Raising the Minimum Wage

Paul Zarembka: Let’s begin by forgetting about economic theory. The ethical point should be that anybody who’s working at least an eight-hour day deserves more than a living wage.

Jerry Newman: I agree. The minimum wage needs to be considerably more than what it is. The question is, how to do it and who should do it?

PZ: That’s a big question. Whatever that number is supposed to be, it needs to be indexed according to some reasonable calculation, like the consumer price index. I’m talking about a real level over the long term, not just a short-term number that gets eaten up by inflation.

JN: I think the highest the minimum wage has been, in terms of the CPI [consumer price index], was in the late 1960s. It was something like $10.75 in today’s dollars. So if we had just kept up in terms of indexing it, as you put it, we’d be at $10.75 right now, which is considerably more than the $10.10 that Congress is balking at. As far as whether or not the minimum wage is going to have an impact on employment, it seems that every article you look at, it depends on who they sample, and over what time frame, whether they came to the conclusion that there is no impact or a short-term impact or a long-term impact. It’s really got me confused, and I’m supposedly somebody who knows a reasonable amount about this.

PZ: I know where you’re coming from. I think the wash is that it’s not much either way.

JN: I believe the old CEO of McDonald’s said in public he would have no trouble with $10 an hour as a wage. The new CEO I suspect would be prepared to offer that kind of wage too, and I’m not sure what’s keeping things slow, other than the inertia endemic to the government.

PZ: McDonald’s wouldn’t have a problem if it knew its competitors had the same problem. If there’s a law saying it has to be at least this, and it will affect everybody in the industry, then I think they would understand.

JN: Right. It has to be a broad-scale change; otherwise nobody’s gonna take that first step. The elephant in the room is calling for a $15 minimum wage. If you get a huge change like that, we’re talking about employers of every size, variety and industry shaking their heads and saying “I just can’t do this.” We also have to note one of the indirect effects, which hardly anyone speaks about, which is the wage hierarchy in the U.S. If wages go up 2 percent for one group, you can bet they’re going to go up 2 percent for another. There’s going to be agitation for wage increases all the way up the hierarchy.

PZ: I know somebody working at HSBC making $14 an hour, and of course they would expect to be making $20 or $22 if you have that kind of increase in fast-food wages. It’s going to propel expectations that wages in general should be higher, which I have no problem with, to tell you the truth.

JN: I’d be perfectly happy to pay more for my french fries. It’s interesting, when I went into the industry for my book, I had this perception of fast-food workers that was diametrically opposite from what I found. They’re highly motivated and intelligent, and many wondered how they could get out of what they perceived to be a dead-end job. One young woman who wanted to go to college said she makes $6 an hour, and she’s a single parent paying $5 an hour in babysitting. She asked me how she could pull it off. For once in my life, I didn’t have an answer.

PZ: For this woman, you’ve got to consider that college isn’t free, so you can get in deep debt making that move.

JN: My area of specialty is compensation. In the 1980s the wage difference between an average worker and the CEO was something like 42 to 1. Now it’s around 300 to 1. It seems to me it reflects on our value system that there are individuals making $185 million a year and we’re fighting to try to get $10.10 an hour for our minimum wage workers.

PZ: We have a moral issue.

JN: These are incredibly hard jobs, much harder than I thought they were. I would much rather be speaking at Burger King’s national convention again, talking to 1,000 people about what I did undercover, than work in a fast-food restaurant at lunch rush. It’s a tough job at $6 an hour, it’s a tough job at $10 an hour. That goes back to your statement that they deserve it, and I wholeheartedly agree.