Minimum Wage Forum – Are Workers Due a Raise?

By Deborah Nelson

Like hamsters on a wheel, Americans are working harder than ever for less.  Meanwhile the rich just keep getting richer.

Between 1979 and 2011, the top 1 percent collected 86.3 percent of income growth in the United States, according to the Economic Policy Institute.

Between the 2009 recession and 2011, inequality has increased more quickly.  Income for the top 1 percent in America grew by 11.5 percent during that time.  But it decreased by .7 percent for the rest of the nation.  In Florida during that same period, the top 1 percent saw a 9.2 percent income growth.  Meanwhile, Florida’s other 99 percent saw incomes drop by 2.4 percent.

Are working people due a raise?

A May 25 panel, co-hosted by the Pensacola Coffee Party and the League of Women Voters of the Pensacola Bay Area, delved into the topic of minimum wage raises.

The Federal minimum wage is $7.25 per hour, or $2.13 per hour for “tipped” employees.  Florida’s minimum wage is $7.93 per hour or $4.91 for “tipped” employees.  Florida recalculates the minimum wage every year, based on inflation, per a Constitutional amendment passed in 2004.

The Wage forum focused on large corporate pay rates.  Panelists didn’t address revenue differences between large and small employers.

Panelists agree that the widening income inequality between rich and poor and what’s left of the middle class is cause for concern

“Our society is weakened by income and wealth inequality,” University of West Florida economist Dr. Rick Harper affirmed.  “The biggest problem is we have become more productive but the wealth from that productivity is becoming more and more concentrated.”

Worker productivity is relatively high.  Americans are working hard.  But because incomes for most Americans are stagnant or declining, the benefits of American productivity are almost exclusively going to the top income collectors.

Meanwhile, necessities like food, education, health care and a place to live are increasingly harder to afford.  And it’s American taxpayers who are footing the bill for paychecks that don’t pay the bills.

Including food stamps, Medicaid and subsidized housing, WalMart workers received $6.2 billion from taxpayers to make up for low wages, according to an April 2014 Americans for Tax Fairness report.

What’s the solution?

Not a minimum wage increase, says University of West Florida economist Dr. Rick Harper.

A wage hike would cause employers to expand automation and fire some employees, Harper predicts, and would increase the price of goods and services.  Employees who get raises would be better off, he said, but others will lose employment.

“Those who lose’s losses are worse than the gains to those who stay,” he remarked.

The solution is to subsidize low income workers without penalizing businesses, Harper said.

He recommends increasing and expanding qualification requirements to receive Earned Income Tax Credit payments.  EITC’s are a Federal income tax “refund” that can exceed the amount of taxes paid.

Harper supports adjusting the Federal tax code so higher incomes would pay more to subsidize expanded low income credit payments.

“We’re going to have to have higher revenue from higher income people,” he said.

“If somebody is poor you should subsidize their income rather than penalizing the person who’s willing to give them a job,” Harper remarked.

Income redistribution would be more economically sound than minimum wage hikes, Harper argues.

That includes, he said, eliminating the carried interest deduction that allows wealthy filers to pay the lower capital gains rate on some income instead of the regular top rate.  But Harper stopped short of advocating a capital gains rate increase.

The highest ordinary income tax rate is 39.6 percent.  But the highest capital gains and long-term dividends rate is 20 percent.

“Over the past 20 years, more than 80 percent of the capital gains income realized in the United States has gone to 5 percent of the people; about half of all the capital gains have gone to the wealthiest 0.1 percent,” according to a September 11, 2011 Washington Post report.

Showing up for work is a moral activity that improves society, said Harper.

Capital gains income comes from non-work sources like securities investments and real estate appreciation.

Harper admits that tapping the rich – even through non-capital gains tax hikes – to pay for expanded Earned Income Tax payments is politically unlikely.  But, he said, raising the minimum wage would be worse than doing nothing.

Florida AFL/CIO Legislative and Political Director Dr. Rich Templin agrees taxpayers are currently subsidizing the labor force so big business doesn’t have to pay higher wages.

Bottom tier workers have changed in recent years, he points out, noting that 88 percent of minimum wage earners are over 20 years, 56 percent are women and 43 percent are college educated.

Could America’s consumer-driven economy run out of consumers?

“We’re getting close to a tipping point where workers don’t make enough to support as consumers the very companies they’re working for,” Templin remarked.

“We need to radically reevaluate wage policy in this country so we can begin to restore the U.S. economy.”

“The lack of spending power in the bottom 50 percent of America’s wage distribution is holding us back,” Harper noted.  “When you put money in the pocket of a working class family they go out to the store and spend it.”

Alleviating poverty will allow businesses to create more jobs, said Harper.  He points out that some jobs pay less because employees have no better job alternatives and also blames low employee skills.

The way to increase consumer demand is to increase wages, said Templin.  “WalMart will still make decent profits,” he noted.

Should millionaires make more money, or should low wage workers make more disposable income?

“Which one would help the economy,” said local publisher Rick Outzen.  “I think we need a new norm.  We create a new norm and things will adjust to it.  The sky won’t fall.”

“If you look at corporate profits, they continue to go up,” Templin noted.  “Let’s stop giving tax incentives for corporations to move overseas.  Let’s bring manufacturing back.”

It’s not just the unskilled who are stuck in dead end jobs.

“The next time you go to a restaurant or a coffee shop, ask them what their degree’s in or what their other job is,” Outzen remarked.

Jobs that used to be considered “entry” positions aren’t any more, he pointed out.

Sharon Gibb took issue with the contention that low-wage jobs are priced according to skills

“We have a vast pool of highly skilled workers who are unemployed and underemployed at the moment,” she said.

Gibb pointed out the local culture is stacked against labor organizing.

“I’m talking about people who are working hard who don’t seem to understand what their personal interests are,” she remarked.  “We need to organize them to put pressure on government.”

Templin noted the shortcomings of media political coverage, and the high cost of getting campaign information out.

“They don’t understand what the issues are about and they don’t understand because there’s no vehicle for them to get it,” he said.

Local writer and producer Robin Reshard says the issue of income inequality is no longer confined to minority communities.

“We’ve been having this conversation in African American and other minority communities for quite some time,” Reshard remarked.  Reshard called for accountability at the individual, institutional and systemic levels.

“Corporations get subsidized just like individuals do,” she remarked, “but we don’t call that welfare.  We vilify a person on welfare but yet we celebrate the corporation.

“The problem ain’t the welfare mother in the Cadillac.  She’s the least of our problem.  It’s the company making the Cadillac.  In this country we’ve had that dividing line and it’s the person against the corporation.”

Reshard said that both raising wages and expanding tax credits are viable options.

“The one way I look at the minimum wage is it’s getting businesses to do what they should be doing,” said Outzen.  “We have to require corporations to do the right thing or we would have no safety [regulations].”

Retired educator Karen Groves recommends investing in secondary work training instead of FCAT spending.

“We need to train those kids for these jobs they supposedly don’t have the skills for,” she remarked.

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