Separating Fact from Opinion, a Messy Divorce

Separating Truth from Fiction

        I noted Face Book comments on the recent US House passage of a $15 minimum wage bill, which sadly probably won’t clear the Senate. As expected, several Face Book “experts” simply parroted the traditional natterings of the far Right regarding the effects overall, one in specifically general said “Many companies ….   Layoffs, cutting hours, reducing staff, etc.” 

      Being the data driven kind of guy I am, I wondered. Ever wonder? I do. In this case I wondered if “many companies” was anywhere close to accurate. I also wondered if the real experts, the Bureau of labor Statistics had numbers which might be useful. They do. Although the most recent widespread analysis is from 2017.

       To begin with, “Many Companies” implies that more than not would be faced with increasing pay to many workers. The truth is harder to find. For example, Amazon will be paying $15 with or without a law requiring it. Moreover, no US Auto industry pays lower than $15 for entry level assemblers. Even a custodian at GM earns $19 hourly with cash bonuses and health insurance, 401K etc. The vast number of businesses currently paying under that minimum are small businesses or service industry concerns.

        In 2017, 80.4 million workers age 16 and older in the United States were paid at hourly rates, representing 58.3 percent of all wage and salary workers. Among those paid by the hour, 542,000 workers earned exactly the prevailing federal minimum wage of $7.25 per hour. About 1.3 million had wages below the federal minimum. Together, these 1.8 million workers with wages at or below the federal minimum made up 2.3 percent of all hourly paid workers.

       The percentage of hourly paid workers earning the prevailing federal minimum wage or less declined from 2.7 percent in 2016 to 2.3 percent in 2017. This remains well below the percentage of 13.4 (!) recorded in 1979, when data were first collected on a regular basis.

       Ok, so what can we learn from the data?  Using 2017 numbers, it is actually quite a lot and very compelling. First, some baseline numbers: A two earner family with two children is below the federal poverty guideline if their annual income is less than $25,100. At $7.25 hourly (2017 minimum wage), they will bring in $29,000 if both work 50 weeks and neither gets sick.

        At that wage level they will still be eligible for an additional $640 MONTHLY in food stamps. While the number fluctuates wildly over the nation, simply using a state I could find readily (Montana) this family of four would also qualify for Medicaid! It is impossible to “dollarize” the cost of that since it varies widely. $640 monthly in food stamps, however, is easy to turn into mathematical reasoning. Ready? Here goes.

       $640 for the household is exactly $2 per hour for both wage earners working a 40-hour week.  One more time: take the $7.25 minimum hourly wage, add the $2 represented by the value of food stamps and bingo, you’re at $9.75 hourly. That’s $640 dollars of taxpayer money that the family would neither need nor receive if they earned even $10.00 per hour. Here’s the revelation: Just to keep up with inflation, it should be $14.11! Remain calm, don’t panic, grab your towels, I’ll explain in simple terms later.

       

       At just $10 hourly, this same family earns (again both working 40 hours, 50 weeks) right at $40,000 annually. No Medicare, no food stamps, both of which are taxpayer dollars.

        It seems to me simply snotty, elitist and, too frequently, racist, to sneer at a minimum wage worker (or anyone) who does their job to the best of their ability because you don’t value their work.

       To recap, there are about 80 million hourly workers in the USA. Only 2.3% of them are at or below the minimum wage. Raising all those to a $15 minimum would cost .35 % of the cost of the $5 billion, unnecessary “Wall.” Even more to the point, it would cost a mere .07% of what Trump’s tariffs have cost us in Farm assistance so far.

        So, when the Far rightists whine about a $15 minimum wage, process this. Most industries have relatively few minimum wage positions. Many have almost none. Service industries have the most and many of those individuals also get tips. Sadly, fast food isn’t one of those. If you denigrate the effort or worthiness of the person who provides you fast food, there’s an old Navy term for that – "asshole.”   

        Not unexpectedly, this drew a response - not just from the two "experts" who opined that:

 1) “minimum wage was not “meant to be” a living wage.”  This is to me remarkable, since the history of legislation creating it during the great depression states: “The purpose of the minimum wage was to stabilize the post-depression economy and protect the workers in the labor force. The minimum wage was designed to create a minimum standard of living to protect the health and well-being of employees!”   

Or: 2) that “… Many companies will cut hours and cut payroll because they can't survive this stupid democratic initiative!” (This from an individual who, I found out from a Linked-In page, makes $35 hourly. I’m assuming $70k brings with it deep insight into the world of minimum wage, because it surely displays gross ignorance of economics.

      Instead the "new" response seemed to imply that raising the minimum wage to $15 was a waste of time because a single minimum wage earner “Can’t afford to live in San Francisco.” He added “and there is the disconnect!”

       After a moment of internalized “WTF?” I responded. Curiously enough, the person offering this opinion lives in semi-rural Maryland, not CA, hence my reaction. Since figures are my friends, I decided to introduce them to this young person as follows:

        “Then don't live in San Francisco. (you don't) Simple, huh? And by the way, the median income in Carroll County, Md. (where you DO live) is $36,900 per capita. Meanwhile in San Fran the median household income is $96,265. Citing San Francisco or Seattle on a broad national economic issue is a fool's errand. A median 1 bedroom apartment rental in SF is $3700/month ($44,400 annually!) In Westminster (note: small town semi-rural Md, where this person lives) I just found any number of almost new 2 BR rentals at right around $1100 monthly, and one BR under $900. You are comparing apples to oranges.

        By your logic, we should not let anyone, anywhere,  make a living wage because SF is expensive. The same wage in Westminster would have that family off food stamps, off Medicaid, able to buy health insurance and not using social services. We should, per your (il)logic, just not do anything because we can't do everything. If one can't afford to live in downtown Manhattan, one shouldn't. What exactly is the mystery about that? There is no "disconnect" other than in your reasoning.”

        The factors which increase the cost of living are prices of goods and services which includes all businesses, undifferentiated by size. In other words: “The increases in fees, prices and costs levied by small business are, overall, just as significant a factor in the CPI increase year to year as are the prices of cars.”

         So, what is this CPI you speak of, Obi Wan? Well, Luke, The Consumer Price Index, or CPI, is calculated by dividing the price of a specified and generally unchanged, year to year, “basket” (list, sampling,) of goods and services in a given year by the price of the same basket in the base year. This ratio is then multiplied by 100, which results in the Consumer Price Index.  In plain speak, if the basket costs $100 in the base year and $105 in base year plus 1, the CPI in the next year is 105 which equates to a 5% increase in the cost of living in that year. 

        Now that we have that squared away, and working under the assumption that the Federal minimum wage was (it was) designed to support  and produce a minimum standard of living, then several things are also true:

1) Unindexed (tied to) to the annual cost of living increase (it isn’t), the minimum wage can (it has) “lose ground” due to inflation, eroding the intent of the original legislation. How badly? Read on.

2) From 1965 to 2019, the hourly federal minimum wage has been increased sporadically (almost always opposed by the Right) from $1.75 in ’65, to $7.25, today. This is an increase by a factor of 4.14.

3)  Over the same time span (1965-2019) the cost of living (as shown by the consumer price index) has increased from 31.2 (1965) to 251.7 (2019). These are indisputable numbers, not guesses.

4) based on those numbers, the true “cost of living” has increased by a factor of 8.067. This means that if the federal minimum wage had simply been indexed to the cost of living, which it WAS designed to cover, (you know like Social Security, Military retirement, etc.?)  the current minimum wage would be $14.11 per hour! And the rest of the issue would more than likely be moot. 

       This, then, is the reality of the situation. Congressional inactivity, influenced by tightfisted and unconcerned people like Donald Trump, who has a well-documented history of stiffing employees, has led to a steady erosion of the efficacy and purchasing power of a federal  minimum wage. As an aside, Trump's Mar A Lago announced that, in the coming season, cooks will be paid $13.31 per hour compared to the $13.34 they received last year. Servers would see an increase of 80 cents per hour from $11.33 to $12.68 but will not receive tips. A pay cut in the "greatest economy ever?" What else would we expect?  Some states, recognizing this have enacted higher state minimum wages. This isn’t being “generous;” it’s just being fair.