BALDWIN PARK, CALIFORNIA, AND NEW YORK
HE LIKES the work; but at $9.60 an hour, stacking the shelves at a Walmart in east Los Angeles does not pay Anthony Goytia enough to cover the bills for his family of five, he says. He supplements his fortnightly pay of $560-600 with the odd catering job, by subjecting himself to clinical trials of a treatment for his psoriasis, and with federal and state assistance. He was recently approved for food stamps; that should make Christmas a little jollier.
America is going through one of its periodic fits of agony over the minimum wage. In recent weeks several states and municipalities have approved rate rises; most dramatically in SeaTac, a suburb of Seattle consisting of a large airport, where voters raised the hourly figure to $15. On December 4th Barack Obama called for a higher federal minimum wage. He has previously suggested that it rise from $7.25 to $10.10. It has lost 5.8% of its purchasing power since it was last raised, in 2009.
Between 1979 and 2007 the incomes of the top 1% of American earners rose by 275%, according to the Congressional Budget Office. Those of the bottom 20% rose by 18%. Had the federal minimum wage kept up with productivity gains since 1968 it would have reached $21.72 last year, estimates the Centre for Economic and Policy Research (CEPR), a leftish think-tank. Campaigners gripe that the government should not have to top up the pay of workers like Mr Goytia (who agrees); this “hidden subsidy” amounts to $7 billion in the fast-food industry alone, according to one study.
There is no consensus among economists about the extent to which minimum wages kill jobs. But recent research suggests that relatively low rates (America’s is 38% of the median wage) are not harmful, and that small increases can be beneficial. They not only lift workers’ purchasing power; they also make them more loyal, and so reduce the amount companies must spend recruiting new people.