Thursday, July 24, 2014

Minimum wage hike won’t kill jobs

By Bob Schelen

It has been the same old story since the advent of the minimum wage: “I cannot pay my workers a fair wage because prices will go up and then there will be job losses.”

And it has never been true.

In fact, enlightened employers of the 20th century wanted to pay their workers a fair wage. They knew their workers were the people who were going to buy their products.

“If you cut wages, you cut the number of your own customers. If an employer does not share prosperity with those who make him prosperous, then pretty soon there will be no prosperity to share. We like to have plenty of customers.” That was Henry Ford explaining why he doubled wages in the midst of 1914′s deep recession.

It was because of this attitude toward wages that we saw the strongest middle class in history become established in the mid-20th century.

Many studies support Ford’s logic. In fact, a 2011 study by UC Berkeley found that San Francisco’s minimum-wage law did not kill jobs in the low-wage sector. Studies by Chicago’s Federal Reserve Bank, the Economic Policy Institute and New Mexico’s Bureau of Business and Economic Research (Santa Fe has a local minimum-wage law), among others, demonstrate that increases in the minimum wage immediately stimulate consumer spending and economic growth in large amounts.

When San Jose enacted a measure that set the minimum wage at $10 per hour, many naysayers feared the worst. But a 2012 UC Berkeley study found that the increase would stimulate the local economy by injecting more money and attracting better workers and would cause no job losses. The price increases passed on to consumers, like 25 cents on a $30 restaurant meal, would be minuscule.

Studies also show that the wage increase benefits employers, too, because workers stay in their jobs longer, reducing turnover and training expenses for their employers.

It is also false that low-wage jobs are only entry-level positions for teenagers to enter the workplace. In fact, the typical minimum-wage worker is an adult white woman who is often a single parent whose family relies on her paycheck.

California is experiencing the largest income gap between high- and low-end wage earners in the past 30 years. Those working at the lower rungs of the societal ladder are struggling with the rising costs of services and goods. The rising tide has not lifted all boats.

California’s minimum wage is less than the minimum wage workers earned in 1979, when adjusted for inflation. For the state to fully recover, this has to change.

Opponents of a minimum wage hike contend that it is bad for business in a time when the economic environment is harsh. Ironically enough, Congress found that it was in the best interest of commerce when it established minimum wage during the Great Depression with the Fair Labor Standards Act of 1938.

Raising the minimum wage would put more money in the pockets of workers struggling to provide food, clothes and housing for their families. This, in turn, would generate consumer spending and give a much-needed boost to the economy.

Still others argue that now is just not the time. Yet, 10 states have minimum wages that increase with the Consumer Price Index. In fact, six other states and the nation’s capital have minimum wages above $8 (the minimum wage in California today).

Assembly Bill 10 raises the minimum wage to $9.25 a hour by 2016 and then ties it to cost of living adjustments. It is a modest measure that is a matter of economic equity.

It is also the right thing to do.

— Bob Schelen is a longtime Davis resident who chairs the Yolo County Democratic Party.

Special to The Enterprise


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