Blog For Iowa

Here is a brief video from Iowa Citizens for Community Improvement (ICCI) concerning the move for a minimum wage of $15 per hour in Polk County.

$15 an hour works out to slightly over $30,000 per year before taxes for a full time worker. This wage does not buy a lavish lifestyle, but in Iowa it does pay for the dignity of a person being able to pay their own way in this society. When you do the math, this is about $2,500 a month before taxes. When you try to stretch that $2,500 to cover taxes, a place to live, food, health insurance (probably at least a partial payment even if supplied by the employer), personal care items, a car to get to work, gas and car maintenance and car insurance it is really tough. There is no room for an emergency in that budget.

ICCI is organizing an event as the Polk County supervisors consider following other progressive counties across the country in raising minimum wages.

Many frame a raise in minimum wage as an issue that is bad for business. Republicans have made claims for decades that any rise in minimum wage drives small businesses out. There has never been any substantiation of those claims. In fact those claims have been refuted over and over and over again in study after study. In a presentation before the New York Wage Board, Billionaire Nick Hanauer refutes these claims with fresh evidence from his own observations:

“When wages go up, employment goes down.” This so-called “theory” is presented by industry and the economists we employ, as if it is an immutable law of physics describing the real world. The focus of my testimony this morning is to show that it is not.
It’s not just that this claim isn’t always true. Or that it isn’t even usually true. It’s more or less never true. The claim that when wages rise, employment shrinks does not describe how the real world works. It is a scam and an intimidation tactic. The only thing true about this claim is that if business owners like me can get workers to believe it is true, that will be very advantageous to business owners like me. Which is why we say it again and again and again, even though it’s not true. It is really just a polite way of saying “I am rich, you are poor. I prefer to keep it that way.” Saying that if wages go up, the economic sky will fall is what I call “Chicken Little Economics.”

According to the U.S. Department of Labor, “a review of 64 studies on minimum wage increases found no discernible effect on employment.” And contrary to popular belief, relatively large minimum-wage hikes like those recently passed in Seattle, San Francisco, and Los Angeles are not unprecedented. For example, the federal minimum wage jumped 88% in one year, from 40 cents an hour in 1949 to 75 cents in 1950. Yet despite the usual warning from the Chicken Littles at the National Association of Manufacturing that the hike would prove “a reckless jolt to the economic system,” unemployment plummeted, from 5.9% in 1949 to 2.9% in 1953.

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Here’s how that thinking goes. I’ll run my business and pay poverty wages and make high profits. And hopefully, everyone else who runs a businesses will pay their workers well. Your workers have the money to buy what my company makes. But, sadly, my workers will not be able to reciprocate and buy the products your company makes. Your workers will pay taxes. Sadly, my workers won’t be able to afford taxes. In fact, they will need taxpayer-funded services like food stamps and Medicaid that your workers’ taxes will pay for.

So I ask you: who wouldn’t want that deal? But the problem with that deal is that it is both morally questionable and economically unsustainable. It’s what we call a free rider problem. Because while it is awesome if I can get you to go along with that deal, it won’t work out if everyone gets that deal. Because if every company owner paid every worker poverty wages, then who will buy the stuff? And who will pay the taxes?

Hanauer lays out in a very simple way what most economists understand – that to stay in business, a business needs customers. If workers are paid so low that they have can barely pay their bills to live, where do the customers come from? Starvation wages are a much, much bigger threat to businesses than living wages. We can have a downward spiral or an upward spiral.

Here are a couple of other benefits that Hanauer doesn’t mention:

With living wages employees are less likely to be looking around for work elsewhere. Constant hiring and training is expensive. Walmart is a prime example of that. They reluctantly raised wages a little bit because hiring and training was getting so expensive.

With living wages, employees will not have to turn to government assistance for things like food and medical insurance. That will be a relief all of us taxpayers. There is a minimum it costs for a person to survive in this country. If their wages at a full time job doesn’t cover it then someone will have to through the government. That is you and I. In essence we are giving businesses that refuse to pay a living wage a subsidy for each of their workers. That is wrong. Employees who were once using the safety net will become taxpayers themselves.

Employees who get a living wage will be less likely to be distracted at work. Imagine trying to work when you are consumed worrying about debt or hunger.

The less money is concentrated in a few hands and the more it circulates through many hands the better the economy will be for all of us. With a living wage, employees will be going to restaurants and shopping that will create jobs.

Just found this video showing how incredibly confused Donald Trump is on minimum wage.