On The Mark: Counterpoint: Yes, raise the minimum wage

Even newspaper owners don’t always agree, and that’s OK. This week I’d like to examine the other side of the argument for raising the minimum wage, in response to my fellow Pine Knot board member Pete Radosevich’s “Harry’s Gang” column last week.

As a retired economics professor, I can tell you there is an irreconcilable conflict of interest between employer and employee when it comes to sharing the proceeds of their joint work. The power to determine compensation is unevenly distributed. That’s why we’ve experienced, at both federal and state levels, pressures to raise the minimum wage to sustain its buying power as prices rise and to give employees a share in the increased productivity and profitability of the enterprises in which they work.

The national minimum wage was first enacted by Congress in 1938, the result of long and successful efforts by labor unions to organize for better wages and working conditions and protect workers from exploitation. But its value and purchasing power has eroded over the time, prompting periodic legislative battles at both state and federal levels to raise it.

The federal minimum wage has not been increased since 2009, despite considerable growth in output and profitability. The returns to owners have increased dramatically, observable in the skyrocketing stock market. Some state legislatures have enacted their own higher minimums. In Minnesota, the current minimum for small employers (with annual gross revenues of $500,000 or less) is $8.15 per hour, and for large employers, it is $10 an hour. Both Minneapolis ($13.25) and St. Paul ($12.50) have raised their minimum wages above the statewide levels.

Progressive economists and policy think-tanks consistently argue for minimum wage increases that will enable workers to share in the returns to their work and enable them to maintain a good standard of living. To avoid continual and costly battles to raise them, they also argue for indexing them to increases in the cost of living. A federal Raise the Wage Act of 2021 is currently being debated in Congress. It would raise the federal minimum to $9.50 this year and increase it in steps until it reaches $15 an hour in 2025. After 2025, the law would adjust the minimum wage yearly to keep pace with inflation.

These Covid months have been challenging for many businesses and households in our region and state, as elsewhere. Many enterprises, especially those serving customers onsite and/or employing people in close working proximity to each other, had to close and lay off workers. When schools and daycares closed, many had to take leave from their employment to care for their kids and/or oversee their distance learning. Various federal and state programs helped many employers and their employees, but not all. Now that we appear to be winning the Covid battle, we’re expecting bouncebacks in many areas of the economy.

This is a good time to raise both the federal and state minimum wage levels. The extraordinary boom in the stock market is evidence that people and enterprises in the highest income and wealth groups have fared quite well. But those among the lowest paid — more likely to be unemployed during this stretch — have been hardest hit: unable to pay rent and subject to eviction, and forgoing education and training that would increase their employability and incomes. In studies of past minimum wage hikes, economists have not found negative impacts on area economies. Indeed, studies show increasing the income of the lowest-paid workers results in marked increases in consumer spending, mostly benefitting the businesses where they live.

Columnist Ann Markusen is an economist and professor emerita at University of Minnesota. A Pine Knot board member, she lives in Red Clover Township north of Cromwell with her husband, Rod Walli.