“Consider the source” is usually said skeptically, and, of course, we always do consider it, whether skeptical or not. Here, the source is pretty impressive. It is The Economist, which Steve O’Keefe, writing for House the Homeless, described as “the house organ of the economics profession, the gold standard of consensus among economists.” He discussed an article about the minimum wage in which The Economist said, in effect, “Hey, if you do this, it increases everyone’s wealth, not just those earning the minimum wage,” and said it to the finance ministers of every country in the world.
What’s going on here? O’Keefe says:
Minimum-wage laws actually don’t reduce employment. In fact, they increase the welfare of minimum-wage workers and their employers. The Economist notes, ‘Not only has [the minimum wage] pushed up pay for the bottom 5% of workers, but it also seems to have boosted earnings further up the income scale — and thus reduced wage inequality.’
Like the Magna Carta and common law and other refinements of civilization, this study came from Great Britain, which O’Keefe says:
[…] introduced a national minimum-wage law in 1999. The British government requires a minimum wage equal to about 46% of median earnings — compared with a less generous 40% in the United States. When Great Britain instituted the national minimum wage ‘worries about potential damage to employment were widespread,’ says The Economist (itself a major worrier), ‘yet today the consensus is that Britain’s minimum wage has done little or no harm.’
In Austin, TX, the minimum wage question has been the subject of controversy. That is where House the Homeless is centered, and co-founder Richard R. Troxell was asked by Commissioner Judge Sam Boscoe to give his point of view. In an email that was circulated to all the Austin City Council members, Richard wrote:
The Fed has determined that based on a sophisticated formula that includes a two-year time lag (so as not to be distorted by new housing startups), that in the Austin Fair Market Rent Area, one can reasonably expect to pay $681 for an efficiency apartment and $834 for a one-bedroom apartment.
Apparently, in Austin, tenants would have to be making more than $16 per hour to meet the rest of their living expenses while renting a one-bedroom apartment. That’s barely enough space for a couple, or a parent and a child. In which case the parent would have to be working full-time and bringing in $16 an hour. Who makes that much? Or if it’s two adults, they both have to be working full-time for at least $8 an hour. Minimum wage is $7.25 an hour. Austin was debating whether, in light of its intense downtown renewal efforts, it should mandate a minimum hourly wage of $11.
By combining existing governmental guidelines, we establish something called the Living Wage, which means enough to allegedly live on. And even those figures are based on the idea that nobody should be spending more than 30% of their income on housing. Many people are forced to spend a much larger percentage.
As head of the campaign for a Universal Living Wage, Richard tells the world that greater income at the bottom of the economic ladder leads to greater spending at the bottom, and boosts the whole economy. Companies benefit from stabilizing the economic situation of their employees, because turnover is expensive. Then there is the matter of lower government spending, when the lowest echelon of workers rely less on government subsidies.
Richard was also recently quoted in a Fortune CNN article by Eleanor Bloxham, CEO of The Value Alliance and Corporate Governance Alliance. The subject was the need for increased transparency in corporate dealings, for instance:
One such disclosure would be whether the company pays a living wage to all its employees — and if not, what percentage of workers don’t receive it.
Bloxham’s article went on to quote Richard about the Universal Living Wage. But let’s get back to another interesting thing about The Economist‘s breathtaking discovery, which isn’t such new news after all. Here is a quotation from Richard’s book, Looking Up at the Bottom Line, which is available via Amazon, Nook, and Kindle:
Ben Bernanke, during his first month of serving as the newly appointed Federal Reserve Chairman, testified before the House Financial Services Committee. Congressman Bernie Sanders asked Mr. Bernanke if Congress should raise the Federal Minimum Wage…
Mr. Bernanke responded: ‘The concerns that some economists have raised about the minimum wage […] does it have any employment effects? That is, do higher wages lower employment of low-wage workers?’ […] Mr. Bernanke then definitively declared, ‘My response is that I think it doesn’t lower employment.’
Reactions?
Source: “Major Reversal: Economists Agree Minimum Wage Works!,” HousetheHomeless.org, 12/12/12
Source: “How to fix rampant CEO mistrust,” CNN.com, 03/14/13
Source: “The Argument in the Floor,” The Economist, 11/24/12
Image by Aidan Jones.