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Raise the Minimum Wage—But Don’t Stop There

Amy Traub

In today’s New York Times, Paul Krugman takes on the plight of low-wage retail and fast food workers, who have seen their real wages fall almost 30 percent since 1973 even as this sector has become a larger part of our economy. During a season when Americans flood the stores for holiday shopping, Krugman asks whether anything can be done for low-wage retail and restaurant employees. Noting that many retail and fast food workers earn so little that they must rely on public assistance to supplement their wages, Krugman concludes:

Yes. We can preserve and expand food stamps, not slash the program the way Republicans want. We can make health reform work, despite right-wing efforts to undermine the program. And we can raise the minimum wage.

Krugman’s policy advice is excellent: he cites the substantial economic evidence showing that increasing the minimum wage has little or no negative influence on employment, even as it does significantly boost employee earnings. He notes that 30 million American workers—and their families—would benefit from a federal minimum wage hike to $10.10 an hour.  And he points out that increasing the Earned Income Tax Credit would complement a minimum wage hike, but cannot substitute for it. Finally, Krugman notes, raising the minimum is a policy that just might make it through Congress, given that majorities of Republicans and self-identified conservatives join Independents and Democrats in supporting a higher minimum wage.

It is vitally important that we raise the minimum wage as soon as we can. In fact, we should make sure to raise the minimum wage for tipped workers as well and to index both to inflation. The efforts to strengthen the safety net and boost the Earned Income Tax Credit are important as well. And Congress must extend federal unemployment insurance benefits so people who can’t even land low-paid work are not thrown to the wolves. But that’s still only part of the story.

The other part is what workers themselves are calling for, as they take to the picket lines and flood the streets this holiday season – not just legislation from the government but action by their employers to stop illegal intimidation and harassment of their workers and provide raises. It’s not just about government policy, but about people organizing to get a better deal in their own jobs.  

The distinction is important for several reasons. First, highly profitable employers like Walmart and McDonalds should not be permitted to hide behind policymakers, insisting that they’ll raise wages when the law obliges them to. As Demos has argued in the case of Walmart and other large retailers, these companies can afford to increase wages – and would actually see benefits from doing so – but have made a business decision to stick with the low-wage model. In the long tradition of the American labor movement, workers are standing up to demand a different business decision. In the case of fast food workers, the call is explicitly for not just a wage hike but for recognition of a union and steps toward bargaining a contract.

Another distinction is the one between charity and solidarity. We may care about retail and fast food workers because, as Krugman suggests, the holiday season is traditionally a time to “reflect on the plight of those less fortunate than oneself.” But we can also consider the impact of raising pay for low-wage workers on our economy as a whole and our own fates in the working world. As Catherine Ruetschlin and I argued in our recent brief on Walmart:

The reality is that families living in or near  poverty spend close to 100 percent of their  income just to meet their basic needs, so when they receive an extra dollar in pay, they spend it on goods or services that were out of reach before. This ongoing unmet need makes low-income households more likely to spend new earnings immediately—channeling any addition to their income right back into the economy, creating growth and jobs.

Raising pay for low-wage workers improves the economy for all of us, whether we feel charitably inclined or not.  And when low-wage workers stand up to demand a better deal, the answer is not just an increase in the minimum wage and strengthening of the safety net, but respect for workers’ own efforts to get a better deal from their employers.