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Build Back Better, Minimum Wage & the Economy

By Mike Hodges

  • The American Rescue Plan and the Build Back Better plan will help bring back our economy
  • Rising costs due to the pandemic, and a lack of inflation protection in the Federal Minimum Wage still leaves workers struggling to make ends meet
  • Congress must protect low wage workers by adding an inflation proviso to the Federal Minimum Wage law

Thanks to President Biden’s American Rescue Plan Act signed in March of this year, and with the Administration’s Build Back Better plan working towards passage, the economy is vastly improved and will get stronger.

According to the Bureau of Labor Statistics the unemployment rate fell by 0.4 percentage point to 4.2 percent in November 2021-near pre-pandemic levels. The S&P 500 is at an all-time high, and income levels have risen over 10 percent since January of 2020. In fact, the economy in some ways is overheating.

The Inflation Worry

The Consumer Price Index (CPI), which measures inflation, is up 6.8 percent since November of 2020. This is mainly due to a huge demand for goods at the same time supply is restricted, and an increasing realization that wages have been stagnant for far too long

During the pandemic consumers have had extra resources to spend on goods and services as they spend less on travel, resorts, and restaurants during this time. And the supply of goods has slowed drastically as manufacturing has slowed because of pandemic restrictions, and bottlenecks at ports have lengthened the time to transport goods.

Many economists expect this high inflation to be transitory. Treasury Secretary Janet Yellen was quoted as saying “On a 12-month basis, the inflation rate will remain high into next year, because of what’s already happened. But I expect improvement by the second half of next year,” Federal Reserve Chairman Powell was not as optimistic, he warned Congress that while the Federal Reserve continues to expect inflation will move down “significantly” over the next year, it “now appears that factors pushing inflation upward will linger well into next year.” It should be noted that inflation, though higher now than last year, is nowhere near the high inflation numbers of the late 70’s and early 80’s.

Coping with Inflation

High earners and the wealthy can cope with transitory high inflation because it consumes far less of their income on a percentage basis and their long-term savings will have time to rebound. However, it negatively affects middle class families and families below or near the poverty line much more. And it can be devastating to a family if unforeseen issues-such as a medical emergency-crop up.

Lower income families spend a far greater percentage of their income on housing, food, transportation, healthcare, and clothing, giving them less income to spend on emergencies. Imagine having to choose between buying food and paying for medicine and health care during an emergency. This is a choice no family should have to make.

Fixing the Wage Gap

It is true that lower income group’s wages have recently kept up with inflation, or at least nearly so. But it does not make up for the decades of lost wage increases that were enjoyed by those in the upper income levels and the wealthy. The unfortunate part of this huge wage gap is that it did not need to happen. One of the main reasons inflation has taken a huge toll on lower income families is Congress’ inability to provide a yearly inflation hedge to our federal minimum wage.

According to Dean Baker, Senior Economist for the Center for Economic and Policy Research, “Until 1968, the minimum wage not only kept pace with inflation, it rose in step with productivity growth. The logic is straightforward; we expect that wages in general will rise in step with productivity growth. For workers at the bottom to share in the overall improvement in society’s living standards, the minimum wage should also rise with productivity.”

Unfortunately, the gap between productivity and the minimum wage has grown substantially worse since the 1970s. This point was aptly put by Dr. Baker when he said “However, if the minimum wage did rise in step with productivity growth since 1968 it would be over $24 an hour today…” And according to the AFL-CIO, “Raising the federal minimum wage to $15 an hour by 2025 would raise wages of up to 27.3 million workers and lift 1.3 million families out of poverty, according to a report by the Congressional Budget Office.” It’s worth noting that because of our current high inflation, even the call for $15 an hour may be too little to bring families above the poverty line.

And yet, the federal minimum wage still stands at $7.25 an hour-unchanged since 2009. As you have read, this is less than half of an inflation adjusted minimum wage (over $15 an hour) would be, and less than a third of what a productivity measured minimum wage (over $24 dollars an hour) would be. Imagine providing for your family after losing 66 percent of your buying power- that is what families earning the federal minimum wage have endured for years.

Minimum Wage and the Labor Shortage

It begs the question: Would we still have a labor shortage had the minimum wage been adjusted for inflation annually? According to Lane Windham, Ph.D. and many others, the answer is no.

In her article in The Hill, Dr. Windham said, “As we approach Labor Day, America’s working people are deep into a protracted general strike. Millions are refusing to go back into low-wage, no-benefits jobs that require they abandon dignity and rights at the workplace door. Their struggle has brewed for 40 years as wages stagnated, benefits vanished and public policy offered working families little reprieve. Employers complain that too few people are returning to work, but America’s “labor shortage” is really a shortage of good wages and workers’ rights on the job.”

Current evidence appears to show that many of those who have dropped out of the job market recently are middle aged and older who have decided to retire early or retire a second time-especially in areas with large numbers of those newly retired.

It is ironic that some of these newly retired were coaxed out of retirement just years before the pandemic to make up for an already shrinking number of low wage workers. With or without the pandemic and with or without retiree workers, a crisis caused by an inadequate living wage for workers was inevitable.

Stop Corporate Wage Subsidies

That is why Congress must adjust the minimum wage annually and automatically to at least keep pace with inflation-if not productivity. The Administration’s Build Back Better plan and the American Rescue Plan Act will make great strides in assuring that Americans near the poverty line do not fall further behind.

But it should not be the federal government that subsidizes corporate payrolls that are too low to keep a family out of poverty. It is well past time that corporations and businesses act responsibly and pay a livable wage. For far too long these corporations have gotten rich off the backs of their employees–with congressional help.

Call to Action

It is time to #RISEUP! Contact your United States House and Senate members to demand an increase in the minimum wage and demand an annually adjusted minimum wage. And fire-with your vote-any member of Congress who will not support this. Send your comments to Sen. Lindsey Graham, Sen. Tim Scott, and Rep. Tom Rice.

It is also time to #RISEUP! and support-with action-the passage of President Biden’s Build Back Better plan. This plan goes a long way to ease the burden of families on the lower end of the economic scale, while we wait impatiently for Congress do their job of protecting the health and well-being of every American who needs it. Urge Rep. Rice and Senators Graham and Scott to put politics aside and support this initiative.

Further, if you would like to support HCDP’s efforts in Horry County to elect Democrats and support the Democratic agenda, please contribute. It’s time to #RISEUP! and defeat the Republicans’ efforts that will only destroy our nation. Please join us in that effort. You can make donations at: https://secure.actblue.com/donate/hcdpvalues

Mike Hodges is a member of HCDP’s Communications Committee. He is a retired airline pilot and makes his home in Horry County.
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