We need an honest dialogue about work and wages in our political discourse.
It’s time to lay out the facts – that many may not know or care to know – about the relationship between work and wages, and how it plays out in society.
The theory of capitalism is that most people work for private employers who provide goods and services to society. They work for and get paid by the employer for their labor. The employer makes a profit, while employees obtain the means to secure the goods and services they need. The things that private enterprises cannot provide are provided by the government and paid for by taxes. Some of the work is done by government employees and some by private enterprises through government contracts.
Pretty simple.
But in reality, things don’t work that perfectly. Business profits increase more rapidly than employees’ wage income. The gap between them grows. This trend reached excessive levels in the early 20th century, leading FDR to establish a minimum wage in 1938. It has been in effect since, with periodic increases to keep pace with inflation. In 1979 it reached its high-water mark In value of $2.90, equivalent to $10.47 in 2019 dollars.
Contrast that to the current minimum wage of $7.25. Which has not been increased since 2009. If a minimum wage worker in 2019 worked full-time all year, he earned just over $15,000. But if that same worker earned the 1979 minimum wage, he would have made close to $22,000 in 2019 dollars.
National inaction regarding the minimum wage has led 30 states and some cities to increase their own minimum wages to higher levels. Kentucky is not one of them. Its Supreme Court struck down increases adopted by Lexington and Louisville.
It is important to look at the minimum wage issue in the context of poverty. The 2021 poverty guideline for a family of three was just under $22,000. So an individual working full time at the minimum wage in a typical family of three earns only 68% of it.
The current U.S. poverty rate is 12.8%, involving close to 40 million Americans. The Kentucky rate is 16.5% – almost 30% higher than the national rate – and involves over 720,000 Kentuckians. This during a period of record-breaking growth in both our national and statewide economies.
However, the reality is actually much worse. Self-sufficiency studies performed in 35 states by the University of Washington consistently show that the poverty level is less than half the money actually needed by families of all sizes and compositions to meet their basic needs without public assistance. Established in the 1960s and based largely on food costs, the poverty level has only been adjusted since to reflect the cost of living increases. It fails to account for today’s actual costs of housing, energy, transportation, food, health, education and others.
In reality, we live in a world, not of simple capitalism, but of corporate welfare. Where businesses making record profits, while paying little or no taxes, pay many of their employees so little they qualify for a variety of public benefits – Food Assistance, Temporary Assistance for Needy Families, Energy Assistance, Housing Assistance, Medicaid, and others.
Employers count on these. Not only do they count on them, but some also train their employees how to apply for them. For many, low-wage employment is a public-private partnership.
Business profits disproportionately go to managers and shareholders. The number of millionaires and billionaires grows steadily while taxpayers absorb much of the cost. The reality of life for low-wage employees is a constant cycle of paperwork, phone calls and meetings, to qualify and re-qualify for benefits. Benefits that are hard to get, hard to keep, stigmatized, inflexible, and inadequate.
Food assistance is of little help if you need tires for your car to go to work.
I am a retired legal aid attorney. For over 30 years I represented legal aid clients’ interests in the Kentucky and Ohio legislatures. In those years I had countless conversations with conservative legislators who had a one-word vocabulary about poverty issues: work.
I would patiently explain that most poor people work, but do not make enough money to achieve economic stability, much less a decent standard of living and quality of life. I would usually get back blank stares, then rhetoric that raising the minimum wage would increase inflation and destroy jobs. This has not proven true over time.
Some argue, on the basis of modest wage increases in today’s tight labor market, with some employers going to $15 on their own, that the minimum wage is no longer needed. This is simply not true.
First, as self-sufficiency studies show, even $15 is insufficient to achieve true economic stability for most families.
Secondly, as Economic Policy Institute President Heidi Shierholz points out, fully 20% of jobs pay less than $15.
Thirdly, and most importantly, the current economic cycle is not permanent. This tight labor market will not last indefinitely.
We still need the minimum wage to protect full-time low-wage workers.
We are the United States of America. We have proven over and over again that we can do virtually anything, once we make the commitment. We need to make a commitment, to make our economy work for everyone who works. To do less, as our current situation reveals, is shameful.
We are better than this.
Col Owens is a retired legal aid attorney who teaches poverty law at Northern Kentucky University’s Chase College of Law. He is the author of the memoir Bending the Arc Toward Justice (Cincinnati Book Publishing, 2020) available at colowensbooks.com.