On Tuesday night, in his State of the Union address, the president will raise the problem of wealth inequality in America and how to ensure America is still a land of opportunity, with the possibility of a middle-class American Dream open to all. This will likely include the need for a minimum wage increase. As well it should. America's dramatically growing inequality is partly driven by the cold hard reality that middle-class manufacturing jobs are increasingly disappearing, replaced by technology or shipped overseas, while low-paying service jobs are increasing. The result? More families who were formerly middle class are moving into low-paid service jobs.
But when President Obama makes his case for a minimum wage increase, his plea does not need to fall on partisan ears. The minimum wage increase is a great issue for Republicans. Just not in the way they think it is.
The federal minimum wage today is $7.25 per hour – which gets you only $15,080 if you work full-time, 52 weeks straight. That's not enough to afford a two-bedroom apartment in any city in America. Contrary to the old-fashioned image of teenagers flipping burgers for pocket money, 88 percent of minimum wage workers are at least 20 years old, and a third are age 40 or older. Family-wise, one-fifth of all U.S. children have a parent who is a minimum wage earner.
No wonder, then, that before Christmas, we saw thousands of fast food workers in 100 cities across America walk off the job to protest their low pay, and thousands of Wal-Mart workers on strike on "Black Friday" after Thanksgiving. What are these protests all about? The growing frustration felt by the 30 million Americans who work on minimum wage but cannot afford to put food on the table for their children.
At one Wal-Mart in Canton, Ohio, the staff held a food drive – for the employees. That's right, they asked for donations so that the minimum wage workers at Wal-Mart, who earn $7.85 an hour under Ohio law, could bring Thanksgiving food home to their children.
Some beliefs are universal to all Americans, and one of them is that people who work full-time should not live in poverty. But the federal minimum wage has not kept pace with inflation, and minimum wage workers fall far below the poverty line. (Raising the minimum wage to $10.10 per hour – as Senate and House Democratic committee leaders Tom Harkin and George Miller have proposed – would raise a family of three above the poverty line.)
Full-time minimum wage workers today live in public housing, they feed their children with food stamps and they qualify for Medicaid, the Earned Income Tax Credit and significant other tax credits. So who is paying the rent and grocery bill for minimum wage families? Taxpayers are. You and I are subsidizing Wal-Mart and McDonald's low pay for their employees, while the Walton family that owns Wal-Mart accounts for 5 of the 10 wealthiest billionaires in America and the CEO of McDonald's made almost $9 million in 2011. The University of California found that half of fast-food workers rely on public assistance, costing taxpayers $7 billion annually. Taxpayers in New York, alone, are paying almost $1 billion each year to subsidize bank tellers in New York, while the top banks in New York comfortably pay million dollar bonuses.
That makes raising the minimum wage a great issue for Republicans, because it protects the taxpayers.
Raising the minimum wage is also great for business, a key Republican constituency. The CEO of Costco, who pays his full-time workers an average of $45,000 per year, says he gets lower turnover, more loyalty and better productivity by paying them liveable wages. Trader Joe's, Starbucks, Stride Rite, Dansko, Eileen Fisher and many other major American companies pay better than minimum wage and are pressing Congress for an increase in the federal minimum wage. McDonalds and Wal-Mart have nothing to fear. A minimum wage increase will bring them more business. Why? Guess who eats at McDonalds and shops at Wal-Mart?
Moreover, raising the minimum wage would be great for America's consumer-driven economy, because low-wage workers put every penny of their paychecks into consumer spending (while wealthier Americans hold back more for savings). The non-partisan Chicago Federal Reserve Bank recently issued a study finding that a minimum wage increase would "stimulate economic activity" by putting money in the pockets of Americans who spend every dime. The Chicago Fed found that even a $1 per hour hike would result in $700 in additional annual spending per minimum wage family. Liberal economists predict that a minimum wage hike to $10.10 by July 2015 would mean $51 billion dollars in added consumer spending over the phase-in period.
Some Republicans say that a minimum wage increase would hit small businesses too hard. But two-thirds of minimum wage employers have more than 100 employees. Moreover, Republicans don't believe in handouts. And every employer who pays full-time workers $7.25 an hour is asking taxpayers to subsidize his employees, to give him a handout. Finally, true small businesses know their employees well; they're small enough to be akin to a family, and nobody wants to see their employees suffer below the poverty line, unable to bring Thanksgiving dinner home to their kids.
Finally, Republicans who support a minimum wage increase would win public support. Just before Thanksgiving, Gallup released a new poll showing that a full three-quarters of all Americans want to see a minimum wage increase. State and city lawmakers are taking note. This fall, Washington, D.C., passed a minimum wage increase to $11.50; SeaTac, Wash., raised its minimum wage to $15 per hour; and California, Connecticut and New York have all raised theirs.
Nevertheless, although raising the minimum wage would be a great issue for Republicans – protect taxpayers, improve business productivity, kick-start consumer spending and tap into 75 percent public support – last March, every Republican in the House of Representatives voted against a minimum wage increase. Will they see the light this year?