How to Stop Losing the Minimum Wage Issue to the Democrats
Sometimes, it is all in the messaging. And when it comes to the topic of the minimum wage, the Democrats are winning the battle. And that’s too bad, because if the Republicans could better communicate the real reason the Democrats want the national minimum wage raised (and the flaws with Democratic thinking), the discussion could be very different.
But as currently explained, which side would you rather be on? The Democrats, who embrace giving more money to the hard-working but struggling employees of the land? Or the Republicans, who seem to favor keeping the literally poor guy under the poverty level?
Have you no heart, man? Heck, even I -- the consummate capitalist who ran multinational corporations – have a hard time siding with Republicans given that choice.
Of course, I know the rationale for a lower (or no) minimum wage. As a University of Chicago MBA, I know all about price elasticity and supply & demand…and how the data (and common sense) dictate that jobs are lost when wages are increased. In my career, I ran companies with factories in Asia and know that it is logical to manufacture high-volume products in countries where wages & benefits are $3.00 per hour rather than in the US where comparably skilled workers pull in $30+ an hour. It’s no secret why jobs have moved overseas in recent decades.
But, explaining the intricacies of economics to most US voters is futile. Consider the facts: 12% of Americans lack a high school diploma. 70% have not completed college. And only 30% of US citizens have passports. The typical group of Americans at a dinner party does not want to hear how an increase in the minimum wage will inevitably create job losses due to global wage economics. Yet this is the ill-conceived Republican approach. A little demand curve debate with your buffalo wings, anyone?
Instead, the Democrats go straight to a simpler, albeit incomplete, argument that the average New Yorker or Chicagoan does understand: a full-time worker earning the US’s national minimum wage only earns $15,000 a year. And residents of a big city could not live on that.
And, at that point, the argument is lost. As the media covers protests in the big cities demanding $15 an hour and marches for equality parade down Broadway or Michigan Avenue, the Republicans spout complicated economic responses or seem to be uncaring for the poor. Often both.
But what is also lost at this point is the real reason the Democrats want to raise the national minimum wage: to prevent the loss of jobs in its liberal strongholds to other, generally conservative states.
Forget the gobbledygook put forth by leading Democrats like Nancy Pelosi, who claimed in 2014 that raising the minimum wage by nearly 30% would create 85,000 jobs. Forget the discredited talk of a “multiplier” whereby higher wages would lead to more jobs. In reality, the Democrats know the economic truth: jobs really do flow to lower cost areas. And they understand that if Democratic strongholds like Seattle and New York continue to raise their local minimum wage rates above the national minimum wage rate, jobs and business activity will flow elsewhere. But, if the national minimum wage were increased, liberal cities and states could raise their wages without the risk that jobs would flow to other states with lower minimum wages.
Given this truth, it is time for new messaging for the Republicans…a message people can understand. Republicans should embrace the minimum wage, but embrace it at the local level. Embrace local minimum wages that reflect the realities of each locale. Embrace that each state…maybe even each city…set a wage that reflects its own costs, its own conditions and its own preferences. After all, one-size shoes don’t fit all, and neither should a one-size federal minimum wage.
Such an argument not only is a political winner, but it makes sense.
Twelve years ago, I moved from the bustling suburbs of Chicago to a quaint, historical town of 10,000 (Madison, IN) on the banks of the Ohio River. And the experience was telling, especially from a financial perspective. For example, I now live in a gorgeous 5,000 sf home on a bluff overlooking the Ohio River and my house price is half what my similarly-sized home (without the river view) was in the Chicago suburbs. My real estate taxes are a ridiculously low $2,800 per year in Indiana, down more than 70% from Illinois.
And it’s not just my experiences. Data indicates nearly everything is much more expensive in Chicago than in Madison, IN. The average rent for a 1-bedroom apartment in Chicago is $1,970 versus $675 in my hometown, a remarkable difference of 66%. Gasoline is 24% higher in the big city, electricity is 44% higher and Chicago’s sales tax rate is 32% higher. Heck…even movie tickets are 30% cheaper in Madison, IN than in Chicago.
Given such differences in cost, how could it possibly make sense that the minimum wage in Chicago is the same as in Madison, IN? The answer: it doesn’t. In Madison, a couple both working full time at the current federal minimum wage could enjoy a reasonable existence. In Chicago at that wage, you might be able to live in a cardboard box in a sketchy neighborhood.
Republicans should point out how minimum wages should match local costs of living. And they should argue that Washington has neither the competence nor intelligence to know what is right for each area of the country. Both are much simpler arguments to make. Both are arguments people will understand.
Of course, the Democrats would hate this idea. Why? Simple. As Democratic strongholds in New York, Illinois and elsewhere pump up wages, the gap between those states and lower cost alternatives increase. And the jobs will flow to the more conservative bastions where minimum wage rates aren’t set at stratospheric levels. Maybe not immediately, but inevitably.
This isn’t just speculation. It isn’t a coincidence that Texas has grown from 24 electoral votes in 1960 to 38 today while New York (down from 45 to 29) and Illinois (27 to 20) have plunged.
Accordingly, Republicans running for office in 2016, should repeat after me: “We see the value in a minimum wage to protect the working man. And we think all men and women working full time should be able to afford a reasonable living. But having the same minimum wage in high cost areas (like New York) and low cost areas (like small town America) is silly. So we support that each state and city set an appropriate wage for their citizens.”
Of course, given that Republicans currently hold the governorships in 31 states, conservative views (and more sound economic thinking) will likely prevail throughout much of the United States. As for the rest? Let the big cities and regions of liberalism raise minimum wages to the high heavens… and let the free market determine where jobs flow. Let’s support the Democrats’ right to raise their local minimum wages…no matter how much it kills them.
Until recently leaving the rat race and joining the world of early retirement, John L. Podczerwinski (age 54) served as President of De-Sta-Co Industries, a multi-national corporation with nearly 1,000 employees and manufacturing and assembly facilities located in the United States, Brazil, China, Thailand, India, Germany, France and the United Kingdom. Prior to that, he held various executive roles in the automotive and furniture industries. He has earned his MBA from the University of Chicago and his B.S. in accounting from the University of Dayton. His columns have been published in numerous sites including TheFederalist.com