J. Scott Applewhite/AP Photo
Senate Majority Leader Chuck Schumer (D-NY) gives a thumbs-up after the Senate passed a COVID-19 relief bill on Saturday.
Democrats lacked the votes to raise the federal minimum wage as part of the $1.9 trillion rescue package just approved by Congress. But the bill will hike wages nonetheless, by putting economic pressure on employers to raise them.
The package includes income subsidies, in the form of cash payments to families and extended unemployment compensation. Conservatives and business groups have expressed alarm that the payments are too generous, and that some workers will stay home rather than accept the lousy wages on offer for tedious and risky frontline work.
Just between us, the conservatives are right. Some people will indeed refuse to work for paltry wages, and more power to them.
And though the bill was advertised as a relief measure and not a stimulus package, $1.9 trillion in federal spending (almost 10 percent of GDP) will indeed stimulate the economy and cut the rate of unemployment. As unemployment declines, employers will have to pay more to attract workers.
As well they should. Nobody can live decently on $7.25 an hour. In much of the country, even $15 is woefully inadequate.
A strong recovery coupled with subsidies to families will raise what economists call the reservation wage. That’s the wage the boss has to pay to get someone to take the job.
As wages rise, inflation could tick up a little. That’s also fine, according to the Federal Reserve, since wages have been so flat that inflation has consistently run well below the Fed’s own target of 2 percent.
So rather than put all our eggs in the $15-minimum-wage basket and lament the failure of Congress to enact it this time around, let’s keep track of what will be a four-pronged strategy for raising wages.
One prong is a strong recovery coupled with relief payments, and its salutary impact on wages. The second prong is the unionization drive now gaining force at Amazon and elsewhere. The third prong is companies like Amazon defensively raising wages, partly out of shame, partly to fend off unions, and partly to attract workers.
And when Amazon boosts wages, other employers with similarly bad jobs raise wages, too. This has already occurred.
One further part of the general momentum to boost wages is the streak of successful ballot initiatives to raise state minimum wages, most recently in Missouri, Arkansas, and Florida. Read that list again—all red states.
A minimum-wage hike enjoys broad voter support. Other states will follow suit, further raising the profile of the cause of raising worker wages, and putting Republicans on the wrong side of a popular issue.
I’m convinced that sooner or later in his first two years, Biden will be successful in getting Congress to raise the federal minimum wage. A lot of wage gains will happen in the meantime—and they will only feed the pressure to raise the national minimum.
