By DAVID BOLOTSKY
What if we could create a program that would strengthen our tax base, make government spending more fiscally responsible and provide a powerful financial incentive to low-income workers? It sounds too good to be true.
But it already exists and dates back to 1938 – the minimum wage.
When wages are too low for even full-time workers to buy basic necessities, workers turn to taxpayer-funded programs like food stamps and Medicaid. A surprising beneficiary is the low-wage employer who is being subsidized by taxpayers.
It’s a perverse incentive program. A corner business or giant retailer like Costco that pays a starting wage of $11.50 an hour gets no government subsidy while a store across the street paying the federal minimum wage of $7.25 is actually getting a government handout because it pays a substandard wage. This does not make economic sense.
Unfortunately, the minimum wage has been eroding for decades. The minimum wage under Republican President Dwight D. Eisenhower in 1956 was actually 18 percent higher than it is today, adjusted for inflation. We can’t progress as a nation this way.
Back in 1914, Henry Ford doubled the average auto worker’s pay and reduced their workday to eight hours in order to cut turnover and enable them to afford to buy the Model T. He understood the crucial connection between worker wages and consumer demand.
Too many business people have unlearned this lesson and our economy continues to suffer as customers have less to spend on the products businesses have to sell. If cutting wages were the answer, our economy would be humming right now.
Raising the minimum wage is a great way to boost consumer demand because every additional dollar that goes into the hands of a low-income worker is very likely to be spent, thus spurring business sales and economic growth. Our economy needs this boost from the bottom up.