In his 2013 State of the Union Address, President Barack Obama urged Congress to raise the minimum wage from $7.25 to $9.00 an hour. Unsurprisingly, the most unproductive Congress in history responded with a collective yawn. Letting the United States government shut down for half a month was apparently more important to legislators than repairing the ailing economy. So it was all the more interesting when, in this year’s State of the Union, the president didn’t just double down on the minimum wage, he raised the stakes. Thanks to Obama, federal contract workers got a raise, a minimum wage of $10.10.
That position is worth applauding. The president should do more to cut through the false hype against a living wage. Obama has repeatedly invoked Henry Ford to back up his claim. Ford knew he had to pay his workers a wage that allowed them to afford the product they were making. That’s more than just rhetoric—Ford’s strategy makes for sound economic policy.
A person making the minimum wage in the U.S. right now earns slightly more than $15,000 a year, before any tax payments. After taxes, that person still makes an income near $14,500, subtracting local and state taxes and adding back in likely refunds and benefits. If this person pays $700 a month in rent, he or she is down to $6,100 to feed his or her family, pay the bills, maintain transportation, etc. For perspective, consider that the median rent in Raleigh in 2011 was more than $830.
Conservatives usually offer a pro-business rebuttal to an increase. If the government forces businesses to pay their employees more, conservatives say that will lead managers to cut positions and maintain profit margins. This approach is overly simplistic, and upon scrutiny, the position collapses.
It may seem like an increase in the minimum wage cuts into profit margins of businesses, but adherents ignore that consumption drives growth. After the wage increase, minimum wage workers can suddenly afford to buy new clothes, better food and rent better homes. This happens because the poorest members of society almost have to spend their money, because they can’t afford to save. If the most disadvantaged had money to save, poverty would disappear, a fact conservatives discount in every possible policy debate. The added spending goes back into retail stores, grocers, restaurants, gas stations, property managers—the people who employ minimum-wage workers. To argue that raising the minimum wage would slice up profit margins is absurd.
What’s equally absurd are reports from The New York Times that a Domino’s Pizza in New York was requiring immigrant workers to clock in 60 hour weeks while receiving just 45 hours of pay. This astonishing malpractice was ongoing, but the employees claim they were afraid to give up their jobs, as it is difficult to find steady employment these days while simultaneously supporting a family. According to one worker, management told him this practice was necessary for managers to receive bonuses—maybe that’s the same kind of employer opposed to raising the minimum wage. It’s common knowledge that such odious practices occur nationwide. CBS reported 100 workers in 20 cities nationwide participated in a strike on Dec. 5. The Domino’s in question fired 20 striking workers that day.
Practicality is the father of good policy, and practical thinking about economics and morality clearly indicates a minimum wage increase is necessary in 2014. If conservatives wish to oppose a livable income, that’s their prerogative. However, putting their claims about harmful economic consequences to scrutiny is like shattering a glass house. The real reason conservative interests are opposed to the increase is because of human greed, not economics—the president needs to make that clearer in his rhetoric.
Henry Ford didn’t raise his wages because of philanthropy. In 1913 Ford hired 52,000 to maintain a workforce of 14,000. The next year he started paying linemen $5 a day so that the lowest ranking worker could afford a Model-T. Thousands surged into Detroit in 1914, giving rise to the legendary Motor City boom.
$7.25 may be good for greed, but a livable wage—that’s good for business.