One of the arguments against raising the minimum wage is that businesses must choose whether to lay employees off or pass the additional cost on to consumers. Neither alternative is palatable.
However, that argument neglects some inconvenient facts. The price of goods and services — the cost of living — goes up regardless of the minimum wage. How much were you paying for a hamburger in 2006? Chances are, the price has climbed more than the minimum wage, which hasn’t changed in Arkansas since then.
Another argument is that the minimum wage affects mostly people in entry-level, low-skilled jobs. That may be true in many cases, but it also affects single parents, workers who have been laid off from other jobs and older people who found a need to re-enter the job market.
These may have been entry-level jobs at one time, but the Recession wiped out many of the next-tier jobs, as acknowledged by a high-level Walmart executive in a March interview with The Associated Press. The resulting bottleneck is widening the gap between the richest Americans and everyone else.
“Some people took those jobs because they were the only ones available and haven’t been able to figure out how to move out of that,” Bill Simon, CEO of Walmart U.S., said.
Many businesses keep costs low by holding workers to the minimum wage and offering few, if any, benefits. If the government didn’t raise the rate occasionally, it probably wouldn’t be much above the 75 cents an hour established as the federal minimum in 1955.
On the other hand, Congress, which must approve each federal minimum wage increase, in 1989 established an automatic cost-of-living adjustment for itself. Every year, absent action to stop it, lawmakers get a raise. Although they have declined the last five, they have accepted the raise 13 times since 1989 — three times since 2006. Next year’s raise could be $2,800.
If the cost of living goes up in a free-market economy, all wages should go up. But in slow economic times the employees at the bottom and middle of the wage scale suffer the most because of layoffs and wage freezes. While the most recent recession resulted in a high unemployment rate, chief executive compensation reached extraordinary heights in 2012, according to the Economic Policy Institute, a nonpartisan, nonprofit organization.
Further, a 2013 EPI study showed that the growth of CEO and executive compensation overall was a major factor in doubling the income shares of the top 1 percent from 1979 to 2007.
Certainly, some executives are worth what they are paid, but let’s don’t pretend that only minimum wage employees are driving cost increases. You could hire a lot of counter help for the $13.8 million McDonald’s CEO received in 2013. And that’s way down from the $27.7 million his predecessor was paid the previous year (including a hefty retirement package).
The minimum wage has become an important issue in this year’s elections, not only because national Democratic leaders are pushing for an increase in the federal rate but also because an initiative to raise the state minimum may be on Arkansas ballots.
An organization calling itself Give Arkansas A Raise Now is proposing a ballot issue that would raise the state’s minimum wage from $6.25 an hour to $8.50. The group must gather 62,507 voter signatures by July 7.
A Talk Business-Hendrix College poll of 1,000 likely voters indicates the measure would pass easily. About 79 percent of those responding, including two-thirds of Republicans, said they would favor it.
A people’s initiative is necessary because the Legislature has twice bottled up bills proposing increases in recent years, one sponsored last year by state Rep. Butch Wilkins, D-Bono, which died in committee.
The Legislature raised the state’s minimum wage from $5.15 to $6.25 in 2006 but only after a similar organization started working on a ballot initiative. That put Arkansas above the federal minimum of $5.15, but only until 2008. The federal minimum is now $7.25, and Democrats want to hike it to at least $10 a hour.
Generally, small businesses (with less than $500,000 in revenue annually) that don’t engage in interstate commerce can use the lower state rate.
The national Democrats’ proposed increase is too ambitious, but the Arkansas initiative is more reasonable. If approved, the rate would go up to $7.50 next Jan. 1, then $8 a year later and $8.50 in 2017.
Those who believe that raising the minimum wage is bad for business should study the case of San Jose, Calif., whose voters approved an increase to $10.15 an hour in a November 2012 ballot initiative.
The Wall Street Journal reported last month that hiring of fast-food workers in the region slowed in the early months after the vote but then accelerated last year. The San Jose Mercury News said that unemployment in the metro area dropped by almost two points from February to December (to 5.8 percent) and that the city registered 9,000 new businesses last year.
Arkansas isn’t on the way to San Jose, but putting more money in the hands of people likely to spend it surely can boost the economy.
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Roy Ockert is editor emeritus of The Jonesboro Sun. He may be reached by email at email@example.com.