Raising the Minimum Wage — The Right Way

Ever since President Obama took office I’ve periodically wished I had the ability to call the White House get him on the phone and say “Hey, you’re not doing it right!”  Let me be clear—I don’t mean he hasn’t done the right thing—just that he’s too often done the right thing the wrong way.

For example, like many economists and advocates for working families, including Paul Krugman and Robert Reich, I thought the President’s economic stimulus package was way long on help for the “Too Big to Fail” banks and other Wall Street institutions and way short on dollars for infrastructure projects, support for education and job training, and other programs that would have helped the working families who inhabit the nation’s Main Streets.

Same thing with health care reform.  Yes, it needed to be done. But he did it wrong.  Instead of a system that guarantees health insurers millions of new customers, does little to rein-in costs, and gives anti-reform advocates the ammo they need to scare small and medium sized businesses into opposing the plan, he could have done something simple: Medicare for all, or at least for all of us over the age of 55. Not only would this approach have made Medicare solvent by bringing younger, healthier people into the system, it would have given the government immense power to negotiate lower costs with providers.

Unfortunately, the same principle applies to the President’s proposed minimum wage increase.  It’s the right thing to do, but nine dollars an hour? Really?  At least in this instance Mr. Obama’s not alone in being wrong.  Predictably, the Republicans and their bosses in the business community, led by the U.S. Chamber of Commerce, the National Federation of Independent Business, and the National Restaurant Association, became apoplectic seconds after the words “raise the minimum wage” rolled off the President’s tongue during the State of the Union address.

Their reaction was as predictable as the specious claims they make about the cataclysmic effect giving the folks at the bottom of the economic ladder a boost will have on the economy.  Business leaders wail and gnash their teeth any and every time raising the minimum wage is proposed, including back in 2006 when labor led the successful effort to win voter approval of an Ohio Constitutional amendment that both raised the wage and indexed it to inflation.

The fact that their dire prognostications have never come to pass—last time I checked people are still doing business in Ohio despite the onerous burden of having to pay workers a whopping $7.85 an hour, and Costco is thriving despite paying starting employees more than $10 an hour –apparently doesn’t matter to them or to the members of the media who give their ludicrous contentions credence by repeating them.

Unfortunately, President Obama’s proposal was every bit as predictable in nature and scope as the arguments against it.  Raising the minimum wage $1.75 is fine as far as it goes—which isn’t far enough.  Had the President and his advisors really given the issue some thought they could have crafted a plan that would have both insulated the administration from criticism and gone a long way toward addressing the income inequality that plagues the working class and the middle class and has the U.S. economy stuck in neutral.

Here’s the deal.  Part A:  raise the minimum wage to $9 per hour for the vast majority of employers.  Their protestations to the contrary, it won’t bankrupt them or force them to cut jobs.  Especially when they begin ringing up the additional sales Part B of the plan generates: raising the wage to $15 per hour for full time and $11 per hour for part-time workers employed by the nation’s largest companies.

There’s little doubt that companies like Wal-Mart will attempt to avoid paying the higher wage by eliminating full-time employees or turning to temp services for workers.  To stop them, the law must include provisions that prevent employers from moving workers from full-time to part-time status and that classify temps as employees of the corporation using them.  Those two provisions would help ensure that companies comply with the letter and spirit of the law.

Which firms would qualify as “large” under the plan?  Those that directly employ 100,000 or more and average 80 workers per location.  Under this definition franchise operations like McDonalds and most other fast food chains would be exempt.  In addition, the increase would have little or no impact on large employers like IBM, UPS, FedEx and others who already pay above the proposed new minimum.

The plan would affect retailers like Wal-Mart, Target, Macy’s, Kroger’s, Home Depot, and Lowe’s along with America’s biggest banks—the folks responsible for the 2008 economic implosion would.  (Here’s an important side note: although most people equate low wages with retail, bank employees are grossly underpaid, and financial institutions are infamous for aggressively opposing union organizing drives.)

Using Wal-Mart as an example and assuming that 40% of the company’s 2.1 million workers are full time, their aggregate annual wages would climb from $17.4 billion to $26.2 billion.  Annual wages for the retail giant’s 1.2 million part-timers would jump by nearly $5 billion, from $12.5 billion to $17.2 billion.  In all, the increases would pump an additional $14 billion into the hands of Wal-Mart workers every year.

Imagine the staggeringly positive impact this one policy would have on the economy when the wages of the more than 3.5 million people who work for America’s other large corporations are factored in.  Billions of dollars will be spent on homes, cars, clothes, food, dining out, movies, electronics, and other goods.  People who now live paycheck to paycheck will actually be able to save and plan for the future. In short, millions of working families will have an opportunity to grab a piece of what has become a fading American Dream.

The increases would also help reduce the deficit—something Republicans should love.  Higher wages will generate more income and sales tax revenue.  As salaries rise, so will the flow of dollars into Social Security and Medicare, especially when tens of thousands of workers are no longer eligible for the Earned Income Tax Credit because they’re earning a living wage.  Finally, government spending will fall because the legions of low-wage workers at Wal-Mart and other firms that now receive government benefits will no longer need them.

But instead of a bold plan that could end decades of wage stagnation, we get a small across-the- board increase that simply won’t get the job done.  Someone get me the number for the White House.  I need to call Barack and tell him he’s doing the right thing the wrong way.

Again.

Leo Jennings

Will Ohio Democrats Sell Out Workers Again?

The State of Ohio provides several forms of public assistance, including Medicaid, food stamps, and cash assistance through the Ohio Works First Program.  Medicaid is the largest line item in the Ohio budget. Through these direct supports to low-wage workers, the state also indirectly subsidizes employers.  They can get away with paying low wages or not providing health insurance because they know that workers can turn to the state. Some even help their workers sign up for state assistance.  The biggest recipient of this form of corporate welfare in Ohio is Wal-Mart. According to the Ohio Depart of Jobs and Family Services, 15,000 Ohio employees receive Medicaid and 12,000 receive food bank assistance. In 2009, this amounted to an estimated $67 million subsidy.  That makes Wal-Mart the biggest “welfare queen” in Ohio.

Over the last four years, Ohio Governor Ted Strickland administratively required the Department of Jobs and Family Services to report on how much the State was subsidizing various corporations. The Republicans who now control the Ohio House, Senate, and statewide offices, including Governor, won’t continue that practice.

Knowing that this would happen, State Representative Bob Hagan (D-Youngstown) attempted to codify the practice by introducing legislation that would have required companies with 50 or more employees to report how many receive public assistance.  During the lame duck session in December 2010, the legislation made it out of the House State Government Committee and to the House floor.  With Republicans controlling the Ohio Senate, it had little chance of passing, but its journey through the House is a reflection of the disconnect between Ohio Democrats and their core constituencies.

The bill barely got enough votes in Hagan’s Comittee, and even though Committee support reflected party affiliations, when it reached the Democratic caucus,  three Representatives refused to support it because they feared offending the Ohio Chamber of Commerce, the National Federation of Independent Business, and the Ohio Manufacturing Association. Democratic party operatives reported that one Democrat Representative, Josh O’Farrell, who had just lost a reelection race, said that he wanted the Chamber of Commerce support should he run for election in the future.  The Chamber had taken no position in his race in the 2010 election.  Another Democrat, Representative John Carney, spoke against it in the Democrat Caucus and walked off the floor just prior to vote – a move referred to as “going to the duck pond.”  Democrat Representative Stephen Slesnick said the bill was anti-business and refused to vote for it.  That Ohio Democrats sold out on a bill that merely required that the public be informed of indirect state subsidies to corporations, a bill they knew had no chance of passing, did not surprise many in the Democratic base.

Given the debacle of health care reform, inaction on the Employee Free Choice Act, and the Wall Street bailout, it is easy to understand why Democratic voters simply did not show up in the November election in Ohio and elsewhere.  With confidence in Democrats at such a low point, many agree with Paul Krugman and Robin Wells who have suggested in a recent article in the New York Review of Books, it is only a matter of time until that the Democrats will ultimately sell out on social security.  Many Ohio public sector workers now feel the same way, as the attack on the public sector grows.

The base has little hope that they can count on Democrats to fight against the mounting attack on public employees.  Around the country, Republicans are going after public sector pensions and bargaining laws, taking aim at workers who often earn less than their private sector counterparts, heaping scorn on hard-working men and women who fight fires, care for the elderly, and teach our children.   If they don’t stand up for these workers, Democrats will be walking away from their base. According to the Economic Policy Institute, public sector workers are more likely to be female and black than are workers in the private sector, and they are also more likely to belong to unions.

Even as they seek to cut public sector jobs and benefits to those workers who will remain, Republicans tout their job creation initiatives, many of which amount to corporate welfare.  It’s easier to blame public sector workers – women and people of color, after all — for draining state budgets than take responsibility for the results of tax breaks to corporations and tax cuts to state residents.

We need our Democratic representatives to fight for Ohio’s workers.  But facing worries over their own re-elections and the endless challenge of raising money to fund campaigns, Ohio Democrats find themselves confused and disoriented.  Those who do speak out feel as if they’re in an echo chamber in Columbus, talking to themselves. Without leadership and/or a coherent plan, they are doomed to irrelevance.  And did I mention the looming battle over redistricting, a process that will shape the state’s political future for the next decade?

What should the Ohio Democrats do?  First, when the Republicans propose cuts to primary, secondary, and higher education, the Democrats need to formulate ballot initiatives and use the referendum process to roll them back. If Republicans attempt to undermine state bargaining laws or prevailing wage rules, or if they try to enact “right to work” laws, Democrats should take the issues directly to the voters.  No matter what the Republicans do, Democrats must fight back – not for the sake of fighting but to defend Ohio’s workers and their families.

This strategy has several advantages.  First, ballot issues have the ability to inspire and motivate constituent groups, especially the Democrat base who could become even more dispirited as Democrats lose vote after vote in the legislature.  They provide a way to get the message out, to mobilize and engage community and labor groups.  By going to the voters, Democrats can step outside the Columbus echo chamber. People will listen to the debates that accompany ballot initiatives and the referendum process.

Furthermore, Democrats will be able to raise money and organize around ballot issues. If they can propose the right issues and demonstrate their willingness and ability to fight for them, progressive funders will respond, because they want to prove that the voters aren’t “working-class idiots” who want to dismantle the government.

Best of all, going directly to voters does more than demonstrate commitment or inspire support.  They can work.  Just look at the coalition that came together to enact the minimum wage amendment in Ohio last year.  The odds don’t look good, but if they are willing to fight, Ohio’s Democrats have a chance to regain the support of workers.

John Russo, Center for Working-Class Studies