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House Speaker John Boehner
says raising the minimum wage is “bad policy” because it will cause job losses.
The
U.S. Chamber of Commerce says a minimum wage increase would be a job
killer. Republicans and the Chamber also say unions are job killers,
workplace safety regulations are job killers, environmental regulations
are job killers, and the Affordable Care Act is a job killer. The
California Chamber of Commerce even publishes an annual list of
“job killers,” including almost any measures that lift wages or protect workers and the environment.
Most of this is bunk.
When
in 1996 I recommended the minimum wage be raised, Republicans and the
Chamber screamed it would “kill jobs.” In fact, in the four years after
it was raised, the U.S. economy created more jobs than were ever created
in any four-year period.
For one thing, a higher minimum wage
doesn’t necessarily increase business costs. It draws more job
applicants into the labor market, giving employers more choice of whom
to hire. As a result, employers often get more reliable workers who
remain longer – thereby saving employers at least as much money as they
spend on higher wages.
A higher wage can also help build employee
morale, resulting in better performance. Gap, America’s largest clothing
retailer, recently announced it would boost its hourly wage to $10.
Wall Street approved. “You treat people well, they’ll treat your
customers well,”
said Dorothy
Lakner, a Wall Street analyst. “Gap had a strong year last year
compared to a lot of their peers. That sends a pretty strong message to
employees that, ‘we had a good year, but you’re going to be rewarded
too.’”
Even when raising the minimum wage — or bargaining for
higher wages and better working conditions, or requiring businesses to
provide safer workplaces or a cleaner environment — increases the cost
of business, this doesn’t necessarily kill jobs.
Most companies
today can easily absorb such costs without reducing payrolls. Corporate
profits now account for the largest percentage of the economy on
record. Large companies are sitting on more than $1.5 trillion in cash
they don’t even know what to do with. Many are using their cash to buy
back their own shares of stock – artificially increasing share value by
reducing the number of shares traded on the market.
Walmart spent
$7.6 billion last year buying back shares of its own stock — a move that
papered over its falling profits. Had it used that money on wages
instead, it
could have given its workers a raise from
around $9 an hour to almost $15. Arguably, that would have been a
better use of the money over the long-term – not only improving worker
loyalty and morale but also giving workers enough to buy more goods from
Walmart (reminiscent of Henry Ford’s pay strategy a century ago).
There’s
also a deeper issue here. Even assuming some of these measures might
cause some job losses, does that mean we shouldn’t proceed with them?
Americans
need jobs, but we also need minimally decent jobs. The nation could
create millions of jobs tomorrow if we eliminated the minimum wage
altogether and allowed employers to pay workers $1 an hour or less. But
do we really want to do that?
Likewise, America could create lots
of jobs if all health and safety regulations were repealed, but that
would subject millions of workers to severe illness and injury.
Lots
of jobs could be added if all environmental rules were eliminated, but
that would result in the kind of air and water pollution that many
people in poor nations have to contend with daily.
If the
Affordable Care Act were repealed, hundreds of thousands of Americans
would have to go back to working at jobs they don’t want but feel
compelled to do in order to get health insurance.
We’d create
jobs, but not progress. Progress requires creating more jobs that pay
well, are safe, sustain the environment, and provide a modicum of
security. If seeking to achieve a minimum level of decency ends up
“killing” some jobs, then maybe those aren’t the kind of jobs we ought
to try to preserve in the first place.
Finally, it’s important to
remember the real source of job creation. Businesses hire more workers
only when they have more customers. When they have fewer customers, they
lay off workers. So the real job creators are consumers with enough
money to buy.
Even Walmart may be starting to understand this. The
company is “looking at” whether to support a minimum wage increase.
David Tovar, a Walmart spokesman,
noted that
such a move would increase the company’s payroll costs but would also
put more money in the pockets of some of Walmart’s customers.
In
other words, forget what you’re hearing from the Republicans and the
Chamber of Commerce. The real job killers in America are lousy jobs at
lousy wages.
Robert B. Reich has served
in three national administrations, most recently as secretary of labor
under President Bill Clinton. He also served on President Obama's
transition advisory board. His latest book is "Aftershock: The Next
Economy and America's Future." His homepage is
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