Minimum wage and the hourglass bottom

I had this line of thinking before the holiday break that I might crank out a few posts — and, really, there were some great conversations going on — but that hasn’t quite worked out. The next two weeks won’t be any better as I try to finish the semester out strong. Yet I wanted to add my two cents to one aspect of this past week, on the matter of minimum wage and the (service sector) bottom of the hourglass economy.

On Friday I tweeted a link to the Economic Policy Institute’s (EPI) 2009 wage portion of their State of Working America, which included this graphic on the declining purchase power of the minimum wage:

EPI goes on to note (all emphasis mine):

Although each legislated increase in the minimum wage has served to increase its value, the Figure shows these increases have generally been short-lived, with inflation naturally eroding its purchasing power over time. As a result, the current value of the minimum wage is well below its historic peak in the late 1960s.

So I had asked folks to remember as they went on their shopping sprees this holiday season that most of the workers helping them earn a wage that buys a lot less than it used to — a fact of which has implications for everything from the increased recessionary government transfers (via Krugman, excluding health care)…:

…to burgeoning income inequality….:

…and walkouts by the low-wage workforce (via Occupy Wall Street):

As to the picture above, last Friday featured the most contentious organization against Wal-Mart in the company’s history. Calls for better wages were an important component of that activity, along with many others. I should note that the subject of Wal-Mart’s economic and labor effects is far from settled. Yet when you have a single firm exerting that much influence over low-end service sector wages (including, as Ezra Klein mentions, the supply chain) it shouldn’t surprise us when it becomes the focus of a larger, diverging, income trend. Indeed, the bottom of the hourglass is exactly where you’d feel the most deleterious effects (by way of Richard Florida):

Retail workers are among the lowest paid Americans, averaging less than $10.90 an hour or $20,990 annually, according to U.S. Bureau of Labor Statistics (BLS) figures. One in five retail workers are the sole income earner in their families. More than half contribute 50 percent or more to their family’s income. And more than one million retail workers and their families live near the poverty level, according to a recent report by the think tank Demos.

That inequality is a thing that exists — see the second graph above and remember that GINI don’t preach — and is often a subject of focus on the political left is heartening to those of us concerned. Truly. But as Jared Bernstein notes, while more research about the long-term inequality trend is released “the Beltway” only views budget deficits as a national emergency:

Since the early 1980s, deficits have averaged around -3% of GDP with a pretty big variance, -5% in the mid-80s, +2.4% (surplus) in 2000, as high as -10% during the great recession, and about -7% and falling now.

On the inequality side, since the early 1980s, according to Piketty and Saez, we’ve transferred 15% of national income from the bottom 90% of households to the top 10%.

Which of those is the bigger economic deal?  If you ask any DC policy maker what’s the most important challenge facing the nation, they’ll tell you it’s the budget deficit.  Yet a compelling argument can be made that a shift of such magnitude in national income from the bottom 90% to the top 10%, and the commensurate problems it presents—the growing gap between growth and the living standards of the middle class and poor—is, in fact, at least equally, if not far more, worthy of their attention.

I won’t deny that all the inequality blogging in the world may do nothing but boost antacid sales if the bipartisan polity doesn’t consider it important, but it’s worth advocating (potentially) helpful remedies nonetheless. Now some have chosen to focus on making the federal income tax structure more progressive, which also conveniently assists with the budget deficit. That’s all well and good, sure, but how about including a more apolitical strategy – perhaps one that centers on raising wages? That is a strategy that might lure wider support, and the most straightforward way to do that is to simply raise the minimum wage.

Such a proposal is already garnering (some) conservative support. Noah Milliman at The American Conservative (TAC) writes:

I hope so for reasons of principle and for practical reasons. In principle, any kind of “one-nation” conservatism has to care about inequality as such, and particularly about the weakness of labor’s bargaining power in most of contemporary America. Right-wing individualism is often conflated with a conservative approach to governance in contemporary American politics, but that conflation is a profound error. As a practical matter, I’m convinced that wage stagnation is the deep reason for the financial crisis. The Bush-era answer to stagnating wages was cheaper credit. That papered over the problem for a while, but it teed America up for a terrible crash. (Harper’s Canada, having dodged that crisis, may be heading for a similar crisis of their own now.) Avoiding a repeat requires fixing the structural drivers of widening inequality, and particularly means raising wages at the low end of the scale. In that context, a legislated rise in the minimum wage should absolutely be on the table for discussion.

TAC also hosts a paper by Ron Unz advocating a minimum wage hike to boost the low-end services sector:

So how might we possibly raise the wages of American workers who fill this huge roster of underpaid and lesser-skilled positions, holding jobs which are almost entirely concentrated in the private service sector?

Perhaps the most effective means of raising their wages is simply to raise their wages.

Maybe this is too much to hope for…I don’t know. Yet the bottom of the hourglass will continue to be a cause for concern regardless of the near-term fights budget fights, and contentious actions like the Wal-Mart strike may be more the rule than exception as the factors driving their grievances continue to grow. That more folks are noticing these trends is encouraging — even more so when they starting thinking about policies to correct it — but until those who actually pass such policies into law begin to pay attention I think I’ll continue to stockpile Tums.

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One response to “Minimum wage and the hourglass bottom

  1. Pingback: My chart for 2012 (and for 2013) | Punditocracy·

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