Waging the War on Economic Inequality

According to a recent article published in the “New York Times,” the “growing populism among voters in both parties” presents a perfect opportunity for Democrats to push for an increase in federal and state minimum wages. Democrats have also, however, been accused of only bringing up the long-contended issue of minimum wage in order to use it as a way to evade repercussions following the botched rollout of the Affordable Care Act. Nevertheless, Republicans and Democrats who disagree with an increase in wages should keep in mind that this move, although a clever political maneuver, is a manageable and bipartisan opportunity to raise the living standards of those on minimum wage, and should be considered accordingly. Historically, the minimum wage in the United States has been on the rise since 1956, when it was $1.00. Economists have attempted to empirically establish a correlation between an increase in minimum wage and effects upon the economy in areas including unemployment, poverty and market elasticity. Their attempts have so far proven largely unsuccessful, making it easy to claim that higher wage rates do not have a substantial effect on the market. Still, it is impossible to deny that the apparent difference in value between $1.00 and $7.25, when adjusted for inflation, changes. At a constant 1956 dollar value, $1.00 to $7.25 is really $5.77 to $4.87—a 90-cent overall decrease in 57 years. Granted, certain points in US history, especially during the 1960s and 1970s, showed fairly high rates, the living standard of today’s worker in the service industry is harsh. For example, the rate in 1968 was $7.21 and boasted a 3.7 percent unemployment rate compared to today’s 7 percent. We have seen over the years that an increase in minimum wage frequently fails to produce the disastrous effects that many have alleged. In fact, proponents claim that a higher minimum wage—today, the White House targets a federal minimum at $10.10—stimulates the economy by putting more money in the hands of the working class to increase the standard of living, thereby decreasing poverty and closing the gap of economic inequality. If the government does decide to raise the minimum wage by enough to tie it proportionately to inflation and the rising costs of living, then perhaps the minimum wage will do its job. Currently, the U.S. minimum wage is ranked as the 11th highest minimum hourly wage rate, behind countries such as: Australia ($16.88), Luxembourg ($14.24), Monaco ($12.69), France ($12.09) and Japan ($8.32). Although comparing these nations with the United States on such a macroscopic scale causes the effect of minimum wage to become less evident, the general welfare of their citizens who depend on these wages is still protected. Germany and Denmark, for example, don’t have federal minimum wages but rather rely upon a strategy called “collective bargaining,” secure much higher wages for its workers, negotiating minimums of $14.15 and $20.00 per hour. Both also have lower unemployment rates than the European Union’s average of 10.29 percent, 5.2 percent and 6.7 percent respectively, and lower poverty rates, 4 percent and 5 percent respectively (compared to EU’s average of 5.6 percent).   In addition to all of this, there is one defining factor that sets the argument for minimum wage apart from countless other partisan political debates—namely, that it may actually prove possible despite our polarized political system. Gallup Poll records that 71 percent of U.S. adults support an increase in the federal minimum wage. Opposed to a split Republican mindset, a majority of Democrats (91 percent) and Independents (68 percent) support a bill for increased minimum wage, as outlined in Obama’s 2013 State of the Union Address. This implies that even though this plan looks like a move by Democrats to garner votes in 2014, it carries true potential to succeed as a bipartisan solution. This year, 13 states raised their wage floors above the federal $7.25 rate, including New Jersey, a traditionally blue state ($8.25), and Arizona, a red state ($7.90). The Economic Policy Institute estimated that these increases will bring a $2.5 million increase in the incomes of low-wage workers. The heart of this push, indeed, lies in the working class. As Democrat Rick Weiland from South Dakota, who is running for Senate in 2014, said, “When you start talking about earning a dollar more an hour it means something to them, regardless of their party.” At the end of the day, the US is looking at an American issue. The President, Congress and voters should not only see this as a political opportunity, but also one of principle. For both parties, this should be more about combatting poverty as well as securing decent living standards, which cannot be achieved with a minimum wage of $7.25 per hour. Here lies a chance to address a major factor of economic inequality, which President Obama calls “the defining challenge of our time.” Democrats and Republicans who believe that the end-goal of this agenda is to put Republicans “on the wrong side of an important value issue when it comes to fairness” need to lose the brinkmanship mindset and focus on the issue at hand. Coupled with universal lower health care coverage through Obamacare, we can begin closing the gap of inequality in this new year by guaranteeing higher standards of living for those working for minimum wage.