• Making work pay
    April 22,2014
     

    The Legislature is moving toward adoption of a higher minimum wage. The question that remains is how much and how fast.

    The House passed a bill with a rapid increase that promised a clash with the Senate, where speculation suggested that senators might be more supportive of the slower rate of increase favored by Gov. Peter Shumlin.

    The House had proposed raising the minimum wage from its present level of $8.73 to $10.10 on Jan. 1. Shumlin favored raising it to $10.10, but in three stages — on Jan. 1, and then in 2016 and 2017. Some senators were considering a compromise, raising it to $10.10, as all parties apparently desired, but to do it in two stages.

    Now an alternative has emerged from the Senate Committee on Economic Development, Housing and General Affairs. The committee voted last week 5-0 in favor of a plan that would raise the wage to $10.50 but to complete the increase in 2018.

    Resistance to a higher minimum wage has been crumbling as awareness has grown about the historic trends that have created economic inequality in America higher than at any time since 1928. Businesses have customarily opposed the minimum wage or its increase by saying it would hurt productivity and cost jobs. Their reasoning is that if businesses must raise the wages of their workers, then they will have less money to expend on hiring new workers.

    Over the years economists have debunked this rationale in a number of ways. For one thing, they have found that when businesses pay workers higher than the extremely low level of the minimum, workers are more dependable and the workforce is more stable, which is good for business. Also, putting more money in workers’ pockets tends to stimulate the economy as a whole, creating economic demand that lifts all businesses. If a rising tide lifts all boats, then paying workers more is one way to lift the tide.

    Vermont already has a higher minimum wage than all but two states, Oregon ($9.10) and Washington ($9.32). Meanwhile some other states have already passed legislation that will raise the minimum.

    Maryland has adopted the Shumlin plan, raising the wage to $10.10 by 2017. New York has voted to raise its minimum wage from $8 to $8.75 at the end of this year and to $9 by the end of 2015.

    Meanwhile, the federal minimum wage remains $7.25. President Obama has made the wage into a political issue, urging Congress to raise it to $10.10. There is little likelihood Congress will do so, but Obama and the Democrats hope to make the Republicans pay at election time.

    In Vermont it is significant that the Senate plan approved by the committee last week is supported by the committee’s Republican chairman, Sen. Kevin Mullin. Awareness of the need to raise the minimum wage is so prevalent that Republicans have given up on fighting it and instead are looking for ways to make the change comfortable and reasonable for business. The slower rate of increase favored by Mullin would seem to give businesses time to adjust to the rate, allowing them to proceed in due course to a level even more favorable than the wage proposed by the Democrats.

    Wal-Mart, the nation’s largest employer, would seem to offer a useful example justifying the higher wage. It has become widely known that four Wal-Mart heirs possess as much wealth as the bottom 40 percent of the economy. In other words wealth is accumulating at the top at a rate that is almost medieval. How did the princes and kings of Europe pay for their castles and palaces? They exacted rents and taxes from the vast multitudes. That is the sort of wealth enjoyed by the top 0.01 percent today. Squeezing a few extra dimes for the low-paid workers who secure the wealth of the Walton family is not only good economics. It is simple justice.

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