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Minimum Wage Based on Productivity Gains? $21.72 per Hour

Advocates of the South Dakota ballot initiative to raise our minimum wage should read this article from The Next New Deal. The article points to studies and meta-studies (that's studies of studies) showing that raising the minimum wage does not increase unemployment. It concludes with this fascinating statistical tidbit on the mismatch between the current minimum wage and what workers are really worth:

The buying power of minimum wage has steadily been waning due to the effects of inflation for the past 40 years. When prices increase, a worker’s paycheck buys less and less. To put it in perspective, we look to another brief by John Schmitt: if minimum wage had continued to match productivity growth, it would have been $21.72 per hour in 2012. If we only adjust for the cost of living, a minimum wage pegged to inflation would be $10.52 [Emily Chong, "Debunking the Minimum Wage Myth: Higher Wages Will Not Reduce Jobs," The Next New Deal, 2013.08.07].

If we were paying people for what their labor is worth, they'd be getting almost triple what we guarantee them now. Wow.

In related news, Think Progress points to the successful business practices of the employee-owned WinCo grocery chain, which is beating Walmart on worker pay and benefits:

The company, which will soon have close to 100 stores with the latest openings in Texas, has almost 15,000 employees. Those who work at the store long enough qualify for a pension plan into which the company puts an amount equal to 20 percent of their yearly pay. More than 400 “front-line” workers — clerks, cashiers, and others who are not at the executive level — have retirement accounts that are worth at least $1 million, according to a company spokesman.

It also provides full health benefits for those who work at least 24 hours a week, beyond the requirements in the Affordable Care Act. While the company is private and hasn’t made wage information available, Glassdoor reports that cashiers and clerks make more than $11 an hour. Thanks to these benefits and wages, the company has low turnover. An industry analyst estimated that the average hourly worker stays with the company for more than eight years.

The same level workers can expect $8 an hour at Walmart and part-time workers won’t get health care coverage. Even half of full-time workers aren’t covered because the costs are so high. Thanks to its low pay and few benefits, workers rely on $1 million worth of public benefits in a single store just to get by [Bryce Covert, "The Company with Lower Prices and Better Benefits Than Walmart," Think Progress, 2013.08.09].

I've noted before how easy it would be to raise hundreds of thousands of Walmart workers out of poverty simply by each of us tipping one Walmart worker 30 cents on each shopping trip. But WinCo gives its workers better wages and benefits without taking more money out of customers' pockets. They beat Walmart on price:

Yet WinCo’s prices are often lower than Walmart’s. To drive them down, the company doesn’t rely on distributors to get products and instead sends its own trucks to get food and other goods in bulk, which can amount to a 10 to 50 percent discount. It requires that customers bag their own groceries to cut down on the cost of a worker doing it for them. It doesn’t take credit cards to eliminate the processing fees. And its stands and displays are “pragmatic” and “lack frills” [Covert, 2013.08.09].

Paying employees full value for their labor is not a liability: it's a moral imperative. As research and practice show, it also won't sink your business.

Update 15:30 CDT: McDonald's put together a website to help its employees create household budgets. McDonald's own figures show that you can get by on minimum wage... if you get a second job, work 74 hours a week, find a health insurance policy that costs only $20 a month, and don't eat.


  1. Michael Black 2013.08.10

    We are only a few short years away from robots putting us out of work. Farmers will be able to buy field ready tractors next year that need no driver at all. In 5 to 10, trucks will drives themselves down the road. Robots in factories are already taking away jobs. They can work 24 hours a day, don't need breaks or benefits. Even in service industries, real people are going away in favor of automated systems.
    The question many be not how much we pay but what will we do with chronic high unemployment of 30-50% or more.

  2. Jana 2013.08.10

    Not sure if it started with the greed is good era of Ronald Reagan or not...but the business mantra on more and more profits has seemed to divorce themselves from any social contract that may have existed.

  3. Douglas Wiken 2013.08.10

    And corporations making billions of dollars on the backs of low-wage workers paid no income taxes. They may sell in USA, but they profit in countries with no income tax.

  4. Steve O'Brien 2013.08.10

    Jana, agreed. This country cannot survive unless business turns away from the psychotic promotion of short-term profit and becomes an agent of long-lasting society. The nature of our current economy is for all to be in service to the corporation: the workers, the tax code, the politicians . . .

  5. Douglas Wiken 2013.08.11

    Wolff's book or DVD "When capitalism hit the Fan" might be worth getting.

  6. caheidelberger Post author | 2013.08.11

    Robots—Michael is onto the same fear I have. Technology boosts our per-worker productivity. We could well reach the point where we only need the labor of million Americans to meet the needs of 300 million-plus Americans. What do we do with all those other people: give them busy work? Let them starve? Or change our paradigm to replace the idea (to which Steve points!) that we serve corporations and the economy with the recognition that corporations and machines and the economy exist to serve our human needs and dignity. When we no longer need a man's work, what do we do with him?

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