The wages of low pay

On a recent evening during my book tour, a Seattle audience listened in shocked silence as a pediatrician spoke of treating a dangerously unhealthy child suffering from serious neglect.

Dr. Tao Sheng Kwan-Gett, welcoming the crowd to a lecture I was about to give on inequality, said he asked the child’s mother question after question about basics every parent should know. Again and again the mother had no answers. She just did not know the condition and activities of her child.

As Kwan-Gett spoke, his voice rose in cold fury, his face flushed with anger at the callousness of this awful excuse for a parent. Finally, he said he asked the mother directly how she could be so uncaring.

Abruptly, the doctor’s voice turned soft as he recounted the mother’s response. She and her husband worked such long hours at such below-minimum-wage pay that they were always desperate for sleep. They were barely able to pay the rent. Their choice was between neglecting their child and living on the streets, where life is nasty, brutish and often short.

“My anger,” Kwan-Gett said softly, “turned to sympathy.”

His words brought home the hidden and future costs of our callous mistreatment of tens of millions of American workers whose incomes keep falling even as the economy recovers from the Great Recession.

The price we pay today for low wages is as big as it is easy not to notice. Unless we change our public policies, that price will explode as a significant number of children grow up without proper care and diet, and with no reason to believe their own initiative will make their lives any better.

In Seattle the local business and political leadership, while far from united, is about to take a major step toward ending stories like Kwan-Gett’s. Seattle is going to lead America in moving toward a livable minimum wage, one that makes sure everyone who works full time is not mired in poverty.

That change in attitude came about after a socialist, Kshama Sawant, ran for City Council on a platform of raising the Seattle minimum wage to $15. The business and political establishments woke up when Sawant won the citywide race.

Any doubt that the public had more than enough of declining wages vanished when Howard Schultz, the founder and CEO of Starbucks, said a $15-an-hour wage would hurt. Schultz, who last year earned $9,600 an hour, failed to win over the elected officials who make municipal law.

Mayor Ed Murray put forth a plan to raise the local minimum wage, currently $9.32 an hour, in stages. Big employers would pay first, starting in 2017. Under the mayor’s plan the full $15 minimum would be delayed until 2021, by which time inflation will likely have eroded it to $13 in 2014 dollars.

Still, that is a vast improvement over what is happening in the other Washington. On Capitol Hill the Republicans killed President Barack Obama’s proposal to raise the minimum wage to $10.10.

Raising the minimum wage, opponents claim, would mean fewer jobs, and thus holding the minimum wage down is really for the good of the poor, who would evidently be better off working themselves to death and not caring for their children than being able to make ends meet. 

Of course, the debate on Capitol Hill is not about raising the minimum wage, but about restoring it to close to its inflation-adjusted level in 1968. Back then jobs were plentiful and polls showed broad popular support for the federal government, as George Will noted in his most recent Washington Post column, on the decline of America since President Lyndon Johnson’s Great Society social programs.

Today government gets terrible marks in the polls. Candidates for Congress who want to eliminate the minimum wage abound. On television and radio, people who have never worked at minimum wage, who have never met people like the mother of Kwan-Gett’s patient, pontificate about why lower pay is good for everyone, or at least that government interference in the free market will only make things worse.

Funny how government was in higher repute when it helped make the lives of millions better through policies that included a much higher minimum wage, while today — as government funnels hundreds of billions to corporations and the richest among us — its favorability ratings are down sharply. Will sees that as proof that we need to cut the Great Society policies and programs that help the vast majority. I think he is reading the evidence exactly backward.

I was a minimum-wage worker in 1968. Back then America was not nearly as rich as today, yet in today’s dollars the minimum wage was $10.90 an hour. Working four part-time jobs that left me desperate for sleep, just like that child’s mother, I managed to feed my wife and child, make the rent on a leaky shed-like dwelling in a swampy field near Santa Cruz, Calif., and buy just enough gas to get to work, often without a dime in my pocket.

At today’s minimum wage I would have to work 40 percent more hours to eke out that awful existence. The human body cannot sustain those demands for long. That neglected child’s parents may soon find their bodies exhausted, bringing on heart attacks, strokes or other ailments that will diminish their capacity to work. And that child Kwan-Gett treated, because the parents could not make enough to care for her, will never fully develop, even with the good doctor’s intervention.

If restoring the minimum wage to the level of more than four decades ago actually destroyed economies, then Washington state, with its nation-leading $9.32 an hour minimum, should be a wreck. Facts show otherwise.

First, Seattle students and unskilled workers I interviewed indicated that the street wage — the real minimum wage paid by honest employers — is $9.50 an hour. That is, to attract workers employers need to pay even more than the highest state-level minimum wage in America, at least in and around Seattle.

Paychex, the payroll processing firm, and IHS, a global jobs consultancy, report that among the 20 most populous states, Washington led the country last month in new jobs created by small business, as the graphic below shows. 

The reason for these results seems clear. Higher pay increases what economists call aggregate demand — the collective capacity to buy goods and services. When people make more, they have more to spend, not just on the rent but also on everything else, and they have time for both sleep and nurturing their children.

In contrast, when all the gains are concentrated in a few hands, as the economic data show since the Great Recession ended in 2009, piling on more does not help the economy grow in the face of low aggregate demand. People like Howard Schultz, who already can consume virtually anything at any price, cannot consume more — they can only invest more. But without demand for goods and services there is little demand for new investment, creating a vicious cycle of widening inequality instead of a virtuous one of growing prosperity.

Driving down pay for low-skilled workers — and cutting labor law enforcement so severely that even brand-name employers such as WalMart and McDonald’s steal from their workers through wage theft — is the path to a future in which public costs must rise as overworked people become disabled or die and children grow up less than whole.

Who is going to work hard in the future for diminishing returns? And how many youngsters who could have grown up to become productive contributors will instead, perhaps like that neglected child, never develop the capacity to be productive because they lacked the most basic requirements of early life, not the least parents with time to nurture them?

If we don't restore the minimum wage, we're going to find out.