Raising the minimum wage would boost the U.S. economy
By Ryan A. Dodd
Special to The Star
As the federal stimulus comes to an end, the U.S. economy once again appears to be faltering. In search of an alternative, all eyes are on the Federal Reserve to further reduce interest rates in an attempt to induce American households to borrow and spend more.One half of this equation makes perfect sense. Everyone agrees that what is required is more spending. It doesn’t take a Ph.D. in economics to realize that businesses only hire and pay workers because they expect to be able to sell what those workers produce — and that requires customers.
As it turns out, the single largest group of spenders in the U.S. economy consists of those very same workers who depend on wages and salaries to support themselves and their families. Therefore, getting these workers to spend more is as good a place to start as any to stimulate a weak economy.
But how are they to do so when the vast majority of American households have seen their real (inflation-adjusted) incomes either stagnate or decline for the better part of nearly four decades?
The answer has been — and continues to be, now as a matter of policy — to increase household debt. This half of the equation, unfortunately, doesn’t add up, as was made painfully obvious in the most recent economic crisis.
However, the fact of stagnating or declining real incomes for the vast majority of American households gives us a clue as to an alternate route to a reinvigorated economy.
Plainly stated, incomes have to rise, especially for those most likely to spend them — the nearly 26 percent of the labor force earning less than $10.55 an hour or $21,944 a year, just below the poverty line for a family of four.
A good start would be raising the current federal minimum wage of $7.25 an hour. By raising the wage floor, minimum-wage legislation not only would help those lying on the ground, it also would provide support to all low-wage workers in need of firmer footing.
Two bills are moving through Congress to raise the federal minimum wage to $9.80 an hour over the next three years. In Missouri, a ballot measure will go to voters in November to raise the state minimum wage to $8.25 an hour.
As a recent Star article indicated, opponents of the minimum-wage increase point out that raising it would hike the costs of doing business. But they neglect to mention the impact of rising incomes on the demand for goods and services produced by those very same businesses. At the same time, a policy aiming to raise the incomes of American workers is certainly preferable to one aiming to increase their debt loads.
Where does Sen. Roy Blunt stand on all of this? Let’s hope right next to the rest of us who want to see more jobs and higher incomes for the people who truly make the U.S. economy work. Sen. Claire McCaskill has publicly stated her intention to support raising the minimum wage in Missouri and will sign on to a federal increase when it comes up in the Senate. And Rep. Emanuel Cleaver already signed on to co-sponsor the minimum-wage increase bill in the House.
So I urge Blunt to support the Senate proposal as well as the Missouri measure in November as a first step in the creation of a more prosperous American economy.
Ryan A. Dodd is an economics Ph.D. candidate at the University of Missouri-Kansas City and a visiting lecturer at Gettysburg (Pa.) College. He supports KC Jobs With Justice, an organization that backs a higher minimum wage.