The current level of the minimum wage ($7.25/hour) is far too low by any reasonable standard as per “Raise that Wage”. It is not even half of what Economist Dean Baker argues to be over $16.50/hour if the minimum wage were raised in step with productivity growth. Contrary to popular belief, raising the minimum wage would cost no jobs. Besides, evidence from many natural experiments in the United States points to little, if any, negative effect of minimum wage increases on employment, and modest increases in wages for the least-paid do not necessarily reduce the number of jobs.
In the aggregate, there is no job loss at all due to higher minimum wages in studies conducted in one metropolitan area crossing the state boarder where the minimum wage goes up in one state but not the other. One could cover half of the cost of the minimum wage were it to reach $10.50 an hour, as proposed in the Grayson Bill, at McDonald’s by slightly raising the price of a Big Mac from $4 to $4.05.
Productivity has hugely gone up since 1960, yet wages have not seemed to be keeping up. The extra money earned as a result of increased productivity only goes to the top 1% of all Americans—the super rich who make hundreds of millions of dollars each year. Most businesses, especially fast food restaurants, do not want to raise the minimum wage because higher wages would mean less profits for business owners.
Increase in the minimum wage would force some of the profits generated with productivity growth to benefit workers themselves. There would be less money going to the rich’s pockets and more, perhaps merely a fraction in the eyes of the 1%, going to those in the bottom quintile. There also would be more money invested in the community and more jobs created. Therefore, a minimum wage increase could be one of the many ways to help decreasing the wealth gap.
Richard Wolff discusses in the interview that a lot of Americans whose low income would not allow them much room to spend on flexible and discretionary expenses keep borrowing money to buy what they want, which is in part what caused the financial crisis in 2008 to begin with. Raising the minimum wage to match up to the inflation rate as well as productivity growth might help Americans with their financial stability in that they would not have to keep taking out loans but failing to repay them, and thus creating a vicious cycle.
UC Berkeley Labor Center published “Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast-Food Industry” in 2013, reporting that the fast food industry pays wages so low that taxpayers have to provide public assistance such as food stamps to its workers just to keep them afloat, which costs a whopping $7 billion every year. If that $7 billion were taken out of the profits gained by the super rich, who are ironically taxed super little, the economic crisis might be able to improve.
Another side effect of low wages Wolff suggests is that working-class Americans have to work like crazy to make up for their limited earnings. It inevitably drains their physical strength and causes stress. While striving to achieve the American dream, the low socioeconomic status of those on the bottom rung of the ladder becomes a dominant stressor in their lives. Status anxiety so occurs when the least-paid fail to maintain their position in the social hierarchy that they are ashamed of their current status and condemned for dreaming big. In no way, shape or form will this alleviate divisiveness and distrust between the rich and poor already induced by income inequality, not to mention it puts the low-income further in harm’s way as far as their mental health is concerned.
This article was written by Mildred D. Li, a writer for dusk magazine.