Blame all around for the impasse over minimum wage.
Wisconsin Gov. Tony Evers’ proposed $91 billion biennial budget is many things, some good, lots not good at all.
We can leave most of it for another day, because the governor’s budget is an exercise in fanciful thinking. Evers and legislative Republicans are, for all practical purposes, governing different states. The governor’s priorities—starting with a nearly 10% increase in spending—mostly will be non-starters in the Republican-controlled Legislature. Republicans will write their own version and Evers will wave his veto pen. What eventually is adopted will be a product both parties can hold their noses and support. That’s divided government, and it’s not all bad.
Let’s take a look, however, at one aspect of the proposed budget because it runs roughly parallel to federal legislation on the same subject.
The minimum wage.
Currently, it’s $7.25 an hour in Wisconsin, which is consistent with the national requirement. The Wisconsin rate has not changed since 2008, when it increased from $6.50 an hour to $7.25.
Legislation moving through the U.S. House of Representatives, attached to pandemic relief, would establish a path toward a $15 an hour national minimum, reaching the top figure by 2025. Evers’ state budget calls for raising the minimum first to $8.60 per hour, then to $9.40 in 2023, and to $10.15 by 2024. Additionally, he calls for establishing a task force to study how best to reach $15 at a later date.
First, consider findings by the nonpartisan Congressional Budget Office on the impact of a $15 minimum wage requirement. It’s a mixed bag. As common sense might suggest, bumping workers to at least $15 an hour would raise pay for some 17 million Americans and lift nearly a million out of poverty. That’s on the plus-side. At the same time, the CBO says the higher pay would result in an estimated 1.4 million job losses. If you’re one of those, that’s decidedly negative.
In both Washington and Madison, Democrats are riding the increase pony hard while Republicans are yelling, “Whoa!” Both parties share blame for the messy issue and have a lot to answer for, in our view.
First, stipulate this: Trying to get by on $7.25 an hour is like scaling a tall tree that grows faster than you can climb. Workers who want to get ahead have to get promoted or find a different tree.
By the way, let’s set aside a third argument sometimes heard from hard-case free marketers, mainly that there shouldn’t be a minimum wage. Or, basically, that it should be zero. Market demands for skills would set wages for each employer. No minimum; no maximum. There’s a certain sensible ring to that, in theory, but the train left the station a long time ago. Politicians will not repeal national or state standards. Minimum wage rules are here to stay.
So what about those Democrats, pushing hard to reach $15 an hour? In the first place, it makes no sense to set $15 an hour in Beloit, New York and Los Angeles. Geography matters. Secondly, Democrats betray their status as the party of government. Want to spend more on payroll? Democrats live in a world where that means just raising taxes. Businesses do not have the luxury of raising costs while assuming the extra overhead can be passed on to consumers. Plenty of businesses operate on very thin margins. Raising employee costs most likely will result in layoffs or even business closings, because profits are not optional in the private sector. Too many Democrats don’t get that. A rush to require higher wages will cause collateral damage.
Likewise, raising the minimum pressures entire pay scales. Does it make sense for businesses to pay their worst, average and best employees all $15 an hour? Of course not. So the worker currently earning $15 an hour is going to expect a hefty raise to maintain the spread. Owners and operators will go crazy trying to make that balance sheet work.
Republicans don’t get off the hook either. Republicans always oppose increasing the minimum wage. That’s why it hasn’t budged in more than a decade. We get it. Republicans fancy themselves as the party of business, so holding operating costs lower is the partisan default position. Perhaps that stubbornness will ease under the current populist trends within the party, as Republicans try to identify more with working-class voters.
This shouldn’t be that hard. If the two political parties are reconciled to the notion that a minimum wage ought to exist, the path toward a less volatile model is obvious. Set up a system that reviews and adjusts minimum wage levels at regular intervals, similar to the way Social Security benefits are determined. It takes the political infighting out of the picture. It reviews levels based on actual data. Market-based filters can take into account differences in geography and cost of living.
It would require Democrats to accept that businesses are not jobs programs or charitable institutions. Businesses represent the life investments, and often big gambles, of entrepreneurs. Republicans would have to accept that people who work hard every day ought to make enough to sustain themselves. Holding the line on labor costs may play well with donors, but a party chasing the populist vote needs to find a better answer.
Thirteen years since the last change is enough. Democrats and Republicans should make a deal.