The Opinion Page
Mon February 25, 2013
Op-Ed: It's Time To Raise The Minimum Raise
Originally published on Mon February 25, 2013 1:48 pm
JENNIFER LUDDEN, HOST:
This is TALK OF THE NATION. I'm Jennifer Ludden.
Now, the Opinion Page. It's a no-brainer, that's how secretary - former Secretary of Labor Robert Reich described President Obama's recent proposal to raise the federal minimum wage. The plan would boost minimum pay from 7.25 an hour to $9. In a syndicated column, Reich wrote, a mere $9 an hour translates into about $18,000 a year, still under the poverty line.
We'd like to hear from business owners today. What would a $9 minimum wage meant for your company? We're at 800-989-8255. Our email address is firstname.lastname@example.org. And you can join the conversation at our website. Go to npr.org and click on TALK OF THE NATION. Robert Reich served as labor secretary under President Bill Clinton. He's now professor of public policy at the University of California Berkeley and joins us from a studio there. Welcome back to the program.
ROBERT REICH: Hi, Jennifer. How are you?
LUDDEN: Good. So as you - you'll not be surprise to know not everyone agrees with you on the minimum wage. It's often called a job killer if it were to be increased to $9 an hour. What do you say to that?
REICH: Well, I know that's how a lot of people view it and particularly business people. And that's been their argument every time the minimum wage has been raised. It has been raised consistently, and it has never actually killed jobs. In fact, there has been no relationship between raising the minimum wage and losing jobs.
I remember in 1996, when I was Bill Clinton's secretary of labor, we raised it over the objections of the business community. They said it would be a job killer. We - and instead of killing jobs, actually, we saw a huge increase in the number of jobs. I'm not saying the minimum wage will increase jobs. It's just that, particularly in this environment where you've got so many people who are scraping by, barely able to make it, it is not only economically appropriate but is - it is morally just to do it. We shouldn't have a lot of people who are working below the poverty level full time.
LUDDEN: But '96, you know, that was a different economy than we have today. I mean, some small employers say they are scraping by. You know, there's high unemployment, low inflation. Some people say, well, it might be a good idea, but this just isn't the right time. Couldn't some employers be hurt more now if this were to happen than any other...
REICH: Well, at least - I've heard that too. The answer to them is that when we're talking about very low-wage workers, we're talking about people who are working in restaurants, hotels, hospitals, low-wage jobs that basically are not competing directly with international competitions. Certainly, these jobs are not going to be offshore, the outsourced. They're not even going to be replaced by machines or automated equipment because they have to involve - they involve personal service. And what we see whether the economy is good or bad and - again, we're talking about a very long history, lot of research since the minimum wage was initiated in the 1930s, good economies and bad. What we see is that, basically, small businesses and all businesses tend to simply pass on the wage increase to consumers in the form of very, very small increases, penny increases in prices.
What's good for the economy, though, is that more people will have a chance because they are earning a little bit more to turn around and buy things. And one of the problems the economy now has, particularly now and in every instance where you have a kind of economic downturn, you don't have enough purchasing power. People simply don't have enough money in their pockets. And so the minimum wage increase would put a little bit more money into the pockets of about 15 million Americans who now work between - who are working now at $7 and $25, 25 - $7.25 an hour. And they would see a raise.
LUDDEN: All right. Well, let's bring a business person into the conversation. Colleen in Stamford, Connecticut. Welcome to TALK OF THE NATION.
COLLEEN: Hi. How are you?
COLLEEN: I own a small business, and my problem with raising of the minimum wage, I'm going to have to pass that cost onto my clients. I'm a one-person business with a couple of high school kids, and the second I have to pay them more money, I have to get that from somewhere. So I'm going to have to pass that onto the client. But the cost of living being what it is, it's only going to increase.
LUDDEN: Can I ask what your product is?
COLLEEN: I'm a dog groomer.
LUDDEN: Oh, a dog groomer. So how much then would people have to pay for - would it be the whole - what is it, a $1.30? See, I'm not good at math. About a dollar - a buck and a half an hour or would you only pass on part of that? What do you think?
COLLEEN: The way that I do my sales tax, I build it into the price. So for me, sales tax is already going up, but now we're going to have that on top of it, so it would probably add another two to four dollars.
LUDDEN: Do you think you'd lose customers?
COLLEEN: When I went up a few dollars when we first started getting services that never had a sales tax before, when I first started applying sales tax to services, I lost a few customers then, and people are just having such a hard time that they're not grooming as frequently.
LUDDEN: What about the idea, Colleen, that if people got paid more, they could pay more for other goods and put it back into the economy?
COLLEEN: That would be lovely. But my fear is that it's going to make the cost of everything go up, so people are going to be in the same boat.
LUDDEN: All right. Colleen, thanks so much for the call.
COLLEEN: Thank you.
LUDDEN: Robert Reich, what about, you know, the workers who have minimum wage jobs? We're assuming they don't have a lot of education, probably not a lot of skills. I mean, would they become less competitive for these jobs? Would we see, you know, if you have to pay more for minimum wage, maybe someone else is going to get that job.
REICH: Well, theoretically that certainly is possible, Jennifer. But we know that states that have a minimum wage closer to $9 an hour right now don't have higher rates of unemployment. They don't have more joblessness. They, in some instances, have a lower rate of unemployment than do states and municipalities that are at the federal level of just $7.25. The other thing to keep in mind is the actual value of the minimum wage has been eroding for years, adjusted for inflation. If it had stayed even with inflation since 1968, it would now be $10.56 an hour. So it's not as if we're cranking up the minimum wage higher than it ought to be or it has been in the past. Adjusted for inflation, it actually is lower than it was in the late '60s.
LUDDEN: Thirty percent lower, I think, is what I read somewhere, less buying power.
REICH: Yeah. And that less buying power, again, as with Colleen, it feels initially as if consumers might recoil, but actually consumers need more money. And if you have 15 million people who have more money in their pockets, they can become consumers as well.
LUDDEN: Well, you mentioned if it had been keeping steady with inflation it'd be 10.50 an hour. In USA Today today, Senator Tom Harkin has an op-ed saying that he will soon propose raising it to $10 an hour. He doesn't think the $9 put out there by the president is enough.
REICH: Well, he may be right. I, you know, my personal both assessment of where the economy is and what the wage should be is that we could easily go to $10 an hour without having negative employment effects. You know, Jennifer, some opponents say that the minimum wage recipients are mostly high school kids working for extra money. That's not true. Nearly 90 percent, and this is a study that the Economic Policy Institute did last summer, showing that nearly 90 percent of the recipients of that minimum wage increase are at least 20 years old, more than half work full time, more than a quarter are parents. I mean these are working people not unlike every other working person, and they do need to - it seems to me and I think it is not just economic issue, it is a moral issue. If they're working full time, they should not be in poverty.
LUDDEN: All right. Let's take another phone call. Ryan is in Geneva, New York. Hi there, Ryan.
RYAN: Good afternoon. Thanks for having me. I'm a small business owner. It's my wife, myself, my mother and my brother, and so we're not a huge company. But I'm strongly in favor of having a strong living wage because I feel that if you're so focused on your bottom line, you will negatively impact your - the whole community that you're in. If you're employees can't afford your own product, if you're not going to generate that recurring business and the whole community suffers if everyone is looking at the bottom line; if we're willing embrace, you know, paying people a fair wage for even basic labor, there's an opportunity there.
I mean, for my guys, I would love my guys who are working, you know, $10 an hour jobs, $12 an hour jobs, to one day be able to afford my product. And I believe they can if we focus on building up the community economically, not just one(ph) little section of it.
LUDDEN: So did you just say you pay your workers 10, 12 dollars an hour, along that?
RYAN: Yeah. I won't pay any of my workers less than $12 an hour. I do have seasonal employees and (unintelligible) largely just general labor. But I can't - I want people who can think for themselves. But it's still not rocket science what they do, but I find that if I pay them $12 an hour, even guys who never worked for that wage before take on (unintelligible) responsibility.
LUDDEN: So if you're already going above and beyond the minimum wage, what difference would this make? Would it impact you at all, do you think?
RYAN: I think it actually would positively impact me because I run into a lot of struggling families who - we do energy improvements to homes. And most of the time these families can't qualify for the very small loans that enable our improvements because they just don't have the income. They're struggling in service jobs and they just - they can't get a $3,000 loan to make their home more comfortable and more warm in winter.
LUDDEN: All right. Ryan, thanks for the call.
RYAN: Thank you.
LUDDEN: And let's go now to Phoenix, Arizona. Zoya(ph) in Phoenix, welcome to TALK OF THE NATION.
LUDDEN: Go right ahead.
ZOYA: I wanted to talk about the minimum wage because right now it's 7.80, a dollar in Arizona, just raised. And giving minimum wage, $9, it would be really difficult. I have a really small restaurant. I feel that I won't be able to compete with chains because being small, I can't buy anything in bulk. And then if I start paying my dishwasher $9 an hour, that means I'm going to have raise prices on all my food items. And I really don't think I can compete after that.
LUDDEN: So even if you're paying the same to your workers as they are, there's other things at play and you just - it would be tough.
ZOYA: Yeah. Because chains can pay extra while they can save from, you know, buying big, by, you know, offsetting it in other ways versus a small restaurant. I can't offset that because I don't have storage and other things and whatsoever. So that's my problem, that I wouldn't mind it, but I really wouldn't know how I would go about basing(ph) prices - 50 cents or a dollar an item. They will definitely notice.
LUDDEN: OK. Zoya, thanks for the phone call.
LUDDEN: You're listening to TALK OF THE NATION from NPR News.
Robert Reich, what would you say to Zoya?
REICH: Well, I've heard that claim from small businesses competing with chains a lot, and we heard it in the 1990s when we were pushing for a minimum wage increase even then. One thing we discovered, and it's interesting, is that small businesses competing with chains, when they raised their wages, even are forced to raise their wages because of minimum wage increase, they are also very often, if they can't pass those costs onto consumers, they have to become more efficient. They are pushed to improve productivity, to give their workers more training, to streamline their operations, something that perhaps they should've done all along.
But this kind of makes it - it pushes them to become better. And that productivity improvement spread over the entire economy, because you've got a lot of small business that can become more productive and can train their workers better, is actually a big plus for the economy that's often not talked about when we talk about raising the minimum wage.
LUDDEN: All right. Let's squeeze in one more caller here. Kirk in Tulsa, Oklahoma, how are you?
KIRK: I'm very well. Thanks for taking my call. One industry that's being left out here are service providers who provide home and community-based services to the elderly and to people with disabilities. We have 1,200 employees. And my average employee makes 8.50 an hour. And everything we earn is paid for through Medicaid, to the state legislators(ph). And so one of the things that happens is this increase in minimum wage to 9.50, coupled with the 96 cents(ph) an hour that's come in with the Affordable Care Act, basically means my minimum cost for employee now exceeds what I'm allowed to charge for my services. And because our rates are set through Medicaid, there's no mechanism for me to raise my rates of reimbursed, and so if both of these things happen at the same time, unless the state that we're in decides to raise rates, a whole industry gets just lasered out and disappears.
LUDDEN: Thank you so much. And Robert Reich, that is one of the fastest growing industries in the country. And we all know about budget cutting at the federal level. So it's - wouldn't that be tough...
REICH: Yes, undoubtedly it's hard. And some of those businesses that are involved in health care are getting hit with a double whammy. But by the same token, I think it's important to consider that if people are not being paid a living wage, or they're being paid under the poverty line, we all end up subsidizing them indirectly through welfare payments, through more Medicaid payments, through housing assistance. In other words, there is a public subsidy that is invisible that subsidizes the small businesses and other businesses that are paying people a wage that really keeps them in poverty.
LUDDEN: You know, you said earlier that you don't think that raising the minimum wage to $9 will lead to more people being displaced by technology. But it's amazing the things that we hear technology may be able to do. I mean, you look at the self-pay machines (unintelligible) pharmacist. And I know all kinds of things are in the works for things maybe we can't imagine. You don't think that this would hasten that process?
REICH: I don't think it'll hasten the process because most of the incentives for employers to bring in machinery - automated machinery or digital machinery to replace workers, that only make sense economically if you're paying workers something in the order of 20, 25, $30 an hour or more. At the range of $7.25 to $9 an hour, if it goes up to $9 an hour, the minimum wage, that's not going to be enough economic incentive to pay for the cost of all that new machinery. It just doesn't make that much sense. And again, studies show that the net economic effect on the country, on the economy, of a modest increase in the minimum wage has tended to be positive because more people have more money in their pockets and they can turn around and buy.
LUDDEN: All right. Robert Reich is professor of public policy at the University of California, Berkley. His latest book, "Beyond Outrage," is out now in paperback. He joined us today from a studio in Berkley. Thank you so much.
REICH: Well, thank you, Jennifer.
LUDDEN: Tomorrow, Dexter Filkins joins us to talk about Hezbollah in Syria's civil war. Join us for that. This is TALK OF THE NATION from NPR News. I'm Jennifer Ludden in Washington. Transcript provided by NPR, Copyright NPR.