Essentially, a low minimum wage adds up to a massive stealth subsidy for corporate America. A recent University of California, Berkeley study reveals that the nation's largest fast-food chains earn $7 billion a year in inflated profits because the rest of us pick up the tab for the food stamps, housing vouchers, tax credits and Medicaid benefits that the businesses refuse to cover by paying adequate wages. Big-box stores get an even sweeter deal. A federal analysis of a Walmart Supercenter in Wisconsin found that safety-net subsidies ran approximately $5,500 per low-wage associate. If that's representative, every Supercenter in America is enjoying a rolling bailout of nearly $1 million a year.
Taxpayer subsidies to the working poor make welfare queens of some of the world's most profitable corporations. "The large restaurant chains, the Walmarts – they hold themselves up as captains of the free-enterprise system," Rep. Miller says, "but their whole business plan is dependent on using the social safety net."
One of the most expensive programs that taxpayers fund is the Earned Income Tax Credit – which doles out $60 billion in welfare payments to poor working parents every year at tax time. The EITC lifts millions out of poverty. But thanks to the inadequacy of the minimum wage, it also creates a perverse incentive. The EITC subsidizes poverty-wage work, so businesses can – and do – drive wages even further below the poverty line.
More than one-third of the EITC is pocketed by employers through artificially low labor costs, according to a Princeton economic analysis. Worse: The EITC actually hurts many single workers without kids, who don't qualify for the subsidy and are made strictly worse off by its existence.
A rising minimum wage is a tide that lifts all ships. This is common sense: If a shift worker gets a raise and is now making what the line manager has earned, the line manager is also going to get a bump in pay. Raise the minimum wage, and the bottom 20 percent of wage earners soon enjoy larger paychecks, says Dube of UMass.
A $10.10 minimum wage would boost the incomes of 27.8 million workers, according to an analysis by the Economic Policy Institute. Far from the image of a teen flipping burgers at Jack in the Box, the median worker who would benefit is a full-time working woman in her thirties, responsible for half of her family's income.
Because these workers spend all the money they make, the $35 billion in extra wages they would earn as $10.10 is phased in would get pumped right back into the U.S. economy – doing far more to stimulate growth than if the same dollars were bloating some billionaire's bank account.
At $10.10, a full-time worker would earn $21,000 a year. If not a living wage, that's at least enough to pull a family of three above the poverty line. According to Dube's math, this boost in wages would drive a 10 percent reduction in poverty – pushing the official poverty rate back down where it was before Bear Stearns.
Skeptics of minimum-wage hikes have long argued that increased wages cost jobs for those who need them the most. As House Speaker John Boehner put it, "When you raise the price of employment, guess what happens? You get less of it." His line is echoed by many of the party's potential 2016 presidential contenders. Texas Sen. Ted Cruz calls it "wrongheaded"; Kentucky Sen. Rand Paul claims it will hurt the "least-skilled people in our society"; and Florida Sen. Marco Rubio declares that "raising the minimum wage does not grow the middle class."
For other Republicans, blocking an increase in the minimum wage isn't radical enough; they argue America must repeal the wage floor altogether. Texas Rep. Joe Barton recently declared that the minimum wage has "outlived its usefulness." In a sign of how far the national GOP has tilted to the extreme right, such outré notions are now being advanced by senators long regarded as moderates. Last June, Lamar Alexander – the GOP's ranking member on the Senate labor committee – announced, "I don't believe" in the minimum wage, insisting that employers should be able to get away with paying $2 an hour.
Such arguments may have intuitive appeal, but in recent years the conventional wisdom has been upended. The minimum wage is the most exhaustively researched subject in economics. Social scientists have scrutinized bordering counties that run along state lines – think Washington and Idaho – measuring what happens when one state boosts its minimum wage and the other doesn't. The results are in: A 2013 meta-analysis of minimum-wage studies by the Center for Economic Policy and Research concludes that higher minimum wages "have no discernible effect on employment." To the degree that mainstream economists still debate the topic, says Dube, it's whether the jobs impact is "fairly small or something close to zero."
Minimum-wage foes – prominently Tyler Cowen, a free-market economist who directs the Koch-funded Mercatus Center – like to point to a controversial 2009 study by University of California, Irvine economist David Neumark, which argues that high minimum wages are disadvantageous to teen job seekers. Yet even Neumark himself does not oppose minimum-wage hikes. "It doesn't mean we shouldn't do it," he said, announcing his study. "If 10 workers lost their jobs but 1,000 families were lifted out of poverty, we'd probably say that was a pretty good trade-off."
The trade-offs of a $10.10 minimum wage came into sharp relief in February, when the CBO projected that such an increase could reduce payrolls by 0.3 percent, or 500,000 jobs. If accurate, that jobs number is nothing to scoff at. But for a sense of perspective, consider that the CBO also estimated that the GOP-led sequester killed 750,000 jobs last year, providing zero benefit to the economy. In contrast, the CBO minimum-wage report calculates that for every disadvantaged job seeker, 33 workers would receive a fatter paycheck. Taken as a group, the nation's low-wage workforce would have an extra $31 billion to spend every year, stimulating the economy. "The bottom line from the CBO report," says Larry Katz, a Harvard economist, "is that for the vast majority of Americans, an increase to $10.10 is a big win."
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