A Minute With...

Labor expert Robert Bruno

11/25/2013  8:00 am

Robert Bruno is a professor of labor and employment relations at the Urbana campus of the University of Illinois. In an interview with News Bureau business and law editor Phil Ciciora, Bruno, also the director of the Labor Education Program in Chicago, discusses the movement to raise the federal minimum wage from $7.25 per hour to $9 per hour.

A recent Gallup poll indicates that more than 75 percent of Americans approve of increasing the federal minimum wage to $9 per hour. Is $9 per hour enough, or should it be even higher?

image of professor robert brunoHistorically, it’s always been true that a vast majority of Americans support increasing the minimum wage. It’s even been a popular public policy with both Democrats and Republicans in the past. But now it’s become more of a challenge since the politics in Washington have become increasingly strident and partisan.

Politics aside, the public has not only supported raising the minimum wage, but also supports raising it to keep pace with inflation and output. And not only is there support for raising the minimum wage to $9 per hour, there’s also overwhelming public support for raising it to $10 per hour. In Illinois, there’s a proposal to raise it to $10.50 per hour.

But is it enough? No. And it’s not even close. Adjusted for current dollars, the federal minimum wage would be about $10.75 per hour. If you take a multidecade snapshot and account for the rising productivity of the American worker, the federal minimum wage would actually be about $17 per hour, by some calculations.

So even if the federal minimum wage was raised to $9 per hour, that’s not going to lift anyone into the middle class. It will continue to be poverty wages.

It comes down to a fundamental choice: Raise the minimum wage to a livable wage and allow people to experience the full value of work and the independence that brings, or keep the wage at an inadequate level but supplement incomes through various government programs. But what that means is that taxpayers are essentially subsidizing the employee compensation of businesses, including many publicly traded, Fortune 500 corporations. The former strikes me as much more consistent with Adam Smith while the latter seems more like state socialism for business.

Is increasing the minimum wage good policy? Does it do what it’s supposed to do (that is, alleviate poverty), or does it simply decrease the number of entry-level jobs?

About 35 million workers, or about 26 percent of the workforce in the U.S., earn less than $10.50 per hour. About three-quarters of those 35 million workers are older than 20, and the majority are women. So we’re not talking about kids in high school working a part-time job bagging groceries. We’re talking about a very significant number of workers. Therefore, any rise in their wages would have a ripple effect for the good on the U.S. economy.

How do we know that? Well, there’s been no social policy that’s been studied as much as the minimum wage. And study after study, across the spectrum of liberal and conservative economists, all overwhelmingly concludes that raising the minimum wage is a good thing. When you raise the minimum wage, employee turnover decreases and morale increases; other measures of productivity also improve. That should be good news for employers.

But most importantly, it puts more money into the pockets of a large number of people who need it the most. And those people also are more likely to spend that money, which will then circulate throughout the economy.

Really, it would be like another stimulus. And there are very few areas of social policy where you could make a difference in the lives of so many people than in raising the minimum wage.

The bottom line: An increase in the minimum wage would not be bad for business. It would be an unalloyed good for the U.S.

If increasing the minimum wage at the federal level doesn’t get any traction in Congress, what happens next?

In reality, this is something that should get traction in Congress. But if that doesn’t happen, we should absolutely look to the states as well as local municipalities to get it done. The states are showing a lot of frustration with the federal government on a whole host of issues; that’s why you’re seeing a lot of proposals in state legislatures to raise the minimum wage. Clearly, the states do need to act, and it’s quite likely that they will.

In addition to raising the minimum wage, what else should the federal government consider to make the lives of low-wage workers better?

Having a more progressive income tax would be significantly beneficial. If we were to raise income tax rates for only the highest income earners, that would make a huge difference in terms of the amount of revenue that we bring in, which could be used to fund an expansion of food stamps, education, infrastructure and job training programs. It means we could essentially build a more solid foundation under those low-paying jobs.

Now, no one is talking about going back to Ronald Reagan-era tax rates on the wealthy, when we were taxing the upper brackets anywhere from 60 to 70 percent. There’s no appetite for that. But the basic principle, that those who can afford to pay more ought to, is a just one. So taxing that wealth – in other words, asking for some of the wealth back to be used as an investment in the country – seems to me a fair and just thing to do.

 

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