WHAT IS A LIVING WAGE
What constitutes a living wage? The answer to that question will vary based on numerous factors including geographic region, number of dependents, and other circumstances. Will setting the federal minimum wage at $15 per hour ensure that every full-time worker has enough income to make ends meet?
The Congressional Budget Office (CBO) states that a $15 minimum wage would lift some families out of poverty while leaving some individuals without jobs. The $15 hourly wage represents a current median income level for many regions across the nation, which is why it is the hourly rate being proposed. The last time there was an increase in the federal minimum wage was 2009.
Most people want workers to be able to earn enough to ensure economic stability. The majority of Wisconsin residents are in favor of increasing the minimum wage. In 2016, a Marquette University poll showed that 51% of Wisconsin residents support a sizable increase in the minimum wage that would double the hourly compensation of low wage earners. In 2014, voters in 13 counties, counties with a referendum on the ballot, voted in favor of increasing the minimum wage. Our legislators have hardly been representative of their constituents on this issue. People may disagree on the dollar figure, but few will argue against having a minimum wage.
The minimum wage approach, however out of date the current minimum wage may be, is likely to fail on delivering the promise of a living wage in the long run. For minimum wage earners, when a raise is first implemented, there is noticeable improvement for some while others may have their hours cut or even lose their job. These outcomes are relatively short term because eventually the costs of goods and services go up. Business owners do whatever they can to maintain a high profit margin.
The impacts of the subsequent inflation often hurt those on a fixed income the most. Annual cost-of-living adjustments (COLA) to Social Security seldom keep up with the rate of inflation. Unless there are more frequent increases to the minimum wage, along with more generous COLA disbursements, and price caps imposed on certain essentials, the long-term economic outlook may not be any better than what we have now.
Over the past four decades, while wages for top earners have grown significantly, wages for low and middle-income households have shown little growth when the numbers are adjusted for inflation. The cost of goods and services have continued to outpace wages, leaving more households with less. This may change as a result of COVID-19, as economic recessions tend to drive down costs, but we may see many more long-term unemployed as well.
The minimum wage laws that were enacted in 1938, as part of the Fair Labor Standards Act, improved the lives of many Americans. But if anyone expects a $15 minimum wage to solve the problem of income inequality, they need to think again.
It is time to consider other solutions. A guaranteed basic income should be part of the solution. This measure differs from the concept of the universal basic income proposed by Andrew Yang; it would not equate to every household receiving a check for $1,000 each month. Americans, regardless of employment status, need to receive enough money to cover the necessities. It would need to be a dollar amount where the vast majority of people would still feel motivated to earn more, while being enough on its own so that people who are not able to work can maintain a reasonable standard of living. Instead of a minimum hourly wage, this would be a minimum annual income, and as such, could never be at or below the poverty level. If done right, it would render poverty non-existent.
In order to create a more just economy, our government should set limits on the wage ratio between the highest paid workers and median income earners within a company. This is not the same as setting a maximum wage, something that is typically thought of as socialism. A CEO could still earn insane amounts of money, but their income potential would be tethered to the income of other employees, including the lowest paid.
Companies such as Ben & Jerry’s and Whole Foods have used the wage ratio model. According to a CNBC report from last year, CEOs now make 278 times the median wage in their companies. The Dodd-Frank Wall Street Reform and Consumer Protection Act required publicly traded companies to report their wage ratio. That was a step in the right direction, but merely exposing the fact that the CEO of McDonald’s makes more than 3,000 times the median income for a McDonald’s employee does nothing to solve the problem that many Americans who work full time are not getting by on that income.
The need for United Way’s ALICE (Asset Limited Income Constrained Employed) fund, money that is directed at programming to help the working poor, speaks to the obscenity of poverty in an affluent nation. It is ironic that the very people who fail to pay a living wage will step up to chair a campaign. Obviously, charity fails to solve the problem of income disparity.
What should the limit be on wage ratio? I have seen 40:1 suggested at one time, but some see that as still too high. One would be hard-pressed to find a specific ratio being recommended by every economist who supports this approach. I think most would say that anything less than 100:1 would be a vast improvement. Even at 100:1, a CEO who feels they need to earn $10 million per year would then be required to offer a median income of $100,000.
The idea that “I do better when you do better” is the sort of uniting force this nation needs right now. Wage ratio limits embody that idea.