Focus On Buying Power, Not The Minimum Wage

There is a lot of chatter lately about raising the federal minimum wage. Democrats in the House have thus far failed to pass a bill calling for the federal minimum wage to be raised from the current $7.25 an hour to $10.10 an hour over the next two years. Before anyone can take a position on the issue, several things need to be considered.

First and foremost, the issue is not likely to become law anytime soon. Members of Congress from both sides of the debate agree that it is unlikely to pass this year, a mid-term election year. Rather than Congress taking this issue seriously, it appears to be more of an election year gimmick than a piece of meaningful legislation.

Unfortunately, it wouldn’t affect many workers, and wouldn’t help those it is meant to help the most. Almost all minimum wage jobs are in the service and retail sectors. Assuming the minimum wage is raised, power brokers in the service and retail sectors will almost assuredly pass the additional cost of doing business directly on to the consumer. And who depends more on low cost services and retail goods than the poverty stricken employees of these sectors working for minimum wage? The increased cost of services and retail goods will hurt those workers hovering under and around the poverty line.

A study conducted by the Center for Economic and Policy Research, based on statistics of wages and inflation provided by the Bureau of Labor Statics shows that the minimum wage should be $21.72 an hour, if wages from 1970 to 2013 kept pace with worker productivity. This demonstrates that while worker productivity and the value of the goods produced by each worker has increased, wages have remained stagnant, or have actually decreased when adjusted for inflation since 1970. In other words, workers without advanced degrees have been doing more work since 1970 and are being paid less, or the same amount for their work. With this in mind, it’s easy to see that raising the minimum wage a few dollars isn’t going to solve the larger issues behind income inequality.

What if I told you that I’d be happy making $1 an hour, if and only if that $1 an hour allowed me to achieve the basic tenants of the American Dream? Say it was enough for me to secure a better future for myself than my parents had. Say that wage allowed me to buy a house, a car, raise a family, tuck a little away each week for savings, pay off my student debt, and even allowed me to go out for dinner and a movie once in awhile. If all that were the case, I’d work for $1 an hour. In other words, I, along with millions like me are not concerned with the dollar figure that represents the minimum wage. We are far more concerned with the buying power that comes with that wage.

See, the debate of raising the minimum wage is a smoke screen. It’s meant to look like a fix for a problem that runs far deeper. For many Americans, the American Dream is out of reach, not just those hanging near the poverty line. Most economists predict that the service and retail sectors will continue to grow at a pace far exceeding higher wage sectors of the economy.

There are several factors affecting this trend. Globalization is perhaps the biggest influence. Cheaper manufacturing labor, a sector once dominated by the American middle-class, can now be found throughout Asia, Central and South America, and other newly emerging economies, making American manufacturing less appealing for deep pocketed investors. Continued improvements in technology are streamlining production and decreasing the demand for manufacturing labor. With the service and retail sectors taking the place of higher wage manufacturing jobs, we can expect these trends to continue.

Raising the minimum wage will do little to combat these underlying trends. The American Dream will continue to fall well out of reach for large swaths of the American population. Tackling the underlying symptoms of globalization will require radically rethinking our economy. A thriving Capitalist economy feeds on the earning and spending of a middle-class that can afford to buy the products the economy produces, like homes and cars. The minimum wage debate is nothing but an election sham. The real debate should focus on a fundamental restructuring of our economy, with a focus on quality of life for all people.

James Bliss is an Ashville resident.