My friends on the right are arguing against the minimum wage. They say that it would be a real job killer and ruin the American economy.
Quite the contrary is true, and I have the evidence to prove it. It turns out that keeping a higher minimum wage on the bench and not making it the starting quarterback to our economic recovery will lead to fumbles, missed targets, interceptions and a loss. Why?
I did some snooping and you might be surprised to know that the American Middle Class was born when worker’s wages were increased by none other than one of the world's most infamous capitalists.
Henry Ford was behind the success of the American Middle class, and he did not do it by lowering wages. In fact, he is quoted as saying "Low wages are the most costly any employer can pay. It is like using low-grade material--the waste makes it very expensive in the end. There is no economy in cheap labor or cheap material. The hardest thing I ever had to do was to reduce wages."
Henry Ford created the Middle Class and the modern economy by simply paying workers $5 an hour, twice as much as the national average at the time. People flocked to get a job at his factory. Other companies followed suit realizing that great, qualified employees were lining up at Ford’s doors. This unprecedented gamble by Ford paid off and America was on its way to becoming an economic giant.
But why would Ford increase wages two fold? Out of the goodness of his heart? Did he suddenly adopt the communist policies of Karl Marx? No. Henry Ford understood that when you pay workers more, they can afford to spend more (especially on new cars, in Ford’s case).
We have an economy based on spending and yet do not give the working man expendable income, and thus the economy is at a standstill.
Some will argue that if companies pay workers more than profits will go down and shareholders will not be happy. Well, let’s look at Wal-Mart and Costco for examples.
Wal-Mart pays its employees very little and does not offer them benefits, meaning that they rely on government subsidies for the basic essentials like food stamps, health care and other government programs. According to the UC Berkeley study, taxpayers pay “$243 billion each year on working families who live in poverty or on the brink of it because their jobs pay so poorly.”
As far as Wal-Mart is concerned, “the Democratic staff of the U.S. House Committee on Education and the Workforce estimates that a single 300-person Wal-Mart Supercenter store in Wisconsin likely costs taxpayers at least $904,542 per year and could cost taxpayers up to $1,744,590 per year – about $5,815 per employee.”
So why do Wal-Mart employees have to rely on charity from the U.S. taxpayer? Henry Ford believed that "Paying good wages is not charity at all-it is the best kind of business." Instead of giving employees decent wages so that we can afford to rebuild our lives, Wal-Mart has chosen to foot the tax payers with the bill. All the while Wal-Mart’s profits are stagnant.
Costco, on the other hand, pays its workers well. A cashier at Costco can receive $45,000 a year with benefits and their profit margins are on the rise, even when paying their employees such great wages. This is because employee happiness translates into happier customers which translates into more sales. There is a membership fee, of course, but I will gladly pay the $110 dollars to ensure that the country has a solid Middle Class.
The U.S. worker is not a charity case. We work hard, but continue to get less and less. Back in Henry Ford's day, the average CEO made 20 times the average worker. That means a person in middle management, not a maintenance worker or cashier. Today, the average CEO makes more than 350 times the average worker at their company. Yet workers wages have actually fallen in this time, even though productivity is through the roof, higher than its been in thirty years. We work more and get less. Does this make sense to you?
The New York Times reports that, “When we consider all working-age men, including those who are not working, the real earnings of the median male have actually declined by 19 percent since 1970. This means that the median man in 2010 earned as much as the median man did in 1964 — nearly a half century ago. Men with less education face an even bleaker picture; earnings for the median man with a high school diploma and no further schooling fell by 41 percent from 1970 to 2010.”
Critics of raising the minimum wage argue that raising the minimum wage will raise unemployment and have a negative impact on the economy. As Henry Ford pointed out in 1934,"Cutting wages is not the way to recovery. Raise wages and improve the product." Henry Ford’s tactic of raising wages so consumers have more buying power has proven to be very successful.
One of the factors leading up to the Great Depression was that businesses would use unsavory tactics to lower workers wages and raise profits for the shareholders. “When business failed to control rising wages through violence or through the state, it still had one more tactic: economic crisis. In this case business would simply go on strike. Businessmen who were upset about the rate of return on their investment would refuse to invest. This refusal might involve an unwillingness to hire new workers, or, more dramatically, it might involve a refusal to continue producing at the going rate of profit. Then it would shut down plants and lay off workers. By throwing workers out into the streets, this business strike would put pressure on them to accept lower wages --a move that would tend to restore business profits to a level it found more acceptable.”
These are the kinds of business practices that led to the Great Depression, and the recession that we are living in now. Will we choose to go down that road, or will we choose to raise wages? Do we choose to go with the business model that created the economy as we know it, or with the model that caused the Great Depression?
The big game is tomorrow so let’s use an analogy. You have a proven quarterback on Payton Manning on your team. He always has big time stats and has won a Super Bowl Ring. He has been there, done that, and won. Because of his great track record and proven success rate you would trust him to throw the ball in the big game. Now, if you were coach, would you bench him for an unproven, untested quarterback like Ryan Leaf? Of course not. You want the best player to play in that situation. The best play call for us is to raise the minimum wage.
Raising the minimum wage has a proven track record of creating and expanding the Middle Class and for creating the standard of living that we knew before President George W. Bush turned the largest surplus in American history into one of the largest economic deficits. Tax Cuts for the wealthy that were never paid for was one of the main causes of the recession.
Many conservatives make the argument that if we lower taxes on the top 2% of income earners, than it will give bosses incentive to create jobs. The opposite has happened, as unemployment still hovers around eight percent with no signs on improvement. Middle Class tax cuts have been voted against three times.
Iceland has recovered from its economic recession. Why? Because they jailed the bankers who caused the economic collapse and bailed out the people. When there is a good amount of money in the hands of the average wage earner, good things will happen. When all the money is only in the hands of a few, we lose out spending power and our economic freedom.
Workers wages have remained stagnant since the 1970s, and have even dropped in a lot of cases. Let’s try doing the opposite of that, raising the minimum wage, as this policy has a proven track record while others do not. Henry Ford, the person whose business policy of raising wages shaped the modern American economy, would agree.
"A big business never becomes big by being a narrow society looking after only the interests of its organization and stockholders." –Henry Ford