President Obama made his case for raising the federal minimum wage to $10.10 an hour in the State of the Union. But the case for raising the minimum wage to $12 an hour—the second highest statewide proposal in the country—isn’t even coming from a Democrat. It’s coming from California Republican multi-millionaire businessman Ron Unz, an ex-gubernatorial candidate, former publisher of the American Conservative and the lone sponsor of a 2014 ballot measure for a statewide $12 minimum wage.
Unz talked to AlterNet on Monday and laid out the conservative’s argument for raising the minimum wage. It’s not a tax increase. It’s not a big government solution. It could cut welfare spending by tens of billions. It would be a giant economic stimulus. Most crucially, it would not be the big job-killer its GOP critics fear.
What follows are excerpts from that interview, in which Unz lays out a half-dozen reasons to raise the minumum wage above Obama’s threshold.
1. It’s an idea that’s gained respectability.
“I published a 12,000-word article in 2011 that argued very much the case for a large hike in the minimum wage. In fact, the figure I was talking about then was between $10 and $12 dollars an hour at the federal level, which seemed totally outlandish at that point in time, but now is getting to be closer to what people are debating. The minimum wage issue had dropped off the radar screen. Even though I’m more on the conservative side, I’ve been friendly for a number of years with the late radical journalist Alex Cockburn, and he wrote a long piece analyzing our arguments. He was very supportive. Then James Galbraith picked up on it. And interestingly enough a number of conservatives and a number of right-wingers suddenly looked at the issue in a new way.
When I discuss the whole minumum wage issue with a lot of conservatives along the way, I was surprised how open they were to it. It hasn’t become a political football. Neither group, neither liberals or conservatives, ever focused on it very much. For example, some of the most prominent liberal economists changed their minds on it but were reluctant to publicly advocate for a large minimum wage increase, like Paul Krugman and Joseph Stiglitz. They cited the job loss issue and it was viewed as old-fashioned and backwards. The reason I know about that is for the few years I have been working with Ralph Nader on the whole idea of raising the minimum wage. And he told me he had been spending months and months lobbying Krugman, and finally—I think it was a year ago last December when Krugman came out in a column. Ralph Nader was really excited and viewed it as a tremendous breakthrough.
One reason I emphasize this history is that even as conservatives start to see a stronger case for a higher minimum wage, they might be reluctant to shift their past position. If they see that many liberals have similarly come around to the idea in recent years, it make them more willing to do the same.
2. Objections over job loss can be easily overcome.
When I discuss the issue with conservatives, including very staunch conservatives, probably 90 percent of the resistance is in the job loss issue. Once my issue got on the radar with the filing of my initiative, I was invited to be on three of the biggest conservative talk radio stations on West coast, because who’s this conservative who supports a higher minimum wage? The reaction I got from each of the hosts was, “How could any conservative support a higher minimum wage?” And then I started to explain the reasoning and they never really thought of it before, and they seemed to think the points that I was making made an awful lot of sense. And I can see many of them supporting it down the road.
The whole thing is it’s not really a traditional ideological issue. What you have right now is a system of massive welfare spending, over $250 billion a year in social welfare programs going to the working poor. In other words, people have jobs but they cannot survive on their paychecks. And those payments really amount to subsidies to low-wage employers. It’s a classic case of where businesses manage to privatize the benefits of their workers—they get the work—and socialize the costs. They’ve shifted the costs over to taxpayer and the government. And that is not something that free market economists like. It’s a classic problem inany kind of economic system.
So when you’re talking about a much higher minimum wage, which would automatically produce huge cuts in government social welfare spending, that’s the sort of thing that conservatives begin to like.
3. A two-income family would earn $50,000 a year.
If you go with a $12 an hour minimum wage, which is generally the figure that I have been advocating, even on the federal level, a single worker who is fulltime would get $25,000 a year, almost exactly. A couple would get $50,000. [Editor’s note: The average American income in 2013 was about $51,000.] Now, if you’re earning $50,000 a year you’re not wealthy. You’re not affluent. But you can generally get by on something like that in most parts of the country. And you automatically lose your eligibility for anti-poverty programs because you’re no longer poor. It’s not that you have to change the laws. It’s that if you’re not poor, you don’t get poverty subsidies. Now you would still get some of them, but you would get much less.
4. Spending on welfare could fall by $40 billion.
The estimates, and it’s a very complex calculation of what savings there would be, but I would think that if you are raising the wages of lower wage workers by about $150 billion a year, which is roughly what you get, I think, there would be about $40 billion reduced in social welfare spending. It’s not like they would lose dollar for dollar, but the average fulltime worker would get an increase of $5,000 a year—$10,000 per couple. And those are life-changing amounts of money for a low-wage family. If they get an extra $5,000 a year and lose, let’s say $1,000 or $1,500 a year in social welfare benefits, they’re certainly much better off. I think society is better off as well.
5. Costs would be outweighed by revenue growth.
I feel extremely confident that the case is easy to make. It seems vey likely that in the overwhelming majority of cases, the workers we’re talking about are in the low-wage, non-tradable service sector. In other words, they are not jobs subject to foreign competition. They are not jobs that can be outsourced. They are jobs at Walmart, at McDonald's, restaurants, home healthcare aides. They involve the personal services that are very difficult to automate.
In almost all the cases we’re talking about, people would keep their jobs at the higher wages, but the costs would be passed through to the consumer. For example there was that proposal in D.C. last year to force Walmart to pay $12 an hour. If none of Walmart’s competitors did that, it would make things very difficult for Walmart because they would have to raise their prices and lose out to the competition. But if you are raising wages for everyone in an economic sector, what would naturally happen is the different companies would raise their prices. They would pass through almost all the costs to the consumer. And they would be perfectly fine with that.
What really amazed me when I looked at the data was how small the cost pass-through would be. For example, a lot of this actually comes from the U.C. Berkeley Institute for Research on Labor by Michael Reich, which seems correct and very detailed, is that Walmart, America’s largest low-wage employer, could cover a $12 minimum wage by a one-time price increase of 1.1 percent. The average Walmart shopper would pay an extra $12.50 per year. McDonald's and fast-food places would probabnly have to raise their prices by 8 or 9 percent, something like that. Agricultural products that are American-grown would go up by less than 2 percent on the grocery shelves. And those sorts of price increases are so small that they would be almost unnoticed in most cases by the consumer.
I would actually argue that if you are looking at a company like Walmart that is suffering economically these days, because so many of the Walmart shoppers are getting too poor to shop ar Walmart, what you are talking about is shifting up to maybe $150 billion a year from the sort of families that don’t shop at Walmart to the sort of families that do shop at Walmart. Walmart raises their prices by 1 percent, roughly one time, and they get a huge amount of extra business.
6. Where job losses occur, better jobs are nearby.
Now, there certainly would be some job losses in certain areas. I could see restaurant jobs that are paying $8.50 an hour, you could easily imagine a situation where some people would lose their jobs. It’s tough to go from $8.50 an hour up to $12. On the other hand, if other companies, like Walmart are booming, because we have had this massive economic stimulus funded by the provate sector, and if Walmart is opening up new superstores that are paying $12 an hour, somebody who loses a restaurant job at $8.50 gets a job somewhere else at $12—they’re certainly better off for it.
What we are really doing is eliminating a lot of these hidden subsidies. And when you have subsidies in an economy, you really distort the economic system and make everything less efficient. So, in other words, with the Earned Income Tax Credit, food stamps, and other programs, we’re distorting the economy. It makes much more sense for businesses to stand on their own two feet and pay the costs of their own workers. And if some businesses lose out while others gain, that’s basically the free-market system.
Unz: Not A Doctrinaire Conservative Or Libertarian
A lot of the media coverage in this campaign has been a little bit misleading. The headlines say "Libertarian supports a minimum wage hike to $12 an hour." Now, real die-hard libertarians oppose the existence of the minimum wage. So it is sort of like a headline saying "Communist calls for private property." It doesn’t really make much sense. My background is more from the sciences. I am a theoretical physicist by training. I tend to look at issues on a case-by-case basis and see what makes sense.
Many times the conclusions I come to are the conservative conclusion or the libertarian conclusion, so that’s why people call me that—and I won’t dispute it. But on the other hand, if people say you’re not a true conservative or a true libertarian, that’s fine with me also. I am willing to say where I stand on a long range of issues.
One thing that I do feel strongly about is that the massive concentration of wealth in American society in the last 20 or 30 years is very unhealthy. It’s reached the point where the wealthiest 1 percent have as much wealth as the bottom 95 percent combined. At some point, you really end up with massive potential for social instability, which doesn’t benefit the 1 percent any more than it benefits the 99 percent.
I am focusing on what I think is an easy solution. It’s very much a first step to raise the minimum wage to a much higher level and that additional steps should be taken. I’m just not sure what those additional steps should be. Maybe they should be along the lines of what more liberal people would suggest. Maybe they should be along the lines of more conservative ones. I can’t really say.