Congress expert Norman Ornstein on what the debate over the debt limit says about dysfunction in Congress, and his ideas for how to fix it.
Guest Host: Susan Page
On Tuesday, Los Angeles voted to raise the city’s minimum wage from $9 to $15 an hour, a change that will roll out over the next five years. The historical increase represents a major win for labor groups and supporters; the so-called “fight for 15” campaign has been gaining increased attention nationwide, forcing many businesses to take notice. Yesterday, a protest demanding a $15 minimum wage for fast food workers overwhelmed McDonald’s headquarters in Illinois. But critics of this latest L.A. victory say the repercussions for small businesses could be catastrophic, and that workers are likely to face slashed hours and layoffs. A look at the debate over the minimum wage in Los Angeles and nationwide.
- Michael Saltsman Research director, Employment Policies Institute; former field economist at the Bureau of Labor Statistics (BLS)
- Jared Bernstein Senior fellow, Center on Budget and Policy Priorities; former chief economist and economic policy adviser for Vice President Joe Biden
- Dave Jamieson Labor reporter, Huffington Post, with a focus on the workplace and low-wage work
- Jerry Newman SUNY distinguished teaching professor of organization and human resources, University at Buffalo; author of “My Secret Life on the McJob." His latest book is “Compensation.”
Map: What Wage Do You Need To Afford An Apartment?
The National Low Income Housing Coalition released a study that broke down the minimum wage needed to rent a two-bedroom apartment in all 50 states.
MS. SUSAN PAGEThanks for joining us. I'm Susan Page of USA Today, sitting in for Diane Rehm. She'll be back next week. Labor groups this week celebrated L.A.'s decision to raise the minimum wage to $15 an hour, a hike that's historic in scale. With this news from the country's second largest city, supporters are hoping it will propel other communities nationwide to join the movement. But critics raise concerns about the impact on small business and even the potential of layoffs.
MS. SUSAN PAGEJoining me in the studio to discuss the debate are Jared Bernstein of the Center on Budget and Policy Priorities and Dave Jamieson of The Huffington Post. Welcome to "The Diane Rehm Show."
MR. JARED BERNSTEINThank you.
MR. DAVE JAMIESONGood to be here.
PAGEAnd joining us from Kansas City, Missouri, is Michael Saltsman of the Employment Policies Institute. Thanks so much for being with us.
MR. MICHAEL SALTSMANGreat to be here.
PAGEWe're gonna invite our listeners to join our conversation later in this hour. Our toll-free number is 1-800-433-8850. You can always send us an email at email@example.com or find us on Facebook or Twitter. Well, Dave Jamieson, let's start with you. Tell us about this debate in L.A. that culminated in a big hike in the minimum wage there.
JAMIESONSure. Yeah, this had been brewing for several months now. Labor unions there had been agitating to get a $15 minimum wage. This was a long process with the council. The mayor there, Eric Garcetti, several months ago had put forward a proposal for $13.25. Labor unions stood strong on $15 and eventually they got it. The council approved this 14 to 1. This doesn't go in right away. There's still a few steps to take.
JAMIESONThey're basically directing the city attorney to develop this plan. But at the end of the day, there's gonna be a $15 minimum wage. It's gonna phase in until 2020 so it'll be kind of gradual over the course of five years. But this is a huge deal. I mean, the minimum wage, the whole debate has been brewing for years now, but I think this is a bit of a turning point for two reasons. One, this is Los Angeles. It is a huge city.
JAMIESONAnd this hike is gonna have a big impact on hundreds of thousands of workers there. The other big factor here is the number, $15. This is what fast food workers have been calling for in the so-called Fight for 15 movement. 15 is very aggressive. We're talking about going from $9 to $15, granted over the course of several years. But if you'd told me three years ago that we'd be sitting here even debating the idea of this realistically happening somewhere, I would've thought you were -- this was kind of ridiculous.
JAMIESONBut this debate has changed so much and this is moving so fast that $15 has become a reality. Seattle already did it. San Francisco has done it. Now, L.A., the biggest city, is doing it. And I think we're gonna see it come east.
PAGESo Michael, do you think this is also a tipping point? Do you see this now happening -- likely to happen in other big cities?
SALTSMANWell, I do think you'll see it happen in other cities where the city council and where the political environment tends to favor unions and I think where unions have a sort of a political stronghold. I actually suspect that labor groups are gonna be a little bit like the dog that caught the car here because -- because of the scope of these minimum wage increases. I mean, historically, when we've debated the minimum wage, especially when it's gone up at the federal level, it's been a debate about whether employees are losing hours or jobs at the margin.
SALTSMANThese are things that don't tend to make headlines. It kind of becomes a wonky economic debate. But what's happening now is, you know, you have cities like L.A. take this step. You have cities like Oakland that go up 36 percent overnight. San Francisco going up to $15 in a pretty aggressive course over three years. You have headline stories of restaurants closing, of businesses in the city's Chinatown, you know, going out of business, you know, of childcare providers being hurt.
SALTSMANSo I think you're getting the kind of stories and dramatic effects of minimum wage increases that historically proponents of a higher minimum wage have been able to kind of write off or ignores. And so I think it's going to change the debate about consequences as much as it changes the debate about the number that is appropriate.
PAGEWell, Jared, do you think that's true when you look at unintended consequences of raising the minimum wage, especially by so much? Are you concerned about what it might -- what some of those consequences might be?
BERNSTEINWell, it's kind of less a matter of whether I'm personally concerned and more a matter of reams of years of academic research on this. And I agree with Michael. It's very wonky, but we have the advantage of new book that came out recently by a couple of economists called, "What Does The Minimum Wage do?" And this book was given the award of Book of the Month at Cornell.
BERNSTEINAnd the only reason I raise that is because they said that these guys have written, I'm quoting, "the most comprehensive analytical and unbiased assessment of the effects of the minimum wage." And what they did, Michael and I could have a very fun time here, although nobody else would like it, of just cherry-picking the studies that we like. You know, he'd like some, I'd like some.
BERNSTEINWhat these guys did is they took all the studies and they did what's called a meta-analysis. They squished it all together and here's what they found. Increases in the minimum wage raise the hourly wage and earnings of workers in the lower part of the wage distribution and have very modest or no effects on employment hours or other labor market outcomes. The minimum wage can, as originally intended, then be used to improve the conditions of those working in the last remunerative sectors of the labor market.
BERNSTEINAnd I think that's conclusion that one should draw from the research, that Michael is not wrong. There are those at the margin who will lose a job or some hours. But the beneficiaries, the number of workers who benefit from an increase, including this planned L.A. increase, will far surpass anyone who is hurt by it. And in that sense, it's a very good deal for the workers themselves. One quick other point.
BERNSTEINIt's not just the unions. I want to kind of disabuse listeners that this is just a union movement. In fact, the unions are behind some of it, but the people that are out on the front line are mostly low-wage workers, often from the fast food industry. They're not unionized.
PAGESo Michael, the study that Jared is talking about from Cornell, do you accept it as unbiased and, you know, a metadata kind of study?
SALTSMANWell, you know, Jared's right. We could have a wonky conversation about it. I mean, I think the gentlemen who did that study, you know, Belman and Wolfson are smart guys, but they also have a point of view. I mean, Belman used to be, you know, a research associate at the Economic Policy Institute, which is sort of the in-house research arm of organized labor and I think they come to this debate with a perspective like anyone else.
SALTSMANThere are some economists, gentlemen like David Neumark and William Wascher, who have actually been uneasy with this meta-analysis approach because they feel like when you squish all these studies together, it becomes actually very difficult to get meaningful results out of your meta-analysis. They found, when they actually read all the studies, they said over the last two decades, about 85 percent of the best research does point to job loss following a minimum wage increase.
SALTSMANBut I actually -- I think the more important debate to have here is really -- and I actually -- I'd be curious to hear Jared's point of view on this is the minimum wage increases they're talking about are ones that have happened in the past, traditionally more modern. What we're talking about now, going up to $15, we are in uncharted territory and we're even actually going above levels -- I mean, some of the research that Jared would favor by folks like Aaron Dubay (sp?) I mean, we're even going above minimum wage levels that would be recommended by economists that support a higher minimum wage.
SALTSMANAnd so I think that's it's sort of -- the onus is on proponents to sort of show, hey, here's the data we have that shows this isn't going to be harmful and it just doesn’t exist.
PAGESo Jared, is this too big a jump, do you think?
BERNSTEINI don't think so. I mean, we won't know what happens until we do it. You know, five years is a long time and I will give you a number or two that might assuage some of your anxiety in that regard. It is -- Michael's right. It is certainly higher than most, although there are a few other cities that have gone there. Let me just say one more -- again, we're not gonna fight about the job studies the whole time, I promise you.
BERNSTEINBut let me just say one other thing about this. I do find it somewhat curious that what you've got a lot of times are economists, Michael, myself, we're citing others, who are looking at data sets on our spreadsheets and in our laptops and crunching numbers and doing, you know, econometrics and saying that this is what's gonna happen and that, if you're on Michael's side, it's gonna hurt low wage workers.
BERNSTEINMeanwhile, the people who are fighting for this are the low-wage workers themselves. And I think there's a certain amount of hubris in this debate to say they don't know what's good for them. We know what's good for them. We, the economists who've crunched the numbers. It seems odd to me that they would be going out and fighting as hard as they can if this thing was gonna hurt them. And I think the reason why they are correct, and here I'll get back to the research, is that even if you take this level as higher than moderate and I do, the beneficiaries will far outweigh anyone who's hurt.
BERNSTEINIt doesn't mean there won't be some job loss. It means that many more people will benefit than will lose jobs or hours.
PAGESo Dave, let's back up a step. How many workers in America are now earning the minimum wage?
JAMIESONWell, it's hard to say, in part, because of all the minimum raises that have gone through in recent months. You know, Congress has not moved on raising the federal minimum wage. The last hike was in 2009. But in the past two, three years, lots of states have moved them so the number of workers who are subject to it, it's kind of fluctuating. Ironically, the federal minimum wage recently, it's becoming a little less relevant because so many states have decided that it's insufficient.
JAMIESONWe're at a point now where the majority have states have moved ahead and set their own, around 30 states now have went higher than the federal level. But as far as the -- to get back to what Jared was saying, in terms of, you know, from a worker's perspective, I recently traveled to Seattle and spoke with workers in Seattle where there's been an increase and also at Sea-Tac, which is the airport town outside, which did $15 in one swoop.
JAMIESONSo they went from around 9 bucks up to $15 pretty much overnight at the businesses where this is in effect. And it was very interesting to talk to the president who runs a parking garage there and his valet parkers who do the work. Not surprisingly, the president, not a big fan of this law, right? He has to deal with high labor costs now. On the other side, it was fascinating to talk with workers who got a 50, 60 percent raise literally overnight.
JAMIESONAnd talking to one worker, I said, what was the biggest change for you when you got that raise? What was the first thing you did? And he said, I quit my other full-time job. So this guy was a valet parker who also worked down the street at a Marriott running shuttles. So that changed his life very drastically overnight.
PAGEWe're gonna take a short break. And when we come back, we'll continue our conversation about the debate nationwide over raising the minimum wage. We'll open the phones and take your calls and questions. Our phones are open, 1-800-433-8850. You can always send us an email to firstname.lastname@example.org. Stay with us.
PAGEWelcome back. I'm Susan Page of USA Today sitting in for Diane Rehm. And we're joined from Kansas City, Mo., this hour by Michael Saltsman. He's research director at the Employment Policies Institute. And with me in the studio, Jared Bernstein. He's a senior fellow at the Center on Budget and Policy Priorities. He's a former chief economist and economic policy adviser for Vice President Biden. And Dave Jamieson, he's a labor reporter for the Huffington Post. He covers the workplace with a focus on low-wage work.
PAGEWe'd like to invite our listeners who might be living on the minimum wage themselves to give us a call or send us an email about your experiences and your perspectives. But for the moment, we're going to be joined by Jerry Newman. He's a distinguished teaching professor of organization and human resources at the State University of New York at Buffalo. Jerry Newman, thanks for being with us.
MR. JERRY NEWMANThank you, Susan.
PAGENow you went undercover as a fast-food worker earning the minimum wage. Tell us what you did.
NEWMANWell, Susan, I did everything from mop floors to clean up dirty diapers in the bathroom to flipping burgers to answering irate people why their pickles weren't on their burger. I did it all.
PAGEAnd why did you do this?
NEWMANBecause I'm insane. The second reason might well be that I wanted to see what the hubbub was about. Was this work hard? Did the work deserve higher wages? And how did they handle leadership in low-wage jobs?
PAGEAnd what did you learn that perhaps you didn't expect or you didn't know before about these workers who are kind of at the bottom of the earnings scale.
NEWMANIt kind of surprised me how hardworking and intelligent they were. That is one of the most high-pressured jobs I've ever had. When it comes noon and you see a sea of people who want their burgers right now, you feel the pressure and you work harder. And you're doing that all for minimum wage. That's tough work.
PAGEAnd did, you know, we were talking here about the transition that we're going to see in Los Angeles and in other places that have raised the minimum wage, sometimes in a pretty dramatic fashion. Did you see any companies going through these kinds of transitions yourself?
NEWMANYeah. The minimum wage went up in Florida while I was working there. And one of the things that happened was I was working at a Wendy's. And while it wasn't because of that minimum wage, it was probably because of the previous one, Wendy's was moving from having somebody flip the burgers to having what is essentially a giant Foreman Grill controlled by a computer that, when the computer says, top go down, the top goes down, they cook the burgers. Then when they're in theory done, the top comes back up. Used to be a person that did that job. Now nobody does it.
PAGENow you say there is a secondary impact to raising the minimum wage that we may not be paying enough attention to. What is that?
NEWMANOh, well there's absolutely an impact that nobody's talking about. There's a hierarchy of jobs in terms of wages. So when the minimum wage goes up for a fast-food worker, the person who's working as a loan officer in one of the banks in Los Angeles making $17 an hour and making $9 an hour more than the minimum-wage worker, all of a sudden the minimum-wage worker is only making $2 less. So that person agitates for higher wages. Maybe they don't get it right away but all the research shows that eventually those other wages move upward too. There's a pecking order and that's -- it's going to be maintained.
PAGESo it sets a new floor for workers. And workers who are making even significantly more than minimum wage might see a bump.
NEWMANYeah, they're going to be rooting for these workers, I guarantee it.
PAGEAnd just one last question. So given your experiences doing this, do you think it's a good idea to raise the minimum wage? And what do you think about this movement of $15 as a minimum wage?
NEWMANWell, before I wrote "My Secret Life on the McJob," I thought that the job wasn't that hard and they didn't deserve more. But pressure is worth money. And I think they deserve more. Whether or not it's $15 an hour, the tradeoff is going to be they're going to get fewer hours. So they may not see that big bump in total income that they expected. But I definitely think that it's impossible to live on the current minimum wage.
PAGEJerry Newman, thanks so much for joining us on "The Diane Rehm Show."
NEWMANYou're welcome, Susan. Thank you.
PAGEJerry Newman, he is the author of "My Secret Life on the McJob." And he's a professor of organization and human resources at the State University of New York at Buffalo. So, Jared, tell us, if you're making the minimum wage, can you live on it? Can you raise a family?
BERNSTEINWell, as we've said, there are now -- this question, are you making the minimum wage, has something like 50 different answers now because there are so many different minimum wages across the country. By the way, interestingly, if you think about trying to live in L.A. on even $15 an hour, it's pretty hard. One of the research groups in town looked at what it would cost a family to get by, a low-income family with a couple of kids, and came up with a number around $34,000 and that's in today's dollars. So that's even higher than you'd make with $15. So, the answer...
PAGESo how much would you make if you made $15 an hour working 40 hours a week, how much money are you making?
BERNSTEINA little bit north of $30,000 a year. And so I mentioned that $34,000 is kind of a baseline. Now, so -- but it certainly helps. And it certainly gets you closer to say the lower end of the middle class versus struggling in the very low-wage sector.
PAGESo, Michael, is that a reasonable expectation for someone who's working 40 hours a week? Is it a reasonable expectation that they should be making enough to live on?
SALTSMANWell, I don't know if reasonable expectation is the right way to frame it. I mean, I think in any of these debates that it always comes back to whether the customer is willing to pay for the higher wage. And I think if the customer was always willing to pay the higher prices to offset a higher minimum wage, we wouldn't ever be having a debate about the minimum wage. Because every time it goes up, businesses would offset that through higher prices.
SALTSMANBut it's because customers are price sensitive that we do have this debate and that we have this tension of businesses finding other ways to reduce costs, whether it is going to the kind of technology in the back of the house where you have an automatic burger flipper or in the front of the house, like a new McDonald's in San Francisco where you place your order at an iPad instead of at a cash register. I mean, and I think because of that dynamic too, it isn't always clear that employees are on net better off.
SALTSMANI mean we've talked to businesses and we've seen stories of businesses in Oakland where, you know, you had employees at a child-care provider who did get a raise but then their hours were cut by about three hours a day. And so some of these employees, even though their hourly pay went up, their take-home pay is not all that different than it was before.
PAGEDave, we saw a study come out, I think just yesterday or the day before, that looked at housing costs and what you need to be able to rent a one-bedroom or a two-bedroom apartment. What did this study find?
JAMIESONWell, basically, that you can't do it if you're making the minimum wage and that you can't do it pretty much anywhere. We know that. It's only logical in big cities like D.C. and San Francisco and L.A. where housing is very expensive, that even if there is a more robust minimum wage, it's not enough to get you into a situation where you can put 30 percent of your money towards the rent and live comfortably. I mean, there was a time when I was younger when I was making probably the equivalent of around $15 an hour. I was living in D.C. But I was doing it -- I was living in an efficiency for about $800 a month. Those don't exist in D.C. anymore. They're long gone.
JAMIESONAnd even on that income, I had nothing left at the end of the month. So when you talk to fast-food workers or people making minimum wage, you see a lot of the same things. You see them bunking up and living with family. You see a lot of them relying on food stamps, getting Medicaid. So you don't die in the street on the minimum wage but it makes life very, very hard.
PAGEWell, tell us who is making the minimum wage. Because one argument might be: Hey, these are kids getting their first job. They're living at home. They'll move on soon to some job that is not a minimum-wage job. Is that the case? Who are the people who tend to be making the minimum wage?
JAMIESONThere are people like that. There are plenty of kids, of high school kids who are going to go on to college and they're making minimum wage now. They're getting their first taste in the workforce. But there are a lot of adults. And what we've seen in recent studies, especially in places like New York where the fast-food industry has really grown, is that your typical worker is generally older now. You know, I talked to a lot of fast-food workers who've been in the job for six, eight, ten years.
JAMIESONYou know, one guy I talked to, he works at a Burger King in New York, I believe it was, and he's been doing that seven, eight years. The last three wage increases he'd gotten were all courtesy of minimum wage increases. These were not raises that he got because his boss wanted to give him a raise.
PAGEJared, what do you think?
BERNSTEINI think that's correct. I think if you actually look at the characteristics of workers who would be affected by the kinds of increases we're talking about, their average age is in the mid-30s. About 37 percent of them, almost 40 percent are 40 years or older. More than half are women, which wouldn't surprise you because -- unfortunately, because of gender pay differentials, women are more likely to be low-wage workers. Actually almost 30 percent have kids. About 60 percent work full time. And on average, they earn more than half of their family's total income. So that tells you that their families depend on them.
BERNSTEINI do have to make a factual correction. I like debating Michael because he typically sticks to the facts and that's good. However, he went off the reservation there for a second and I got to try to pull him back on. There is no minimum-wage study that exists, and I think I know them all, that suggests that on net, which is what he said -- that on net, low-wage workers lose from a minimum-wage increase. That isn't to say that there aren't people -- there are people who will lose hours and lose jobs. But every single minimum-wage study has shown that the amount of pay, the aggregate amount of wages going to those affected by the increase, goes up after the increase.
BERNSTEINAnd that's why I can say with absolute confidence that the beneficiaries, those who benefit from the policy, always outnumber those who are hurt by it.
PAGEMichael, let me give you a chance to respond.
SALTSMANYeah, Jared, I'd be happy to send you the PDF after the show. But David Neumark and William Wascher and another economist at the University of Wisconsin did a series of studies looking at flows into and out of poverty following...
BERNSTEINWell, that's different.
SALTSMAN...an increase in the minimum wage. And they did find that on net, the number of people who were in poverty or near it after the minimum wage went up...
BERNSTEINOkay, that is a different metric.
SALTSMAN...actually outnumber the people who...
BERNSTEINNo, that is a different, this is...
SALTSMAN...were pulled out of poverty.
BERNSTEINYou can't have a debate -- you can't get -- I think what we're talking about...
PAGEJared, I'm going to give you a chance to speak, but let him finish first.
BERNSTEIN...to totally change the...
SALTSMANSo I -- so I think -- I think...
PAGESo let Michael speak and then you can have a chance to respond. Michael, go ahead.
SALTSMANYeah, so I think what we're talking about here is, in the past, looking at on net, what is the effect of a minimum-wage increase, and saying that, hey, look, if somebody does lose hours, if someone does lose their job, that there is a chance that they actually are not better off. And I think that that's why, if you look at for instance the 28 states that raised their minimum wage between 2003 and 2007, you had economists afterwards from Cornell and American University who went back and looked at that time period and found no associated reduction in poverty rates. And I think those kind of facts are difficult for Jared to grapple with because they don't back up what he supports.
BERNSTEINNo, they're not -- look, one of the things -- one of the things I very much like about "The Diane Rehm Show," is that we're -- it's not about who wins. It's about trying to really flesh out what's going on. I made a very simple statement, which is that after every minimum-wage increase that we've had, the amount of wages flowing to affected workers, flowing to low-wage workers who got an increase, is larger than it was before. And then Michael said: No, that's not true. On net, some people are worse off and I -- and started talking about poverty.
BERNSTEINNow it is true -- certainly, as I've said ever since the beginning of the show, there are people who lose. But there are more people who benefit. And every single study shows that. Now, you can start moving goalposts around and telling stories about a particular study that has to do with flows into and out of poverty. Again, very simply, the amount of wages, the amount of pay going to low-wage workers after every minimum-wage increase we've had, in the aggregate, is larger than it was before.
PAGEI want to give our listeners a chance to join our conversation. We're going to go to David who's calling us from Dallas. David, hi, you're on the air.
DAVIDGood morning. This is definitely a heated debate around this issue and I'm really grateful you're having this show today. So thank you. Real quick, I think, as fellow Americans, we really need to look at ourselves and realize that we're the ones making these choices, voting with our dollars. I mean, yes, it's easy to point the fingers at the corporations and the government but, you know, it's not like this everywhere else in the world. I mean, the people in Australia pay their people very well. And, you know, the Aussies still take care of them and you go to the restaurants and buy them.
DAVIDAnd so, you know, increasingly, I'm starting to see that really, culturally, we need to make a shift in how we think about it. And point the finger...
PAGEYeah, David, that's a -- that's an interesting point. I wonder, Dave, if you could tell us how the American minimum wage compares with that in a place like Australia or other Western economies?
JAMIESONYeah, we -- well, we tend to be lower than most other advanced countries, certainly in Europe. And we trail -- tend to trail in other basic, you know, workplace metrics. You know, when it comes to something like mandating paid vacation or holidays or sick leave, in the U.S. in general we tend to be very reluctant in terms of our lawmakers and in putting kinds -- in putting mandates upon businesses. So other advanced countries, particularly in Europe, tend to be a lot more aggressive than we do.
JAMIESONInterestingly, you know, from David's call, if we took, you know, a hundred calls today, in general, the majority -- the overwhelming majority would probably like the idea of a minimum-wage increase. The minimum wage, one thing we haven't mentioned, tends to poll extremely well. And that crosses party lines. The Republicans to a lesser degree like the idea of raising the minimum wage but they also do like it. And, you know, we had four states -- red states recently that passed minimum-wage hikes.
PAGEI'm Susan Page and you're listening to "The Diane Rehm Show." We're taking your calls, 1-800-433-8850. Well, Michael, you're in a city that is in fact debating the minimum wage and the possibility of raising it. Tell us what's happening in Kansas City, Mo., on this issue.
SALTSMANYes. So in Kansas City there's actually a hearing today about whether to raise the city's minimum wage to $15 an hour from the current level of little bit under $8 an hour. They'd be looking at about a 96 percent increase. And the dynamic here I think is driven the same way it's driven in a lot of places, where you have the Service Employees Union, groups like Stand Up KC, have made I think a tremendous effort to put pressure on folks on the Council to do this. But I think there are some concerns. I mean, especially because Kansas City, Mo., is so close to Kansas City, Kan., where you would have a differential of a $7.25 minimum wage on one side of the river and a $15 minimum wage on the other side.
SALTSMANAnd we, you know, for instance I spoke to an apparel manufacturer in Oakland, Calif., who, after the minimum wage went up there, you know, she's got a competitor in San Leandro just a mile down the road who doesn't have to contend with this higher minimum wage. And so instead of raising rates, she's just had to slash her staff and see if she can remain open another year. I think this is the kind of dynamic other businesses face. And it's unique to these city minimum wages, where you don't just have this risk of sort of lost jobs, but you also have this risk of sort of business relocations based on the fact that just over the border there's a much lower minimum wage and it's much more -- it's much easier to operate a business.
PAGEWell, you know, Michael, that's my part of the country. I grew up in -- born and raised in Wichita. It is not exactly a bastion of liberal or union activity. And I -- it's one thing for Los Angeles to raise the minimum wage to $15, another thing for Kansas City, Mo., to be seriously debating it. What does it tell you that, you know, in a state that's become a red state, like Missouri, in Kansas City, that this is under serious consideration?
SALTSMANWell, I think what it tells me is that, even within red states, I do think there are -- I don't think you would call Missouri a bastion of liberalism. But I think within red states, there are cities where ideas like this can take hold. And I think that it's become something of a momentum-building exercise for the folks who are pushing the Fight for 15. I mean, if you look at, you know, Reuters reported last month that the Service Employees Union had spent at least $25 million on this campaign, possibly up to $50 million. And so in order to advance the goal, it really means going to city councils where you can actually get this kind of idea to take hold.
SALTSMANWhere, instead of convincing a whole Congress to do it, you maybe just have to convince five or ten people to do it and where there's less of a threshold to get over. Unfortunately though I think some of these cities are becoming exactly the worst kind of Petri dish, where they're going to have -- find out the hard way why this is a bad idea.
PAGEWe're going to give Jared a chance to respond to that but first we're going to take a short break and then come back. We'll come back -- we'll come back to Jared's comments on what Michael just said. We'll go back to the phones too, take some of your calls and comments. If you're working on the minimum -- working for the minimum wage, send us an email, let us know how it's going for you. Stay with us.
PAGEWelcome back. I'm Susan Page of USA Today, sitting in today for Diane Rehm. And with me in the studio, Dave Jamieson from the Huffington Post, Jared Bernstein from the Center on Budget and Policy Priorities and joining us from Kansas City, Michael Saltsman from the Employment Policies Institute. You know, we've been encouraging people who are making the minimum wage to get in touch with us. Here's a tweet from Joe. He writes, I earn nine dollars and fifty cents an hour, so a little over the federal minimum wage. I live paycheck to paycheck.
PAGEI earn too much for food stamps. I am 62 and stuck. No one wants an older worker. Well, Jared, I promised to give you an opportunity to respond to what Michael was saying right before the break when we were talking about the move even in red states like Missouri or in Kansas City.
BERNSTEINYeah. Well, first let shout out to our tweeter Joe that we're fighting for you and we hear you. It's not just, as I think Michael was kind of suggesting, that there are some cities that are liberal strongholds within conservative bastions. If you actually look at the 2014 midterms, it was really surprising to a lot of us, that some of these quite red states, Arkansas, South Dakota, Nebraska, went to the polls and voted for Republicans the way you'd kind of expect them to, and they voted to raise their minimum wages.
BERNSTEINAnd you have to start asking yourself, what the heck is going on here? And to me, this was one of the most exciting parts of this whole move, along with the fight for 15 and what's happening in L.A. It's really a grass roots, democratic movement, trying to do something about a national problem. Higher income inequality, greater dispersion among wages, people like our tweeter Joe stuck in low wage jobs at the age of 62. And here we have a policy solution, that something that can help and can do so without anything like the distortionary effects that opponents claim.
BERNSTEINAnd I actually think that's a very important point, and it's one of the reasons why the movement is spreading as it is. The opponents, Michael and his folks, say, from the restaurant industry, continuously say every time you do this, the sky's gonna fall and tons of people are gonna lose their jobs. I mean, you heard Michael say this is gonna be (unintelligible) . And in fact, that's not what happens. We have 30 states with higher minimum wage, all these cities. So, the predictions of doom haven't come to pass.
BERNSTEINWhat's come to pass is the quote I read earlier from that New Authoritative analysis is that the policy largely has its intended effect. And that kind of democracy in action, we don't see enough of it these days.
PAGENow, there are complications when you have this patchwork of minimum wages across state lines and once you get out of the city limits. And I wonder, Dave, why is all this happening, do you think, at the state and city levels, where, and not at the federal level?
JAMIESONWell, I think it's happening on the local level because it's very popular. And people can do it by the ballot or they can pressure their city council or whoever to get moving on this. It's much more difficult in D.C. As I was saying earlier, the minimum wage is very popular, even with many Republicans. That, I do not include Republicans on Capitol Hill as part of that. It's very unpopular there. But people outside of Capitol Hill really like the idea of raising it, and that's one reason why we're seeing this really bubble up all over the country right now.
PAGELet's go to Sarah. She's calling us from Hurdle Mills, North Carolina. Hi Sarah, you're on The Diane Rehm Show.
SARAHHi. Thanks for taking my call.
PAGEYou're welcome. Glad to hear from you.
SARAHI had a comment and a question. My question is if people are not earning enough to feed their families and rent a place to live so that they have to be on government subsidies, aren't the taxpayers, then, paying for corporations to pay their employees less? And the taxpayer having to pay more?
PAGESarah, that's a great question. Let me pose it to Michael. Michael, is that the effect, do you think?
SALTSMANI don't. I think we've heard this argument a lot, that we're somehow subsidizing, the government is subsidizing the wage, you know, low wage employers. I think what we're actually doing is we're insuring that jobs that would not exist at higher levels of a minimum wage increase still do exist. The argument, I think, that has been put forward, is actually, it's a little bit of a head scratcher, because, I think, not that long ago, I think a lot of folks, including people like Bill Clinton campaigned on ideas like let's do things like the earned income tax credit that can actually pull people out of poverty more effectively than a minimum wage increase.
SALTSMANI think when you start to get to a point where you say, well, let's dispose of those policies and instead, go with a mandate, a mandate that customers may not necessarily pay for and so is going to cause other effects. Then, I think you're in a situation where instead of someone being partially dependent on the government, they're 100 percent dependent on the government when they lose their job.
BERNSTEINCan I just point out Bill Clinton raised the minimum wage in 1996, so let's be clear about that.
SALTSMANAnd you know, I do think it's interesting though, Jared, and then two years later, actually, there was a proposed 40 percent increase in the minimum wage that Ted Kennedy wanted to push through. And there were memos from Bill Clinton's economic team that said none of your economic advisors support this idea because we think it's too aggressive and it's gonna cause displacement in the labor market. So, even Bill Clinton understood a 12 or 15 dollar minimum wage is a bad idea.
BERNSTEINNo, no no. Look, you insinuated Bill Clinton didn't raise the minimum wage. He did. Look, here's the thing, and I agree with you Michael, on this point. I think you need both. I think you need a minimum wage that's set at an ample level. And by the way, that level's not going to be the same because of different price and wages across the country. A minimum wage is set at a -- complimented with the kind of work supports that people get through the safety net. There are SNAP or food supplements, housing vouchers, the earned income credit wage subsidy, a very significant one that I suspect Michael and I agree is very important.
BERNSTEINBut you can't have one without the other. The burden of making sure that low wage workers can meet acceptable living standards in an advanced economy like ours has to be shared in that way. And it's one of the reasons why we shouldn't see social safety net policies in opposition to a higher minimum wage. We should see them as complimentary policies.
PAGEWell, here's an email from Anthony. He writes us, what happens to the minimum wage worker who is currently receiving financial assistance, such as food stamps when their wages go up, if they lose that assistance? It turns out not to be much of a raise at all. Dave, is that a risk when you raise the minimum wage?
JAMIESONWell, I don't think if, you know, we shouldn't be worried about somebody's -- if somebody's wage goes up, that suddenly the government doesn't have to, you know, provide them money to help them live. I don't think that should really be a concern in this debate. I mean, but one piece of this -- as all of this debate has been happening, and all this agitation from the outside, from workers going on strike, we've seen a lot of companies voluntarily start raising their wages. We saw Wal-Mart do this, Gap do it, and recently we saw McDonald's do it.
JAMIESONI think a part of that is a response to an improving labor market, right? Things are -- unemployment is going down, companies have to compete for workers a little more. That's part of it. I also think they were shamed into doing it, frankly. I think they've been embarrassed by this whole campaign. A lot of Americans think it's really unfair to be working for eight dollars an hour. So, they're raising their wages. I don't think they necessarily wanted to, but I think they've shown that when they crunch the numbers, they can do it. There may be some growing pains there, but they're managing.
PAGEOh, that's interesting. And what's been the effect at some of these places? Some of things that Michael and other critics have raised is that you'll lose -- we'll raise your hourly pay, but we'll cut your hours. Has that happened?
JAMIESONWell, I think that that might happen at smaller places. You look at Wal-Mart. Wal-Mart is raising their wage floor. They had an earnings report out last week, and earnings are down. And they attributed that partly to the wage hike. So, one way you respond as a company to -- there's a few ways you can respond to having to raise the wage or voluntarily doing it, is you can try to give somebody fewer hours or you can take less profits or, and bring in less revenue. And that's what Wal-Mart is doing right now.
JAMIESONBut what they also said on their earnings call was that we think this is still a smart move long term because it's going to lower turnover, we're going to have happier workers, so they're sticking to it.
PAGEMichael, have you seen -- what effects have you seen when these big employers voluntarily raise their bottom wage?
SALTSMANWell, I think it's great news for those employers and for those employees. I mean, I think of a company like Wal-Mart or McDonald's looks at the labor market, and as Dave said, you know, decides that, hey, we can raise our prices enough to offset the costs of this wage increase, then it's a good idea for them. But what that doesn't necessarily mean is that it's good for everyone else. And I do think it's also proof, you know, we put a lot of attention on these wage increases, I think, today, when Wal-Mart makes this announcement, you know, there's press releases going out from all the labor groups that are focused on Wal-Mart.
SALTSMANI mean, historically, it's really not unusual for minimum wage earners not to be stuck at the minimum wage. I mean, over a long time period, I mean, most minimum wage earners get a raise within one to 12 months on the job. You know, between when the minimum wage went up, you know, during the mid-90s and then again in the 2000s, you know, the number of people earning the minimum wage went down almost like every single year. And so, it's not unusual for market forces to mean that people are getting raise increases on their own.
SALTSMANAnd I think that's actually part of the story that's left out, that there is a career ladder. People do work their way up it, and then when you raise the minimum wage, you can cut off some of bottom rungs of the ladder.
BERNSTEINSo, I think one of the problems with citing market forces is that the economy just kind of on its own, what Michael's correctly calling, you know, market forces, hasn't been very kind to low wage workers for about 30 years. And this is kind of interesting, because the low wage work force, you might say, well, based on market forces, that must mean that the low wage work force is less productive or less educated. In fact, the opposite is true. The low wage work force, if you go back to the late 1960s, 17 percent of low wage workers had at least some college.
BERNSTEINNow, it's almost 50 percent. 46 percent of low wage workers have at least some college, as I mentioned earlier. They're older, they're more likely to have had families. And yet, their wages have been stagnant. So, as I said earlier, one of the things that I really like about this movement, this kind of democratic, grass roots, we can wrap our heads around this and solve this through policy intervention, is the idea that you're saying, actually, market forces aren't giving us a boost and we have to turn to public policy.
PAGEThat's really a stunning statistic, isn't it? 46 percent of people who are at the bottom of the income...
BERNSTEINYeah, the bottom fifth of the wage scale.
PAGE...have some college. Because don't you go to college so you're not in the bottom fifth of income earners, Dave? I mean, isn't, isn't that surprising?
JAMIESONYeah. Well, you know, we're still, this is not, we're still coming out of the recovery. You know, we've had disproportionately, the recovery has been a lot of service jobs, a lot of low wage jobs and you've had people who were in better jobs before the recession and at the end, they wound up in kind of a lesser station. And they wind up in these low wage service jobs, so it's been very difficult on them, and there have been studies, recently, showing that your typical low wage worker is older and is better educated than he or she used to be.
PAGELet's go to Robert. He's calling us from Sand Springs, Oklahoma. Robert, you're on The Diane Rehm Show.
ROBERTGood morning. And thank you for taking my call.
ROBERTHey, I was a professional poverty worker for 38 years, helping low income people deal with shelter, transportation, food, housing, you know, the whole thing. And then I went to Wal-Mart for four years and had extra income. I had other retirement. And just watched people try to survive at the end of the month and pretty soon, I gave almost seven thousand dollars away, just please take it, because their food stamps ran out. Now again, my point is that I think we have to come to some sense of sanity about a living wage and it's going, you know, it's not all boats will rise, but in some ways it is.
ROBERTBut yet, people need to eat and to have transportation and live. And here, which is, you know, you can call me red state Robert, cause I'm not a red stater, but I live in one. I love it. The point is we have to give people more money and we have to find a way that we can balance that through the system, even up to shareholder and dividends and certain things like that. Now, that could be a little radical, but still, living wage. I think we need a safe living wage, rather than minimum. And thanks for taking my call.
PAGERobert, thanks so much for your call. I want to ask Dave, the 15 dollar figure, was that reached scientifically to be a living wage? How did that number come about?
JAMIESONNo. It's interesting. This, so, the background here is SEIU, the union, Service Employees International Union, has been the main kind of leader, spearheading this whole fight for 15 movement. When it started about two and a half years ago, and I've talked to people inside the movement, and I've asked how did you get to 15? They say they asked workers, what do you think is a wage that you would find acceptable, that you could live on? And that has become the focus of this movement.
PAGEI'm Susan Page and you're listening to The Diane Rehm Show. We're talking about the minimum wage. Here's an email from Jim, who writes us from Chapel Hill, North Carolina. He writes, instead of explaining why low wage workers should not be able to afford a living wage, let's talk about lowering the maximum wages for Wall Street and maximum wages for economists.
JAMIESONHey now, wait a second.
PAGEAnd here's an email from Boyd, who writes us from Wolf Creek, Oregon. Boyd writes, production sewing workers in the US are often independent contractors like myself. Peace work puts the economic burdens on the workers' shoulders to accept per unit work that pays adequately. Provide a buffer when there's no work and maintain our five industrial machines. How many of us are there compared to employed low wage workers that are tracked and endlessly debated? Jared?
BERNSTEINCan I take Jim first, and then Boyd?
BERNSTEINSo, on this idea of a maximum wage, I have heard that before, and I think it does certainly comport with this problem we've had where so much of the economy's growth has accumulated at the top of the scale. So, I feel you Jim, on that point. However, I think, politically, that is a huge reach and I think better would be to have more progressive taxation and to use the revenues from that more progressive taxation to help low wage workers through the kinds of compliments that we were talking about before.
BERNSTEINAs I said, an ample minimum wage is part of the story, but you also need a robust earned income credit. As far as Boyd's concerned, I don't know that we know the numbers, but here's what we know. We know that the type of people that he's talking about are growing and growing quickly as a share of total employment, as a share of low wage employment. And it's not just peace workers. It's all of the people in the kind of independent economy. The Uber drivers and the Lift drivers and the some of the B to B workers.
BERNSTEINWe're starting to have to think about new categories, in that regard.
PAGEMichael, what do you think on that?
SALTSMANWell, I think on especially this question of executive compensation, I mean, I think that's become one of the main messages of the fight for 15 movement. And I don't think it holds a lot of water. I mean, you can sort of look at it two ways. And the first is that a lot of the folks who own, especially fast food restaurants, are franchisees. They're not CEOs at the corporate level, but even if you sort of, for argument's sake, said, well, let's take the CEO's pay of a company like Yumbrands and let's throw in the whole executive team, too.
SALTSMANI mean, if you decided to just cut their pay to zero and divvy it up among the work force, you'd give everyone about a couple cents an hour raise. So, it's not really CEO pay that's driving this dynamic. Again, it really all goes back to the customer. And I think we're really actually surrounded by the effects and by the evidence of what happens when you raise the minimum wages beyond what the customer will pay. It's the reason why we're checking ourselves out at the grocery store. It's the reason why, at some restaurants now, we place our order via a tablet. Or at a fast food place.
SALTSMANI mean, I think these are very concrete examples of what happens when the minimum wage mandate gets beyond what the customer is willing to pay.
BERNSTEINTwo things. I wanted to get back to this idea that machines are replacing workers. The thing that I object to in Michael's rap on this is actually, I think simple, and to me, anyway, kind of interesting. What we don't want to do in this country is set wages low enough that we incentivize employers not to be more productive. We don't want the set wages low enough that we incentivize a restaurant owner not to invest in productivity in enhancing capital goods. If an iPad makes your place more efficient, go ahead and get an iPad. If the kind of hamburger pressing mentioned earlier -- you know, I think those are actually very important.
BERNSTEINSo, we don't want to follow a kind of a third world strategy, let's just make sure our wages are so low that employers never have an incentive to invest in capital.
PAGEJared Bernstein from the Center on Budget and Policy Priorities. And we've also been joined this hour by Dave Jamieson from the Huffington Post and in Kansas City by Michael Saltsman from the Employment Policies Institute. Thanks all three of you for being with us this hour. Let me close just with two tweets that we've gotten this hour. A tweet from Melody, she writes, the problem isn't the wage. It's access to higher education and affordable child care. And here's a tweet from Ethan. He writes, if your business can't afford to pay living wages, then maybe you don't belong in a modern economy.
PAGEWe want to thank you all for joining us this hour. I'm Susan Page, sitting in for Diane Rehm. Thanks for listening.
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