Seth Berner on the Minimum Wage

Seth Berner

From Seth Berner at the Maine Green Independent Party website:

Many of you are aware that the Portland, ME Finance Committee (FC) approved increasing the minimum wage in Portland from $7.50 to $9.75 by 2020. This is a “scaled down” version of the proposal that had been before the committee, to increase the minimum to $10.68 by 2017. But there is a lot that the media is not reporting. What follows is long, but if you care you should not settle for sound bites or misreporting.

Over the last 10 years or so the cost of real estate in Portland has roughly doubled. Apartments that used to cost $800/month are now $1500 or even $2,000; houses that were $100,000 are now $200,000. More moderately-priced properties are being torn down and replaced by luxury condos, apartments, and offices. There has been no accompanying drop in the cost of other necessities, so living or operating in Portland has become much, much more expensive. This is not just affecting people – the Full Belly Deli recently left Portland after over 20 years here because it could no longer find a rent it could afford. The Deli’s is not a unique story, it just happens to have gotten a lot of attention because the Deli was something of a Portland icon.

If wages had been keeping up with the cost of living then the real estate increases would be a wash. But they haven’t. In real dollars, wages are lower now than they were.

Portland was proposing to take the lead in Maine and raise wages – from the Maine State minimum of $7.50/ hour to $10.68/hour by 2017. The city Finance Committee (FC), the first step to the whole City Council approving the increase, authorized a raise only to $9.75, and by 2020, not 2017. And removed the cost-of-living rider that would increase wages after 2017 to adjust for inflation. This was done in the need to be “fair and balanced” to business owners. This is fair and balanced the way Fox News is fair and balanced.

The minimum wage was intended to be a living wage – the amount necessary for a family of four to live on – when it was first proposed 80 years ago. It was not intended to be a poverty wage. But that is what it has become. Though Walmart has announced an intention to raise the wages of its employees, the nation’s largest employer has been famous for the number of people in its employ who get food stamps – because the employees can’t afford to feed a small family or in many cases even themselves on minimum wage. Economists tell us that in 2014 dollars a living wage would be about $22/hour. “Fair and balanced” between the current food-stamp wage and a living wage would be about $15/hour. Ten dollars and sixty-eight cents is closer to poverty than living. $9.75 is closer still to poverty. And if inflation continues unabated, as it has for some time, $9.75 in 2025 (because there will be no cost-of-living increases) and maybe even 2020 may be less than $7.50 in 2015.

In looking at the businesses that would be affected by a wage hike, one needs to keep in mind that by far the biggest source of jobs in Portland is hospitals. The cost of health care has been spiraling out of control because the profits of care providers has been spiraling out of control. Driven in part by the cost of insurance, which is spiraling out of control – and Portland is also home to Unum Insurance. Throw in the usual national chain stores that are in Portland as they are everywhere, and the businesses that the Finance Committee is concerned about and their CEOs and shareholders have been accumulating wealth at almost unprecedented levels. They can afford to raise wages to almost any figure one proposes. In fact under the theory of trickle down economics they have been urged to since Reagan’s day, they just have chosen not to.

To be fair, Portland is also home to many small businesses that are the lifeblood of a local economy, that might have a hard time with a drastic wage hike. In theory, being concerned about these small businesses is legitimate. But the FC has no data showing that businesses that would have a hard time with $10.68 in 2017 will have any easier time with $9.75 in 2020. Moreover, the FC has no data showing that any sizeable number of businesses will struggle with $10.68 in 2017.

The real-world tests of wage hikes suggest that small businesses are not harmed by wage hikes. Though chambers of commerce and restaurant associations have always opposed wage hikes, businesses have not suffered in those locales that have raised wages, at least where wages are raised in increments, as was proposed in Portland.

Nor does the close proximity of low wage – high wage neighborhoods hurt the businesses paying the higher wages. The FC was told of Moscow, ID, with the federal minimum wage of $7.25/hour, and Pullman, WA just across the state border with one of the highest state minimum wages in the country. Of the two, Pullman is the healthier. This is not counter-intuitive, it is logical. When wealth is concentrated in a small number of people, a smaller number of people can patronize businesses; and while they have the ability to patronize more, a rich person can only eat so many meals a day. But ten people with money to spend can eat ten times that number of meals. And will buy ten times the number of pants – or five times or two times, some more times. Higher wages mean more people who can support the local businesses. Higher wages also mean more people paying taxes. Taxes of the rich are capped; tax revenue is higher when ten people are added to those earning enough to pay taxes. Higher tax revenue means more money that states and cities can reinvest in communities. Income distribution helps businesses.

Arguments against living wages were effectively rebutted by President Franklin Roosevelt when the national minimum wage was being debated in 1938. Don’t take my word for it, read what the most-often-elected president in US history had to say.

The scaling down of the wage hike, then, was a totally arbitrary reduction in a workers’ benefit intended but not likely to actually help owners. There is an irony in this. Every member of the Finance Committee is a Democrat. Their positions are non-partisan, but they are in fact Democrats. Once upon a time, the Democrats were the party of working people: Republicans helped owners, Democrats helped workers. Not true any more. Nationally the Democrats have turned their backs on labor. They are doing it locally as well.

The Portland City Council, that will ultimately decide on a wage hike, is all Democrats, except for a few Greens. There are no Republicans. Whether this will make a difference to workers remains to be seen. But the portents are not good.

This is the real story of Portland’s potential wage hike. If you think what is true – that a real wage hike is necessary if low-wage workers and small businesses are to thrive in Portland – then let the City Council know that $9.75/ hour with no chance of a raise is giving a tiny band aid to people bleeding to death financially. At minimum, the full Council should restore the proposed increase to $10.68 by 2017, with cost of living increases thereafter. If they want to help workers as their Democratic forbears did, they can support the increase to $15.00/hour that is being proposed by citizen groups for public referendum in Portland in November of this year.

~ Seth Berner was a Maine Green Independent Party candidate for State Legislature in Portland in 2010, earning the second most votes in the race with 27.93% of the vote, and again in 2012, earning 33.14% of the vote.

One thought on “Seth Berner on the Minimum Wage

  1. David Terry

    “the Portland, ME Finance Committee (FC) approved increasing the minimum wage in Portland from $7.50 to $9.75 by 2020. This is a “scaled down” version of the proposal that had been before the committee, to increase the minimum to $10.68 by 2017”

    THE QUESTION, of course, is; WHY approve a “scaled down” version”?.

    If one is HONEST, and understands the fundamental laws of economics, it becomes instantly clear that the $9.75/hr proposal does less “HARM” than the $10.68/hr proposal. This fact then begs the question of; WHY DO ANY HARM, AT ALL?

    Why not $15.00/hr. as was recently passed in Seattle? Why not $25.00/hr., or $50.00/he?

    Clearly, this is more complex than the proponents of increased minimum wages understand

    First all, the proposed increase does not simply raise the wages of those currently drawing “minimum” wage, but ALL of those who currently earn less than the NEW minimum wage.

    Consider three employees’ one of which earns the current minimum wage of $7.50/hr.,another
    who earns $8.25/hr. and one who earns $9.00/hr. Under the NEW minimum wage they ALL get an increase in wages, However, before the first checks go out, the latter two employees are mad
    because they are NOW also earning minimum wage; but MORE IMPORTANTLY, they are NOW earning the SAME wage as those who have (a) less seniority, (b) less responsibility or (c) lower qualifications.

    Consequently, the “more qualified” employees who are NOW making the same minimum wage
    as the most inexperienced and most recently hired employees: THEY will expect and demand an increase of their wages comparable to the differences between their previous wage rate and the previous minimum wage rate.

    And so on and so on, right up the chain!!!!

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