Reducing Inequality

A Minimum Wage Increase Is Great, but Full Employment Would be Better

If we want to make a serious dent in income inequality, boosting the minimum wage is a Band-Aid—the first step must be a genuine push for jobs for every American.

Nick Ut/AP

President Obama called for a higher minimum wage in his State of the Union this year, but the push was sidelined by a year of crisis governance, Republican intransigence, and self-inflicted wounds. Now, with a settled budget, a working health care website—and growing concern with income inequality—Democrats are acting on their rhetoric with a broad effort to increase to the federal minimum wage. Here’s more from the New York Times:

With polls showing widespread support for an increase in the $7.25-per-hour federal minimum wage among both Republican and Democratic voters, top Democrats see not only a wedge issue that they hope will place Republican candidates in a difficult position, but also a tool with which to enlarge the electorate in a non-presidential election, when turnout among minorities and youths typically drops off.

“It puts Republicans on the wrong side of an important value issue when it comes to fairness,” said Dan Pfeiffer, the president’s senior adviser. “You can make a very strong case that this will be a helpful issue for Democrats in 2014. But the goal here is to actually get it done. That’s why the president put it on the agenda.”

As the Times reports, Democrats are working with unions and other activists to place minimum wage measures on ballots in contested congressional districts, with the hope that they’ll boost liberal enthusiasm in a cycle where turnout favors Republicans.

I’m skeptical that there’s any electoral utility to pushing for a higher minimum wage—the single biggest influence on voters is the short-term economy—but there’s no question that this is worth doing. At $7.25, the current minimum wage is at a relative low when you adjust for inflation. The congressional proposal, which would bring the wage to just over $10, is a modest boost that increases the value of the minimum wage to where it was in the 1960s and 70s.

As for the GOP argument that this will harm small businesses? If Democrats were pushing for a larger increase—to $15 or $20 an hour—Republicans might have a case. But the available evidence is inconclusive about the effect of a small increase. A $10 minimum wage would place a minor drag on employment, which would be alleviated by higher consumer consuming, as low-wage workers have more cash to spending.

Obviously, I think this is a good idea. But it’s worth emphasizing the extent to which raising the minimum wage is a Band-Aid for wage stagnation and income inequality, to say nothing of the entrenched racial inequality that requires its own set of solutions. A higher minimum wage, for instance, doesn’t make up for our sluggish economy and weak labor market. Indeed, if there’s anything Democrats should commit to in the fight for a more fair economy, it’s full employment.

If 2013 was the year that President Obama made the minimum wage a priority, then 2014 should finally be the year where he calls on Congress and the Federal Reserve to tackle mass unemployment and provide jobs for every American who wants to work. Since, overall, full employment is more than an important step towards reducing inequality—it’s a necessary one.