for the working poor that led him to vote no.
But Henry Ford — no socialist — had an interesting idea. He could have paid less, but decided that anyone who worked building Fords ought to be paid enough to be able to buy one.
Raising the minimum wage is no panacea and clearly has its limits — mandating a $30-an-hour minimum would clearly not work. And perhaps there should be exceptions (though that gets tricky) or regional variations. But when you think of Linda, who earns considerably more than the minimum wage, you wonder whether it was really a bad idea bumping it up from $4.25 to $5.15, and whether Ted Kennedy is hopelessly subversive for suggesting it be bumped up another notch still.
Last, related, point: Something else that’s important is to encourage less developed countries to begin introducing the concept of a minimum wage, albeit on a much lower scale at first, too. Better pay empowers consumers to consume, and in the long run — as Henry Ford seemed to intuit — can profit a nation’s capitalists right along with their workers. And the more prosperous workers in those countries are, and the higher their wages rise, the higher our own wages will be able to rise as well.
Quote of the Day
LONG PULL: There may be nothing exciting about buying for the long pull, but it works.~David L. Babson
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