In 2010 I had the privilege to run for State Senate in what was formerly SD 17 which covered Henry, Newton, Rockdale, Walton, and Spalding counties. One of the most prevalent comments I heard from people across the political spectrum—liberal or conservative; Democrat, Republican, or “Independent”—was “what has happened to this country”?
The post WWII economy, for most people I met, was remembered as one where hard work and playing by rules provided a decent wage and the opportunity to provide a better future for your children; it was both a quite popular economic model and one that people are demanding that their elected officials revive again.
Far too many of our elected officials ignore the basic fact that the dramatic decline in wages and quality of life over the past 30 years didn’t just happen because of market forces in action. These transfers of wealth and prosperity up the economic ladder occurred from deliberate and conscious decision by policymakers to pick winners and losers; as well as policies that transferred risk to those least responsible for economic outcomes who also happened to be most vulnerable to market forces.
The minimum wage and the erosion of its value is a perfect example; it’s a small sliver of responsibility but the impacts are very real to the working class and local economies across this nation. When I made the case for a high minimum wage in response to these questions of “what happened” I consistently found citizens across district 17 willing to support such an effort.
Higher minimum wages are simple and effective mechanisms for helping low wage workers. Following World War II the minimum wage was higher that it is today, when you adjust for inflation. The minimum wage would have to rise to around $9 an hour to reach its peak level in 1968. If the minimum wage had kept pace with the productivity growth we’ve seen in our economy over the last 3 decades the rate would be over $15 today. Imagine what those dollars in the hands of consumers rather than in the hands of investors playing monopoly game for the 1% could have done for our local economies over the past 5 years could have done to reduce the strain of the recession?
Our economy faces an aggregate demand problem. Go ask a small businesses owner in your district what they need and they’ll tell you point blank: consumers. The fact of the matter is low income citizens of this state already face a disproportionate tax burden as a percentage of their income its time low income Georgians got some “umph” from their electeds up at the Gold Dome.
Opponents of increases to the minimum wage will argue that it will decrease the number of jobs in the state and will increase teenage unemployment. But the fact is that there is a large body of research at the national, state, and local level that runs contrary to this simplistic Economics 101 argument.
There are two main reasons why economist have found that modest increases to the minimum wage do not increase unemployment. First is the occurrence of what economists call an “efficiency wage” effect. By paying workers more those workers often times are found to become more productive because employees take the job more seriously. Secondly, higher minimum wages reduce turnover. By decreasing job turnover employees stay on the job longer reducing the cost of reviewing new applicants and training new workers.
What the research shows is that what often happens is simply a reduction in the number of jobs available meaning workers spend more time between jobs. Critics tend to argue that a 10% increase in the minimum wage is likely to reduce employee of minimum wage workers around 1 to 2%. But even accepting these numbers another way to approach their frame is to think about it from the eyes of the minimum wage workers themselves—by working 1 to 2% few hours over the course of the year you still received around 8-9% more in their paycheck that year. 70% of workers who were impacted by federal increases to minimum wage were over the age of 20. So, arguments about reduction to teen unemployment, neither fits the data nor the demographics of who actually receives minimum wages.
Voters are demanding action on the economy and increasing the states minimum wage would be a substantive policy change with marginal cost; one that will shift us back in the direction of an economy that workers for everyone and one that will directly increase $’s in the hands of consumers across the state.