The purpose of this diary is to show why Seattle's decision to raise the minimum wage to $15 an hour is good economics, good politics, and why I believe this may be a small start to something much bigger.
We know the story. Kshama Sawant came out of nowhere to win a seat on Seattle's city council. She ran as Socialist Alternative Party member and beat Richard Conlin, a 16 year Democratic incumbent. She ran on an issue that resonated with Seattle's working class - the $15 minimum wage.
In addition, Mayor Ed Murray supported the $15 minimum wage, and put together a 24 member business-labor-community income inequality advisory group to come up with a plan to raise the city's minimum wage to $15 an hour. The committee's members can be found here.
The committee came up with a plan that 21 of the 24 members supported. That plan is detailed in the table below found on the Seattle mayor's website.
Schedule B - The city's minimum wage will increase to $15 an hour by January 1, 2018 for employers with over 500 nationwide employees who provide health benefits.
Schedule C - The city's minimum wage will increase to $15 an hour by January 1, 2019 for employers with 500 or fewer nationwide employees if their employees do not receive tips or are not enrolled in a health benefits plan.
Schedule D - The city's minimum wage will increase to $15 an hour by January 1, 2021 for all other employers with 500 or fewer nationwide employees.
Once the new minimum wage goes into effect, it will increase at 2.4% per year. These yearly cost of living adjustments will result in a minimum wage of $18.13 by 2025 for all employers large and small health benefits or not.
A near doubling of the minimum wage is not without precedent. In 1949, U.S. President Harry Truman nearly doubled the U.S. minimum wage. from 40 cents and hour to 75 cents. In today's dollars, that would be an increase from $5.70 to $10.70 an hour. That would mean since 1949, or over 75 years, the national minimum wage has dropped by about one-third from $10.70 to $7.25.
In 2004, San Francisco increased the minimum wage from $6.75 to $8.50, and indexed it to inflation so the rate is now $10.74. The law also included a requirement businesses provide paid sick time and provide health care benefits. In 2003, the city of Sante Fe passed a living wage ordinance and the city's minimum wage is now $10.66. Currently, 21 states have raised the minimum wage above the $7.25 federal minimum wage.
There was recently an article in the Seattle Times (link above) addressing that.
Almost none, according to economists at the University of California, Berkeley, who have studied San Francisco, eight other cities that raised their minimum wages in the past decade, and 21 states with higher base pay than the federal minimum.The article notes the biggest drawback was the cost of eating out in restaurants went up 2%-3%. The same math suggests that cost could go up about 7% in Seattle.
In an interview with Bill Moyers on PBS, economist Richard Wolff talks about the myth raising the minimum wage costs jobs. He begins talking about the minimum wage at around the 6:10 mark. At the 8:08 mark, he refers to the "immense economic literature out there" from economists of a "wide range of political perspectives" that shows an increase in the minimum wage doesn't have an adverse impact on employment. Yes, there are some jobs lost because an employer somewhere doesn't want to pay the higher wage. However, we have to weigh this against the fact millions of workers will have a higher income and more money to spend. That has a very positive impact on consumer spending and the economy. When economists have studied this, the two factors "net each other out." His response? If it doesn't hurt the overall employment picture, why not transform the lives of millions of people? Why not do the right thing?
Another argument is while big business can afford it, your small family owned restaurant may not be able to. I won't argue there's not a small family owned business out there somewhere who wouldn't be hurt. Could cities and/or states provide property or other tax credits to very small business to help offset it? The concept of tax shifts has been used in carbon tax and progressive VAT tax proposals to cushion the impact on specific parts of the population. Could this help take away that argument?
Why is a significant increase in the minimum wage good politics?
Why did Kshama Sawant win running as a Socialist Party member? Why do I believe running on a living minimum wage is good politics?
I found a local Seattle news article here. In the article, Nick Licata who has been on the Seattle city council 16 years said:
Councilmember Nick Licata, who has been on the council for 16 years, said Sawant’s message resonates because a section of voters are tired of risk-averse Democrats and Republicans. Sawant, he said, has managed to make socialist ideas appeal to voters.Ah. Understandable, simple, and, I'll add relevant to many people's lives. The press reports indicate approximately 102,000 Seattle city residents earn less than $15 an hour. The same would be true in every major city. This issue resonates because its so relevant to so many people's daily lives. That's why the Seattle $15 NOW movement will spread to other cities. This is already happening in Portland and Tacoma.
“We don’t have a mature socialist political movement in the country, and probably the last time we did was literally 80 years ago,” Licata said. “To Sawant’s credit, she has been able to craft a message that is understandable, simple and eschews most of the rhetoric.”
Why should anyone who is willing to work wind up homeless? A significant percentage of the homeless population is actually employed - here
44 percent of these homeless people did paid work in the past month in a low-income job, and only 25 percent of homeless people are currently employed—the vast majority of them making minimum wage.There are a whole host of issues Democrats could take up that would be very relevant to people's everyday lives but much of the party is still fighting the last war thinking this is the 1980's. A discussion of those issues is the subject of another diary, although people are welcome to make comments!
In Elizabeth Warren's new book A Fighting Chance she talks about a meeting with Barney Frank. Barney Frank liked Warren's idea of a Consumer Financial Protection Bureau, but he thought it should wait because if he tried to push through too much at once, he could lose it all. Barney Frank wanted to pass the other parts of financial reform first. Warren then told him this story:
I don't think my grandparents knew anyone who owned stocks or other investments. For them, the Depression had nothing to do with Wall Street and the stock market crash. It was about local bank failures and families losing their savings and farms.She adds:
My grandmother had never been very political, and she sure didn't follow high finance. But decades later she was repeating her line that she knew two things about Franklin Roosevelt: he made it safe to put money in the banks - and she always paused and smiled - he did a lot of other good things.
Congressman Frank replied "I get it. Let's do it."The last 30 years have been a huge failure of macroeconomic policy. There has been a huge transfer of wealth from the poor and the middle class to the investor class. The question is sometimes asked "How long can this show go on?"
Thomas Frank recently wrote an article in Salon "Plutocracy Without End." He didn't seem that optimistic writing a qualified "this thing can go much farther still."
The ugly fact that we must face is that this thing can go much farther still. Plutocracy shocks us every day with its viciousness, but that doesn’t mean God will strike it down. The middle-class model worked much better for about ninety-nine percent of the population, but that doesn’t make it some kind of dialectic inevitability. You can build a plutocratic model that will stumble along just fine, like it did in the nineteenth century. It requires different things: instead of refrigerators for all, it needs bought legislatures and armies of strikebreakers—plus bailouts for the big banks when they collapse under the weight of their stupid loans, an innovation of our own time. All this may be hurtful, inefficient, and undemocratic, but it won’t dismantle itself all on its own.Yes, that is our job. This is why deep down I believe we will succeed. In every crisis, don't new leaders, new thinkers, and new political movements emerge? Hasn't our politics eventually gravitated towards solutions? Don't elites usually lose in the end? Didn't that happen in the 1930's? Didn't John Maynard Keynes, FDR, and other new leaders with new ideas emerge? I have a hard time believing this show can continue indefinitely.
That is our job. No one else is going to do it for us.
Congressman Raul Grijaalva appears optimistic long term. Meteor Blades wrote about it last evening.
So why is Arizona Rep. Raul Grijalva so optimistic? In an interview on Uprising, he told me, “We [progressives] are too used to losing. Pretty soon we’re going to have to get used to winning.”I recently ran across this study by Michael Lind of the New America Foundation.He argues social conservatism is in a long term decline, and over time political battle lines will be increasingly about class issues. That's a battle we can gradually win. His time table is very indefinite, and long term but it is a trend.
He explained, “We shouldn’t be wringing our hands right now. We’re on the cusp of something very important, where public opinion wants to end wage disparity, where public opinion believes that climate change is real and we have to do something about it, that we need a path to citizenship and immigration reform, that the minimum wage has to be raised and we need to create jobs.” Looking at the big picture, Grijalva was sure that “public opinion feels that our democracy is in a bad place because the rich are running it. These are all public opinions on our [progressive] side of the equation
I was especially surprised the plan had so much support from the business part of the task force. Why did they vote yes?
Howard Wright, CEO of the Seattle Hospitality Group, was the co-chairman of the task force. Here are his words on why he voted yes.
"While I know not everyone in the employer community will be satisfied, I believe it is the best outcome given the political environment."They voted yes because it was the pragmatic thing to do. And that could become a trend.