Now that Joe Biden and Kamala Harris have been sworn in and the first flurry of executive actions are on the books, it’s time to tackle the COVID-19 pandemic. And while improved vaccine production and distribution is top of that list, not far behind is economic relief.
Setting aside the politics of how best to get a stimulus past Congress (whether in reconciliation or a bipartisan bill), President Biden’s $1.9 trillion proposal unveiled a week ago seems like an excellent starting point. And essential to that plan is raising the federal minimum wage. Republicans will reflexively hate it. It won’t provide the immediate help a $1,400 check offers low-income households. And the devil is in the details. But it’s the right thing to do. And badly overdue at that.
Here’s why. Dating as long ago as 1938, the federal minimum wage has provided the guarantee that U.S. workers will not be unfairly treated by their employers. For decades, it was the accepted practice to periodically raise the standard to keep up with inflation. But that effort gradually eroded, and since 2009 it halted entirely with the wage stuck at $7.25.
As a result, cities and states have stepped up to fill this regulatory vacuum, many of them aiming to eventually raise the rate to $15 an hour. In all, 29 states and the District of Columbia now mandate a higher minimum wage. Has this been a jobs killer? Clearly not, since prior to the pandemic has the U.S. had seen a period of record jobs growth. But what the nation has seen, much to its detriment, is a growing gap between affluent and working poor — the very chasm that the minimum wage is designed to help bridge.
This is not to suggest that doubling the federal minimum wage overnight, particularly in the midst of these difficult times, would be wise. It would not. And that’s not what anyone is proposing. Taking it too far too fast would cost jobs. Meanwhile, a lot of small businesses are struggling to meet payroll right now, some even temporarily reducing wages. That deserves to be acknowledged, too.
But there are any number of allowances that can address the potential hazards of right sizing the minimum wage. Congress could, for example, allow variations by region (recognizing that the cost of living in rural Alabama is much lower than in New York City). Lawmakers could at least partially exempt small employers. In times of recession, a freeze or even reduction in the minimum wage might be feasible.
What is unacceptable is to fail to acknowledge the growing wealth inequality in this country, which has seen the top 20 percent of households account for a larger share of all income, rising from 43 percent in 1968 to 52 percent in 2018, according to Census Bureau data. Perhaps not coincidentally, 1968 was the peak year for the minimum wage. It would have to be over $10 an hour today to have the same purchasing power $1.60 provided when Richard Nixon was first elected president. This is not an anti-business or anti-growth choice.
Employers benefit when a reasonable standard is set as it evens the playing field with competitors, both locally and out-of-state. And that enhanced purchasing power of better-paid workers pays off, pumping more money into the economy and reducing the cost of taxpayer-funded programs like Medicare and food stamps that keep families of underpaid workers afloat.
Too often, income inequality is seen only as a catchphrase of Democrats or, as they are known in right-wing media, socialists. But the numbers are real. No other G-7 nation has as deep a divide as the U.S. And in this country, the income divide is especially pronounced along racial lines. How long can society hold together if it continues to deny basic opportunities to minorities and the disadvantaged? Polls show most Americans recognize the threat posed by this imbalance. They just aren’t certain the cure. Well, one step is to return to the days when the federal minimum wage was a meaningful backstop. It’s not the whole solution, of course, but it’s a vital part of one for an estimated 40 million Americans who would benefit directly. And it sure beats tax cuts that primarily benefit the wealthy and serve to worsen the imbalance.
There are a number of other measures in Biden’s stimulus plan that might address income inequality: raising the child tax credit, boosting unemployment benefits and increasing the maximum earned-income tax credit, to name a few. But we trust that at least some modest boost in the minimum wage will remain part of that effort. As President Biden observed in his inaugural address, “we can reward work.” And that’s at the core of this issue: not a handout, just a fair wage for a fair day’s work. What worked a half-century ago can work again today.