Editor’s note: This commentary is by Jeffrey Reel, a writer/lecturer living in Lyndon Center, and general manager of Natural Provisions, in St. Johnsbury. He was previously sustainability manager at the Omega Center for Holistic Studies in Rhinebeck, New York.
[R]aise Vermont’s minimum wage to $15 per hour by 2024. It will have long-term benefits for Vermont’s economy. It will also send a strong signal to individuals and families considering moving here that Vermont takes care of its own.
Opponents of the wage increase, almost to a person, point to a June 2017 study by the University of Washington (UW) critiquing Seattle’s effort to raise the minimum wage to $15 an hour. The study concluded that the salary increase would hurt the lowest paid workers it was meant to benefit because it would force employers to cut back on hiring and hours in order to offset the cost of having to pay higher wages. Released under far less fanfare only a few days earlier, the University of California’s Institute for Research on Labor and Employment reached the opposite conclusion.
The UW study has been embraced – uncritically – by those who oppose the minimum wage increase, while at the same time rejected – uncritically – by those advocating in favor of it. (A major shortcoming of the study is that it has never been peer-reviewed but simply released into the arenas of politics and public opinion.) One notable economist at MIT – David Autor – told the Washington Post at the time that the study seemed “very credible” and “sufficiently compelling in its design and statistical power… .”
Today, though, that same economist, and others, have changed their minds. Autor observes that other recent minimum-wage research papers have underscored the limitations of the UW / Seattle study. The most ambitious analysis is a study by Arindrajit Dube of MIT, which shows that minimum-wage increases eliminated jobs that pay below the minimum wage but added jobs at or above the new minimum. That study looked at 137 minimum-wage increases, not just the one increase studied by the University of Washington. It should be noted that this study as well has not been peer-reviewed.
One other major failing of the UW study is that it did not include businesses with more than one location (no Wal-Marts, McDonalds or fast-food chains). The Seattle study excluded half of Seattle’s minimum-wage workers. This flaw in methodology has raised red flags for most economists and researchers because the real-life evidence of a failed policy seems not to exist. The predictions of economic disaster in Seattle have not materialized, including exorbitant food price hikes.
From the 1860s to the 1970s, the United States experienced over a century of shared prosperity with rising wages and increased surpluses in production. Real wages increased approximately 1.3% annually, including the wages of those at the lowest end of the economic ladder, and all workers enjoyed a rising standard of living during that entire time.
Beginning in the late 1970s, though, the American Dream hit a wall, and at high speed, when wages stagnated (and have remained so ever since) while production efficiencies continued to increase as did the wealth of the owners of those businesses. The income gap between the wealthy and the average American worker began to widen to the chasm that exists today. Computers displaced millions of workers, and the captains of industries maximized their profits by moving millions of jobs overseas where workers labored for far less per hour than Americans were paid.
The end of rising wages meant that individuals and households could either lower their standard of living or find other ways to maintain it: Breadwinners took on second jobs; households sent more of their members into the workforce; and the American worker took on increasing amounts of debt.
Total household debt in 1975 was $734 billion, compared with $12.82 trillion today. As one economist observes, the “free” market now provides rising loans instead of rising wages. The family structure dissolved.
What we have experienced over the last 40 years has not been a moral breakdown: it’s been an economic one, with moral consequences. And it feels immoral to me that we are squabbling over whether our fellow citizens should be paid a living wage, while Walmart, big box stores and others game the system by letting local and federal governments provide safety nets for America’s low-wage workers. Not paying an adequate wage is expensive. These are not high school kids flipping burgers.
As my father once reminded me, the American economy is still grounded on mass production and it cannot function without mass consumption. The down-and-outer, the homeless, the unemployed (without unemployment insurance), the non-working aged (without pension), the destitute, those at the bottom of the economic ladder cannot contribute to the mass purchasing power required by our vaunted “free” economy. This is why we find ourselves supporting government-supplied wage floors, unemployment insurance and health care.
Raising the minimum wage for Vermonters will benefit everyone. It will increase spending power, which gets pumped right back into local economies, as it always has. Let’s not fight, neighbor-to-neighbor, over economic crumbs.