Why a Raise in the Minimum Wage Will Happen

By Imara Jones May 15, 2014

Today in a move of coordinated mass-action fast food fast workers in 150 cities in the United States will go on strike to demand to a higher minimum wage.This unprecedented walk-out, combined with overwhelming public support for an increase in the minimum wage, could signal good news for our economy.  That’s because they point to the political inevitability that the minimum wage will to be raised.  The faster Wall Street and corporations resisting the income hike grasp this reality, the better it will be for the millions of people who work full-time but don’t earn enough to live; especially women of color.

The trend line of where the country is headed on the topic is borne out by the recent history of worker action.  Starting with a single walk-out at one McDonald’s restaurant in 2012, fast-food related strikes grew to more than 100 in 2013, and is expected to exceed that number by 50 percent over the next 24 hours. But the expansion isn’t only limited to the United States.

Low-wage workers across the country will be joined by those in 32 other nations on six continents.  Ron Oswald, General-Secretary of the International Union of Food, Agricultural, Hotel, Restaurant Catering and Tobacco and Allied Worker’s Associations, told Al-jazeera America that the U.S. strikes had encouraged workers around the world to emulate their "fight for higher pay and better rights on the job."

Today’s  action is coordinated by Fast Food Forward,  an organization with backing from several groups including the nation’s largest union. But the growing grassroots participation by workers shows the depth to which employees believe that higher wages are a matter of survival.  When asked during a walk-out last year just steps away from Times Square, in the heart of one of the world’s most expensive cities, Elba Godoy told NBC News simply about her $7.25 hourly wage, "It’s not enough."  

Public Support and Economic Need

Unsurprisingly most Americans agree with the walk-out’s goals. A recent Quinnipiac University poll shows that seven out of 10 people support a lift in the minimum wage, including half of all Republicans.  Results in a poll taken last year by Gallup were nearly identical.

Increasing the minimum wage is so overwhelmingly popular because the current minimum wage of $7.25 reflects a harsh financial reality.  A single parent with a full-time job at a fast-food restaurant who earns the current minimum wage is officially in poverty.  Women make up most of those in low-wage work, and the majority of those at the bottom of the pay scale are women of color

That’s why legislation currently before the Senate proposes raising the minimum wage to $10.10 an hour.  The Economic Policy Institute says that $10.10 per hour will lift 4 million families out of poverty and raise the wages of another 24 million workers. But it would still leave millions more behind. 

Therefore it’s no surprise that those on-strike today are calling for a "living wage" of $15 an hour. That’s enough to keep the vast majority of working families from being poor.

But there’s a broader economic truth here.  Overall, corporations are more profitable than at any point since World War II, yet workers’ wages are near a 40-year low. In way that’s painfully ironic the declining wages of millions of Americans, such that close to half of all families are poor or near poor, is one of the key drivers of these record private sector gains.

The fact that the minimum wage, adjusted for inflation, is lower than its ever been is a reason why–for example–McDonalds has had double-digit increases in profits over recent years akin to what Wall Street expects of high-growth tech companies of the future rather than more mature companies from the past. That’s because every year companies that rely on minimum-wage work have relatively fewer labor costs thanks to the stagnant minimum wage.

The problem with this scenario of economic imbalance–with enormous gains at the top fueled by declining earnings at the bottom–is what it caused the Great Recession.  As I have written before, analysis from the International Monetary Fund concludes that mass economic inequity fuels economic crashes

Though these severe economic crises express themselves differently, the housing bubble in 2008 or the stock bubble in 1929, they have the same root: a growing gap between economic beneficiaries and economic losers.  

To put it bluntly, raising the minimum wage would be an act of national economic preservation, rather the calamity that those who are hostile to it claim.

Corporate Opposition and Change

Despite this growing political and economic rationale for raising the minimum wage, private-sector lobbying organizations are nearly unanimous in opposing it.  The U.S. Chamber of Commerce calls the minimum wage debate a "distraction." 

The National Restaurant Association and the Business Roundtable are in agreement. And the National Association of Manufacturers came out against even allowing the $10.10 measure before the Senate to proceed to an up or down vote.

The challenge is that though their resistance may not be futile, it is potentially self-defeating.  Stifled debate and action at the national level has resulted in 13 states moving forward with higher minimum wages earlier this year on their own, with 34 others perhaps ready to do the same. 

Moreover, local pressure for the even higher wage of $15 an hour is mounting.  Earlier this month, Ed Murray, Seattle’s Mayor, announced a plan to up Seattle’s minimum hourly wage to $15.  San Francisco is also considering passing the "living wage" of $15.  And demonstrations across the country led by thousands of workers today will only increase the weight behind the concept.  In short, the private sector fight against $10.10 an hour is only adding heft to the movement for $15 an hour.  

The changing landscape is perhaps why Howard Schultz CEO of Starbucks has recently come out in favor of increasing the wage to $10.10.  Schultz believes that a raise in the wage would not have any impact on jobs nor his company’s bottom line.  Subway’s CEO, Fred DeLuca, echoed the same point last week, as did Costco’s CEO over a year ago. Hank Greenberg, former head of Wall Street firm American International* Group, told Bloomberg News plainly about the minimum wage, "from a practical point of view I hope they get it done." 

Whatever the eventual raise is–$10.10, $15 or somewhere in between–a change is coming.  The combination of worker action, public support and economic necessity is pushing it further along as time goes on.  The fact that it’s all coming to head during an election year adds momentum to the likelihood of change. 

The bottom line is that worker action over the past two years has helped pushed the country that much closer to a new economic contract for those on economic margins and the private sector is perhaps on the verge of finally accepting it.

Correction: Hank Greenberg was the head of the American International Group, not the American Insurance Group as previously stated.