Saturday, September 25, 2004

Raise the Minimum Wage to Help Business

The student aide at my school was all excited about the California legislature's recent vote to hike the minimum wage to $7.75 an hour in the next two years.
Unfortunately for the student, it won't happen. Governor Arnold Schwarzenegger vetoed the bill, believing it would "create barriers" to economic development.
Schwarzenegger's veto goes back to the traditional Republican held belief that by boosting wages you increase the cost of doing business and damage the economic climate.
History, of course, points in another direction. When the federal minimum wage was increased during Bill Clinton's presidency, Republicans railed against the negative effect it would have on the economy, particularly its potential impact on small businesses.
None of that happened. Although some people may remember Clinton's personal weaknesses, virtually no one would try to take away his positive influence on the economy. More than twenty million jobs were created during his presidency. That means business must have done pretty well, otherwise no one would have been hired. Raising the minimum wage did not damage the economy; it may have helped it.
President George W. Bush, like other Republicans, opposes raising the current federal minimum wage of $5.15 an hour. Bush's economic strategy has been to lower taxes, which benefits the wealthiest Americans. If Bush had managed to create any jobs, you can just imagine how the GOP would have made sure you heard about it.
Lowering taxes on the wealthy created nothing but huge deficits for the country and jobs have been lost. Since Bush took office there are 1.1 million fewer jobs. If giving money to the rich doesn't help the economy, putting it in the pockets of people at the bottom of the economic ladder by raising the minimum wage, makes sense. It would help the more than 15 million people who earn the minimum wage, the vast majority being women.
The hike would mean that people would have a little more disposable income. In all likelihood they'd spend it all on basic necessities and that of course would generate economic activity which would even benefit small businesses, exactly those the GOP is trying to "help" by opposing raising the minimum wage.
Another concern about a hike in the minimum wage is that fewer people would be hired. But research by the Economic Policy Institute found that in 1996 and 1997 minimum wage increases did not cause job losses. More jobs became available.
Another study by the Jerome Levy Economic Institute in 1999 found that the increase in the minimum wage did not affect the hiring decisions of most small businesses.
Raising the minimum wage would not only benefit those at the lowest level of earning power. It's quite likely that it might also have some impact on others who make little above the minimum. People who work at Wal-Mart, a significant percentage of whom live at the poverty level or slightly higher, might eventually see more money in their pockets.
At the national level, the minimum wage has not been increased in eight years. Whatever increase occurred eight ago has been eaten up by inflation.
John Kerry, the Democratic presidential candidate, wants to increase the federal minimum wage to $ 7.00. Even $7.00 does not mean you make it out of poverty. You need at least $9.00 an hour to move beyond the poverty line, according to the Poverty & Health Insurance Report of the 2003 US Census.
Although Arnold Schwarzenegger is officially a Republican, true conservatives often show doubts about California's governor being a fully-fledged member of the GOP. The recently-passed California state budget occurred because of the support of the Democratic-controlled legislature with only a handful of Republican legislators voting for its approval.
Given Schwarzenegger's weak GOP credentials, he had little choice to veto the bill to raise the minimum wage in California. As usual, Republicans worry about the big corporations rather than workers. The sad thing is that by raising the minimum wage, even corporations would have profited because all the "extra" money earned by workers would be gone back in the economy, benefiting business, which opposes the raises. And en español.


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