Bare Minimum Wage

The federal minimum for an hourly wage was $3.35 in 1982 and now it’s $7.25, up 120 percent. Inflation, meanwhile, has climbed during that period by 135 percent. Eight states, including New York, Connecticut, and New Jersey, are considering legislation to boost the base wage. Advocates say that such state measures are fair and make good economic sense: Putting more money in the hands of workers means more demand—good news for small businesses struggling to overcome poor sales. Then there’s politics. More than two-thirds of Americans favor raising the hourly wage to at least $10.

You’d think it would be a win-win for state officials, but it’s not. While truly small businesses like restaurants and retail shops have said in the past that raising the wage will have little or no effect on labor costs, large corporations that pay minimum wage, like fast-food chains, have enormous incentive to propagandize against any increase.

One of the most active in the propaganda industry has been the Employment Policies Institute, a so-called think-tank in Washington that serves as a front for Richard Berman & Co., a lobbying firm for major corporations in the fast-food, alcohol, and tobacco industries. The Employment Policies Institute studies essentially say: Raising the minimum wage hurts minimum-wage earners. We know, we know. That sounds counter-intuitive, but trust us. We're the experts.

Recently, New York City Mayor Michael Bloomberg and State Assembly Speaker Sheldon Silver co-authored an op-ed in the New York Daily News making the demand-side case that New York City is expensive to live in and that minimum wage has not kept pace with inflation.

Fortunately for Berman, he has allies among politicians, reporters, and lobbyists to counter arguments favoring an increase in the minimum wage. In New York, State Senate Majority Leader Dean Skelos warned the bill could be a "job killer rather than a job promoter." In Connecticut, the National Federation of Independent Business reacted to news that the state's General Assembly looked to raise the wage from $8.50 to $9.75 over two years, then index it to the rate of inflation. Local Director Andrew Markowski said a wage hike would hurt "the working poor—the people whom the advocates want to help." The editors of the New York Post allowed a recent report to cite a study by the Employment Policies Institute showing the minimum wage "razes jobs" without revealing the Institute's corporate ties. The report's lone qualification came in the form of an opposing claim that the Institute "is a front group for the restaurant and hospitality industry." Even so, it stated unequivocally later on that studies supporting a wage hike were "union-backed."

According to watchdog group Citizens for Responsibility and Ethics in Washington (CREW), Berman opposed the 1996 hike, claiming the legislation would threaten the livelihood of more than 621,000 workers across the country. That never happened, but that hasn't stopped Berman from making a fortune making the same claim every time lawmakers debate raising the minimum wage. And it doesn't stop there.

Berman takes millions from his clients and funnels the money through 15 "nonprofits," according to CREW. They in turn generate reams of misinformation to distract the public from issues like drunk driving, childhood obesity, second-hand smoke and animal rights. The Center for Media and Democracy's PR Watch says Berman works "in the shadows for decades while pocketing millions from unpopular industries for his work thwarting public interest legislation." If the Employment Policies Institute were truly a think-tank, truth would matter.

Studies of minimum wage are categorically ambivalent. There is no consensus.

Heidi Shierholz, an economist at the Economic Policy Institute (the real EPI), says there was a consensus for many decades on the minimum wage issue because of an obvious fact: When the cost of something goes up (like labor), the demand for that thing goes down. But in the 1990s, case studies grew more sophisticated and, as a result, that consensus began to crumble, she says. From the vantage point of 2012, raising the minimum wage does not lead to jobs loss. According to a 2006 report by the Fiscal Policy Institute, states that raised the wage saw higher employment rates among businesses with 50 or fewer workers.

The obvious fact is that minimum wage earners care about take-home pay and little else. In fact, raising the minimum wage in Connecticut, to $9.75, is a deal for businesses, because that’s still less in adjusted dollar than what businesses paid in 1968. That’s why Bloomberg and Silver's demand-side argument is more compelling than any supply-side position, which twists itself into knots rationalizing a corporate-backed agenda.

Comments

If you start at 3.35 and go up to 7.25 the increase is 3.9/3.35= 1.16 which is 116% not 46%

"... less in adjusted dollar than what businesses paid in 1968 ..."

What is left out here is that per capita income was only $15,000 in 1968 and grew to $28,500 by 2006 (in today's dollars) -- almost double! Got to get the whole story out folks.

DOUBLING the minimum wage to $15/hr ($30,000+/yr) would add all of 3.5% direct inflation (see simple eighth-grade math below) giving half the country a raise (did I mention the median wage grew at most 20%, from $12.50/hr, since 1968) -- probably bringing more customers than ever to McDonald's -- not to mention ending ghetto drug gangs.
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Jumping to a federal minimum wage to $15 would add about 3.5% direct inflation – easily computed: 70 million (half the workforce – at very most; many positions not hourly or salaried) X $3.25 average raise (close enough) X 2000 hours (work year) + 3.5 million* more half raises for those at or below the minimum (in 2009) X $3.25 X 2000 hours = $477.75 billion altogether -- out of a GDP of $14 trillion = 3.4% direct inflation.

* http://www.bls.gov/cps/minwage2009tbls.htm
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The stagnation of the median wage is more shocking to me and the reason no one can afford medical care today (sorry medical profession; we don't have any money). Modernizing the American labor market (and political forum simultaneously) is the only way back -- and the only way to institutionalize labor bargaining power and middle class political punch (proven method around the world for decades now) is legally mandated, sector-wide labor agreements (Google it).

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