FOUR decades of stagnant wages and incomes for all but very few Americans put the writing on the wall: To keep a strong middle class, something needs to change.
The question is not whether, but how. Raising the minimum wage is a big part of the answer.
The decades following World War II saw unprecedented U.S. prosperity. While not everyone benefitted during this period, the American dream was real for many.
Millions who worked hard and played by the rules built better lives for themselves and their families as an increasingly productive labor force drove economic growth. And workers shared in the benefits through a commensurate rise in wages, strengthening the American middle class.
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Starting in the late 1970s, a shift occurred, with profoundly damaging consequences. Even with substantial economic growth, wages and income pretty much stalled, according to the Washington State Budget & Policy Center’s analysis. Since 1979, real median wages in Washington state have increased just 3 percent, while the amount of goods and services our labor force pumps out has increased nearly 20 times that.
The numbers paint a bleak picture. Our economy continues to grow, but most Washington residents aren’t benefiting. Since 1979, average income for the richest 1 percent of households in our state more than tripled, but the other 99 percent saw an average growth of just 14 percent. That whopping disparity makes Washington state one of the worst in the nation for income inequality, according to an Economic Policy Institute report, “The Increasingly Unequal States of America.”
If there is a silver lining to be found in the Great Recession, it is that we can learn from what got us to this point. Growing inequality in wages and other income sources were a major reason for the length and severity of the steepest economic downturn of a lifetime.
This problem continues to hinder recovery. When only 1 percent of the population is benefiting, our economic future is in serious trouble. It turns out that strong middle-class households — with revitalized purchasing power — are the real job creators.
Raising the minimum wage would help jump-start meaningful recovery. Had Washington state’s minimum wage kept pace with worker productivity like it did after World War II, it would be, by conservative estimates, at least $15 an hour.
The state minimum wage in 1968 would be worth $10.49 today. Over the same period, a conservative estimate shows state productivity has increased 52 percent. An equivalent increase in wages would come out to at least $15.90 per hour.
That would bring greater economic security for Washingtonians, which would result in greater spending. More spending would drive demand for local goods and services, which means more customers for local businesses.
We should be thoughtful about implementing an increase to mitigate impact on small businesses and human-service agencies. But these valid concerns shouldn’t be used as an excuse against the equally valid concerns of low-wage workers.
The well-being of businesses and workers are interdependent, not mutually exclusive. Let’s stop pitting them against one another and start talking about solutions.
Fortunately, we have plenty of real-world examples to learn from, including Washington state’s own experience, where raising the minimum wage occurred without the negative impact on employment most businesses fear.
Raising the minimum wage isn’t a silver bullet. It wouldn’t solve the problem of income inequality alone, but it is a crucial component of a broad strategy to help workers and our economy. It’s also crucial that this time around we build a more inclusive middle class, where people of color and women have an equal shot at prosperity.
It will take more than just wages. Other measures essential to economic security include affordable child care and health care, high-quality education for all, family-leave insurance and a more equitable tax system.
We have done this before in Washington state and the nation, and we can do it again. It’s not just the right time, it’s about time.
Lori Pfingst is research director of the Washington State Budget & Policy Center, a research organization that focuses on the prosperity of all Washingtonians. She has a Ph.D. in sociology.