Capitalism’s most basic fundamental is: if workers have no money then business has no customers. We have always been a demand economy. Despite the last thirty five years of forced continuous trickle-down (supply side) economics which has culminated to around 74% of all newly created wealth since 1981 going to the top 1%, 82% in 2017 alone. Now look, I get it, we all hate taxes. But they are the price we all pay for this thing called civilized society. Speaking of taxes, Mitt Romney was not far off when he pointed out in 2011 that 47% of American workers don’t pay any taxes. He was mostly right in the case of income taxes, but not all the other taxes, from local sales, property, excise, and other forms of local and state taxes dissociated with ones income. In essence, everyone, no matter how poor or legal status, ultimately pays taxes of some form or another.
Leading into the so-called Roaring 20s taxes on high wealth were dropped from 73% in 1921 to 25% in 1925. Sure, there was an immediate economic boon, but it was nothing but a massive bubble that ultimately popped in 1929. Same thing happened in the 80s with Reagan and the boom/bust cycles started up again, but I digress. Along came Frances Perkins and her New Deal, who, with Eleanor pushed FDR, a man who became so loved by the American people he was elected four times for having implemented Perkins’ New Deal! So many great things came from the New Deal: Social Security, unemployment benefits, welfare. But it is the minimum wage we are discussing here today.
The great thing about the minimum wage was that it was tied in with both inflation and economic growth so that the lowest paid workers could keep up with our demand economy. That was the case until 1972 when Nixon removed it from production and Reagan removed it from inflation in 1986. Had the minimum wage remained tied to both it would be somewhere near $24 an hour, instead of the $7.25 it currently is today. In the meantime inflation, production, and prices have continued to go up.
This has led to millions of hard working Americans having to work longer and harder hours, sometimes two, even three jobs just to try and make ends meet with few if any benefits. This is pure and simple wage theft! Meaning that despite the higher production levels of our economy, the worker, due to stagnant wages, has been busting their butts while the owners have been able to reap the extra profits for themselves. Hard work used to pay off for all who did. But in our rigged economy that is simply no longer the case.
In the 1950’s not only did we have 33% unionized workers, but you needed only one person in the household working to not merely make ends meet, but be able to take the entire family on a yearly vacation. In other words, all newly created wealth was more evenly distributed. The owners still got a larger share, which is understandable, but the workers also got a slightly larger piece of the pie as well. As a result he middle class boomed and grew. We were a much happier, more productive society.
Today however, the dollar continues to lose its value because of inflation, and nearly every newly created dollar has gone to the top 1% which has led to a systemic breakdown of our economic system. The worker continues to get poorer while the top 1/10 of 1% gets wealthier. Coupled with lower taxes on higher wealth and incomes, wages for the average worker has stagnated. The unsaved, non invested dollar no longer has the same purchasing power as it once did. This means the average American family with low incomes and little to no savings has a harder time spreading their dollar around for daily necessities than higher income earners with saved or invested money that has the capacity to keep up with inflation and the ever growing economy.
For those who claim to be for smaller government, listen up now. A higher minimum wage leads to smaller government! That’s right, you read that correctly. For an increase in the minimum wage to say $15 you would have millions of Americans who currently do not pay income taxes or are on government assistance would now be making enough to pay income taxes and no longer be in need of government assistance. With their larger paychecks, these millions of fellow Americans would now have more earnings to spend in the local economy, which would lead to higher demand, which will lead to more hiring, more spending, rinse and repeat.
There is a third thing that happens as well. No longer would your tax dollars go towards subsidizing companies like Wal-Mart where about 60% of employees are on welfare and food stamps to make ends meet. And no, prices would not go up if we raised the minimum wage, which is a flat out lie. The minimum wage has not gone up since 2006 and yet prices have been going up, but that is mainly because businesses don’t have nearly as many customers as they might have if we had a livable wage.
Don’t believe me? Then perhaps the word of an actual capitalist speaking on a livable wage might convince you? Go HERE or simply type in “nick hanauer minimum wage Bloomberg” into Google.