The Conservative Case for raising the Minimum Wage

If you have ever worked a minimum wage job, you understand why they call it a starvation wage- if you were trying to live on just that wage, you would starve. While the minimum wage has remained stagnant in most of the country, cost of living has risen dramatically, especially in cities. 

This graph can be a little confusing, the bottom line is what the actual minimum wage was. The top line is what that amount would have been if adjusted to 2016 dollars. The graph shows that minimum wage in the 70’s was worth more than then our current $7.25, that is because minimum wage has not even been adjusted for inflation. Inflation is what explains the fact that $2/hour bought much more in the 1970’s than today, you can buy less per dollar. This graph shows long periods without any rise in the rate, even as the rate itself was providing less. 

You’re wondering, what the heck is conservative about this so far, buckle up. First let’s refresh the definition of working class. Then let’s dive into corporate welfare, and how the Walton’s are the true “welfare queens” that Reagan raved about. 

COVID showed us the value of a job is not reflected by the rate it pays. Hedge Fund managers and big tech executives didn’t offer a thing to us during COVID, it was the minimum wage grocery store worker, the uninsured Rideshare drivers delivering food, and the working class. It is all too common among elite circles to hear the argument, “fast food workers don’t deserve more pay because it doesn’t take any skills or qualifications to work there.” ”If they want more pay they should work somewhere else or learn a skill”. Or a slightly less hostile “McDonalds has to pay that low to stay in business, its supply and demand, after all, you like $1 burgers don’t you?”

This thought can really only come from lack of experience in the other person’s shoes. COVID has really uprooted many of the seeds of anti-worker sentiment running rampant in the US for 30 years. Thankfully Americans writ large are empathizing with the massive class of working poor in this country. While anyone with a salaried job and benefits was and is understandably nervous about losing their job, they saw fellow community members working in their local grocery store, literally risking their life for $7.25 an hour. The only bright side of tragedy is that it has a way of bringing people together and cleaning the slate. Let’s continue to respect and fight for all workers. 

When you think about the welfare system, sadly many Americans think of a poor, lazy, likely obese, con artist who has figured out how to game the system and live off actual workers wages. While they aren’t poor, the biggest beneficiaries of welfare are certainly con artists(Walmart). Let’s go back to the working poor, we know that the minimum wage is so low that even working 40 hours a week will still not provide the basics of food and rent. Imagine having a family on that wage, on this low wage most workers have multiple jobs and still cannot provide enough for their children. Before children go hungry, these workers are forced to enroll for food stamps. 

Take a big pause here, do we like the idea that in America today you can absolutely bust ass and still need Government assistance to survive? 

This is where the Walton’s come in, remember the stories in the news about Walmart holding food drives for EMPLOYEES!? Yes they acknowledge that many of their workers do not have enough food to eat. However lets focus on how they are truly the recipients of the most welfare. By lobbying the government minimum wage companies can get the wages to stay inhumanely low, Walmart can stomach starving people because they know these workers won’t starve to death because they are forced onto the Government’s payroll. Imagine if food stamps didn’t exist, guaranteed we would hear the same stories we hear from China of people keeling over right on the job. Many Walmart workers would lose the roof over their heads. At the end of the day if you pay taxes, you are really paying Walmart’s payroll. If the national minimum wage was gradually raised to $15/hour, we would see the amount of workers seeking welfare drop significantly. 

At the end of the day based on capitalist values, it isn’t the employees but the Walton’s who cannot compete with their own hard work, they only succeed by changing the laws that the government has laid out. Wait a minute, using the laws and government to succeed, isn’t that socialism!? You got that right, socialism is here, you just don’t qualify.

Studying Ronald Reagan: Part 1 Voo-Doo Economics

Have you ever heard the phrase trickle-down economics? The term gained popularity when Ronald Reagan passed his massive tax cuts to the wealthy in 1981. While the term trickle-down was used by the enemy of that agenda, the right referred to it as supply-side economics. No matter the term the primary idea was that the wealthiest in society create all the jobs, therefore if you give them the money it will “trickle-down” to all members of society. So how did trickle-down economics pan out for us here in America? 

Before engaging in an argument that can be split a million ways about the “success” of the 80’s, let’s open the tool box and see how to dismantle this. Ah, Velocity of Money, that will do the trick. If we remember the velocity of money is the rate at which money changes hands. Later we will dive into why money changing hands is the core of an economy. It is known that someone making less than $50,000/year will spend 100-110% of any tax cut or stimulus given to them. It is also known that a wealthy person with millions of dollars will spend 0-30% of any tax cut or stimulus given. This is really easy to visualize, if you are barely scraping by, that stimulus could help you eat, pay bills, or cloth your children, of course you will spend it immediately. On the reverse side, image what a millionaire did with their $1200 stimulus check, they put it right into their bank. That money won’t see the light of day, or should I say the light of the American Economy again. 

This is one of the major reasons we see massive inequality start to take hold during and after the Reagan Era. Once the wealthy got that chunk of the economy they have no incentive to give it back.

Income Gains Widely Shared in Early Postwar Decades - But Not Since Then

Notice on this chart from the Center on Budget and Policy when those lines really started to separate – 1981. Reagan didn’t change this chart with tax cuts alone, he also completely annihilated unions and any laws protecting workers. 

Let’s dive into his actual tax cuts.

The first tax cut (The Economic Recovery Tax Act of 1981) among other things, cut the highest Personal Income Tax rate from 70% to 50% and the lowest from 14% to 11% and decreased the highest Capital Gains Tax rate from 28% to 20%.

The second tax cut (The Tax Reform Act of 1986) among other things, cut the highest Personal Income Tax rate from 50% to 38.5% but decreasing to 28% in the following years [2] and increased the highest Capital Gains Tax rate from 20% to 28%.

If you caught our tax piece on how the wealthy avoid taxes, your ears probably perked up when you noticed that Reagan first cut the Capital Gains tax, Bush then followed in his footsteps dropping it back to the 20% we see today. This was one of the effective ways to let the wealthy pay far less taxes than workers. When we think about socialism for the wealthy after FDR, this is a prime example. Lobbying the government to change a law so that you make more money. That is socialism, a real competitor would earn it in the market. Funny how the wealthy “capitalist” seem to be so well versed in using the Government to enrich themselves. 

You might have also noticed that the top Marginal Tax rate was 70% before Reagan and 28% after Reagan. That is a radical change. This is the beginning of the extreme wealthy and aristocracy of families like the Walton’s. Imagine owning the bakery, butcher shop, toy store, electronics store, mechanic shop, pharmacy, and garden center in every town in America, then only having to pay a maximum tax rate of 28%. And that is the worst case scenario, they typically avoid all taxation as we have just seen with President Trump paying $750 in taxes in 2016. So the Walton’s and Jeff Bezos are funneling money out of every small town and large city in America, with a majority of the wealth never returning to the system. Think of the economy as a bathtub, the wealthy are putting massive holes in our tub and no one is making them add some water back. With the Reagan tax codes they could drain money from the rest of the country at a rate never seen in America.