By John Burbank
Last month voters approved a $15 an hour minimum wage for workers at Sea-Tac. In California, Ron Utz, a conservative Silicon Valley millionaire, is pushing an initiative for a $12 minimum wage. In Seattle, there is a growing movement for increasing the minimum wage to $15 within the city limits.
Is this a trend? Perhaps the critical focus on the top one percent has finally turned a spotlight on the impoverishment of the middle and low wage workers. After all, the income for the top one percent didn’t fall from the sky. It came from somewhere. And a lot of it came from working families.
How do we know this? Simply by looking at the evidence. In 1968 the minimum wage in our state was $1.60. Toggle that to inflation, and it was the equivalent of $10.74 today. Our current minimum wage, which is the best state minimum wage in the nation, is $1.55 short of this.
But just keeping up isn’t a very good metric. Our economy is much more productive now. What does this mean? It means that for every hour of work, more things, goods, services of value are produced. A simple measurement is gross domestic product per hour worked. That measurement has doubled in the past 30 years. In the decades after World War II, the gains in productivity were proportionately shared between workers and owners, and wages kept up with increases in productivity. But that relationship has been knee-capped. If the minimum wage had grown proportionally with the increase in productivity in the past 30 years, it would be at $17 an hour now.
How about minimum wage workers in comparison to other workers? Low wage workers make about 50% of what typical workers earn. That hasn’t changed over the past 30 years, which means typical workers have been stuck with stagnating wages as well, regardless of the increased value of their work. So a better measurement may be workers at the 90th percentile and the 95th percentile, the folks close to the top. The 90th percentile workers have seen their income increase by about 33 percent over the past 30 years. The 95th percentile workers have seen their income shoot up over 40 percent. A similar increase for minimum wage workers would push it to $15 an hour. If you look at managers in the top 1 percent, their salaries increased 131 percent. And of course, CEO salaries have exploded, increasing from 30 times higher than a typical wage worker to over 200 times higher — that’s 2,000 percent.
The minimum wage is the canary in the coal mine of our economy. Our national economic activity can be roughly divided up between compensation for work and corporate profits. From 1979 through 2007, labor’s share of national income in the private sector decreased from 64 percent to 58 percent. That means that the 120 million American workers employed in the private sector in 2007 were missing $600 billion, or an average of more than $5,000 per worker. What happened to that money? Corporate profits per unit increased 140 percent in the same time period. As a Forbes’ commentator wrote: “(t)here are two ways you can make more profit: sell more stuff, or get a higher margin on the stuff you are selling. The latter has been a big winner since the 1970s.” And that margin comes from pushing down labor’s share of national income.
So back to the minimum wage: One reason that Ron Utz wants to see it increased is that people will be less likely to depend on government for Medicaid, food stamps and child care support. Why? Because they will have higher incomes. This amounts to an admission that the depressed minimum wage has translated into huge subsidies for business. Low wages move money to corporate profits, while workers have to rely on the government to meet basic needs.
The minimum wage is a measure of respect for work. As it teeters on poverty, we are signaling to those workers that we don’t respect them as workers, while we benefit from their services. If we increase the minimum wage, then we respect work and workers.
John Burbank is the Executive Director of the Economic Opportunity Institute (www.eoionline.org). He can be reached at email@example.com