0

Open Letter to Federal Reserve Chairman Janet Yellen

Janet Yellen - Caricature

Janet Yellen – Caricature

Janet Yellen, the new Chairman of the Federal Reserve, has called income inequality “one of the most disturbing trends facing the nation.”

National income inequality is a problem that is comprised of many components.  House the Homeless views the Federal Minimum Wage as a major component of this problem.  We are a nation of 1,000 plus economies, and yet we set a federal wage standard that embraces the concept of one size fits all.  At present, it is set at $7.25 per hour.  It is so low that a full-time, minimum wage worker cannot get into, and keep, basic rental housing. This is a statement repeated by the U.S. Conference of Mayors in their annual report for the past several years.

We all know that the single most expensive item in the budget of every American (housing) fluctuates across the nation, and it does not cost the same to live in Washington DC as it does to live in Harlington, Texas or Santa Cruz, California, etc. So how appropriate is this one-size-fits-all approach?

Because of the disparity between what our nation’s minimum wage workers are earning (federally set at $7.25 per hour), and the cost of housing locally, 3.5 million minimum wage workers will experience homelessness again this year.  Ms. Yellen, you are correct, “the nation’s identity as a land of opportunity is at stake.”

It is important to realize that these minimum wage workers compromise the base of our socio-economic society.  These workers are daycare workers, ditch diggers, cafeteria line workers, theater ticket takers, dry clean workers, porta-potty vacuumers, window washers, restraint workers (McDonalds), retail sales people (WalMart), data key operators, hotel/motel maids, construction laborers, janitors, bank tellers, farm workers, receptionists, nurse aids, poultry processors, agricultural workers, home care aids, garage attendants, car washers, manicurists, elder care aids, security guards, infant care workers, etc.  And remarkably, they all have one thing in common; none of these jobs can be out sourced!  They are the last bastion of purely home spun, at home American jobs.  A person has to be on site to flip the burger and serve the child from the cafeteria line.

It only makes sense that if the stability of our economic structure at its core, is dependent upon the economic stability of these workers, we should do everything we can to stabilize their financial situations.  Many businesses are operating under the false assumption that because the pool of minimum wage workers, bolstered by immigration, is basically infinite in scope, that they can continue to use people like tissue paper in less than full-time jobs, and then discard them for easy replacements.  This shortsighted approach, as even Henry Ford realized, carried with it a devastating effect that resulted in exorbitant retraining costs of replacement workers.

By indexing the wage of the local cost of housing in areas about the size of counties referred to as Fair Market Rent areas by the U.S. Department of Housing and Urban Affairs, we ensure that if a person puts in 40 units of work, they will be able to afford basic rental housing (an efficiency apartment) including utilities, wherever that work is done throughout the United States.

In this fashion, we end economic homelessness for all people desirous and able to work and enable them to put a roof over their own heads, other than a bridge.  As a result, we are able to stabilize businesses that employ minimum wage workers while saving them and tax payers tens of billions of dollars each in unused supports like food stamps, EITC, public assistance (see the 2014 Economic Policy Institute Minimum Wage Report) and retraining costs.  See Looking Up at the Bottom Line for greater detail.

We urge you to urge the U.S. Congress to review this novel approach and simply tweak the Federal Minimum Wage established under the 1938 Fair Labor Standards Act.  Such a response will solve the minimum wage conundrum once and for all time, prevent economic homelessness and stimulate the national housing industry by creating needed, affordable housing for workers who like Henry Ford’s employees, will then be able to afford the product that they need most.

Image: DonkeyHotey