Raising the minimum wage only hurts top earners

08/27/2013 6:16 PM

08/27/2013 7:26 PM

The good news this Labor Day: Jobs are returning. The bad news this Labor Day: Most of them pay lousy wages and provide low, if not nonexistent, benefits.

According to a new report from the Economic Policy Institute, weak wage growth between 2000 and 2007, combined with wage losses for most workers since then, means that the bottom 60 percent of working Americans are earning less now than 13 years ago.

This is also part of the explanation for why the percentage of Americans living below the poverty line has been increasing even as the economy has started to recover — from 12.3 percent in 2006 to around 14 percent this year.

Many of them have jobs. The problem is that these jobs just don’t pay enough to lift their families out of poverty.

But wait a minute. Since 2000, productivity has grown by nearly 25 percent. That means the typical American worker is now producing a quarter more output than he or she did 13 years ago.

So if wages have flattened or declined for the bottom 60 percent, yet productivity has increased, where have the gains gone? Mostly to corporations and the very rich.

All of which gives some context to the strikes in recent weeks at fast-food chain stores, such as McDonalds, where workers are demanding a raise to $15 an hour from their current pay of $8 to $10 an hour. And the demonstrations and walkouts at Wal-Mart stores, whose workers are also demanding better pay. The average Wal-Mart employee earns $8.81 an hour.

Few of these workers are teenagers. Most have to support their families. According to the Bureau of Labor Statistics, the median age of fast-food workers is over 28; and women, who comprise two-thirds of the industry, are over 32. The median age of big-box retail workers is over 30. These workers typically bring in half their family’s earnings.

They deserve a raise.

At the very least, the minimum wage should be increased from the current $7.25 an hour to $10.50 — and to $15 in areas of the country with a higher cost of living.

Unlike industrial jobs, these sorts of retail service jobs can’t be outsourced abroad. Nor are they likely to be replaced by automated machinery and computers. The service these workers provide is personal and direct: Someone has to be on hand to help customers and dole out the burgers.

And don’t believe critics who say any wage gains these workers receive will be passed on to consumers in higher prices. Big-box retailers and fast-food chains have to compete intensely for consumers. They have no choice but to keep their prices low.

McDonald’s — bellwether for the fast-food industry — posted strong results during the recession by attracting cash-strapped customers, and its sales have continued to rise. McDonald’s CEO Don Thompson was awarded a big whopper of a compensation package last year, valued at $13.8 million.

Yum! Brands, which operates and licenses Taco Bell, KFC and Pizza Hut, has also done wonderfully well. Its CEO, David Novak, received $11.3 million in compensation last year. The company enjoyed a 13 percent gain in annual earnings — its 11th straight year of double-digit growth. Shareholders got a return of 15 percent.

Wal-Mart, the nation’s largest employer, also continues to grow despite a sluggish economy, and pays its executives handsomely. The total compensation of Wal-Mart’s CEO, Michael Duke, was $20.7 million last year, up from $18.1 million in 2011. Total sales rose 5 percent to $466.1 billion. Earnings per share rose 10.6 percent.

Not incidentally, the wealth of the Walton family — which still owns the lion’s share of Wal-Mart stock — now exceeds the wealth of the bottom 40 percent of American families combined, according to an analysis by the Economic Policy Institute.

It would not be a tragedy if some of these shareholder returns and compensation packages have to be trimmed in order that low-wage workers at McDonald’s, KFC and Wal-Mart get a raise.

Indeed, if this nation is to reverse the scourge of widening inequality, such a trimming is necessary.


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