No Mercy / No Malice
Doing the Minimum
During Tuesday night’s debate, Trump and Harris discussed the economy, but neither referenced the simplest available move to reduce poverty and inequality: raise the minimum wage.
On the campaign trail, they’ve both jumped on an idea to eliminate the federal income tax on tips. This is populist bullshit that would accomplish nothing. Workers who depend on tips comprise just 2.5% of the workforce, and most don’t make enough to pay income tax. Meanwhile, one can imagine private equity firms and real estate brokers finding law firms to restructure their carried interest fees and commissions as “tips.” BTW, nearly every change to the tax code over the past 40 years has transferred wealth from the young/middle-class to corporations and the überwealthy, who are enjoying their lowest tax burden since 1939 and paying single-digit tax rates.
The federal minimum wage is $7.25 an hour. Harris has said she supports raising it but hasn’t said by how much; Trump, who’s been stiffing employees and vendors his entire life, has flip-flopped on the issue.
Wage Warfare
There is an economic war between the old and rich and the young. And it’s been a slaughter. The federal minimum wage is Exhibit A. It was created by Congress in 1938 to serve as a floor for state minimum wages, which vary widely. A number of states have recently raised theirs. The federal minimum, though, hasn’t gone up since 2009; it’s not even been adjusted to keep pace with inflation or gains in productivity. Its buying power peaked in 1968.
A federal minimum wage adjusted for inflation and productivity would be about $25 an hour. The reason it hasn’t kept pace, and is instead 40% lower (inflation adjusted) than in 1970? A: Politicians from both parties believe their core constituency is corporations, and they’ve served them well, protecting the profit margins of companies whose business model is based on paying sub-poverty wages. In 2021, when Democrats controlled both houses of Congress, eight Democrats joined with the GOP to kill a measure to raise the minimum wage to $15. All this bitching/barking about tearing down the 756 U.S. billionaires, vs. lifting up the 34% of American households that make less than $50,000 (annual income if we raised minimum wage to $25/hour).
Another reason the minimum wage hasn’t kept pace is that it mostly affects young people. Young people are less likely to vote than seniors and have little representation or empathy from a Congress that’s become a cross between The Golden Girls and The Walking Dead — average age 62, vs. 38 for all Americans. Two-thirds of the people getting paid the minimum wage or less are 34 or younger, and nearly half are 24 or younger.
We have epidemics in the U.S. — depression, anxiety, high blood pressure, homelessness, obesity, and poverty — among young people, particularly men. (Though it’s worth noting here that the majority of people making the minimum wage in the U.S. are women.) The most powerful means of addressing these ills, and the “deaths of despair” that follow, is a good job at a fair wage that acknowledges the nobility of work. In addition, a good job creates incentives and illuminates a path to wealth creation and economic security.
We’re not talking about making busboys and home health aides millionaires, but creating an incentive structure that vaccinates young people from the virus that is the largest preventable cause of death in the U.S.: poverty. And less poverty has an added benefit: It would reduce the need for expensive and inefficient government programs.
Who loves sub-poverty minimum wages? A: The for-profit industrial prison/fast food/service/hospital/pharmaceutical sector. These corporations have figured out a way to clip a staggering commission from a social construct. It’s not unlike health care, which generates more private, corporate income from treating diseases vs. preventing them. To prevent the disease of poverty, we need to just get the money to people who need it. The most efficient food stamps/mental health/obesity/diabetes/child-poverty program is … money. We’ve traded dignity, at a lower cost, for corporate profits that weigh on society.
Latin for “I’d Pay You Less”
The most compelling argument against raising the minimum wage is that employers would either pass the higher costs on to consumers or cut jobs rather than raise salaries. There is no free lunch, but the downsides have been consistently exaggerated by business lobbyists. “Minimum wage” is Latin for “I’d pay you less if I could.” But we need to bury the myth that the middle class is a self-healing organism the market shapes organically. It isn’t. The greatest innovation in history, the U.S. middle class, requires a consistent investment that matches the rhetoric. Any CEO or politician who drones on about heroes, the middle class, and Jesus is usually underpaying their employees, cutting food stamps, and soliciting oral sex in airport bathrooms.
$15 Big Mac
There have been headlines lately about $15 Big Macs, and in California some fast food chains have closed since the minimum wage went up. They say this like it’s a bad thing. If we were to foot taxes to the externalities — which is what government is supposed to do — we’d have beef and gas at $20/pound and $10/gallon. Yes, fast food restaurants and many retail, hospital network, and prison system stocks would decline. And it would be worth it.
Some restaurant, hospitality, and retail companies would fail, but most would be able to pass on the costs to customers without damaging demand. Most empirical economic data shows raising the minimum wage is broadly good for the economy, because poor and middle-income people spend most/all their money, creating a robust multiplier effect.
UC Berkeley economist Michael Reich and University of Victoria economist Justin Wiltshire recently wrote, “Outside the theoretical world, economists have conducted hundreds of studies on the actual effects of minimum wage. They repeatedly find that increasing the minimum wage raises the pay of low-wage workers, without leading to even minor job losses. Prices increase by minimal amounts that are too small to deter anyone from buying a burger or taco.”
An April 2024 study by University of Michigan and Carnegie Mellon economists found much the same thing. Co-author Nirupama Rao said, “Our results show clearly that minimum wages do little harm to independent firms and even benefit some owners while meaningfully increasing both the earnings and employment of young and low-earning workers. Of course, these gains to workers and owners are financed by consumers, who appear fairly inelastic in their overall demand for the goods and services furnished by independent businesses affected by minimum wage policies.”
According to a 2021 study by the Congressional Budget Office, raising the federal minimum wage to $15 by 2025 would lift 900,000 people out of poverty. And a 2019 study by the Economic Policy Institute, a Washington think tank, estimated that raising the minimum wage to $15 could lead to an annual increase in consumer spending of $22 billion.
Disunion
There is constant, inescapable tension between labor and capital. For decades now, however, capital has been kicking the shit out of labor.
That’s why the federal government needs to take the lead on raising wages. Businesses won’t do it, and unions can’t. Unions are not only ineffective — their membership over the past 30 years has fallen by half — but they also help support the illusion that middle-class workers have robust representation and don’t need large-scale programs. They don’t and they do, respectively. There needs to be one union for all workers: The federal government.
The traditional union construct has outlived its usefulness. Union membership in the U.S. peaked at around 33% in the 1950s and stands at 10% today. The labor movement has been crippled since its inception by infighting and corruption. Shawn Fain seems like an honest man, especially in contrast to the past two UAW presidents … who are in prison.
Other unions are simply ineffective. For all the hype about unionizing Starbucks locations, the baristas’ union has yet to win a collective bargaining agreement or negotiate a national contract. Last year’s Hollywood writer’s strike was a disaster for the WGA, with its members taking a 100% pay cut for the five months they were on the picket line in exchange for modest concessions from the studios. And it was the catalyst for a downsizing that curbed production in Los Angeles 60%, year over year.
Social Capital Formation
Low-paying jobs, particularly first jobs, tend to be shitty. That is as it should be — almost everybody with a great job now started out doing something tedious and hard for not much money. How do you make a lot of money? A: By starting to make money … any money.
For young people, though, an early job is as much about socialization as it is about cash. Somebody working on the front lines in service or retail can’t help but learn a lot about themselves and the rest of humanity. Pro tip: The biggest tippers are people who’ve worked in service jobs and now have money.
You learn how to work on a team, how to deal with co-workers and managers and customers who can be jerks. You learn how to get people to buy something from you, which is the key skill in a capitalist economy (i.e., the U.S. and anywhere else you’d want to live). In short, you learn how to develop and deploy social capital and begin connecting work and talent with money, and money with a better life. It sounds obvious, but many never make the connection. They want success, but aren’t willing to sacrifice for it. Few things build a young person’s self-respect, sense of purpose, and willingness to buy into society more than their first paycheck.
When I Grow Up
I didn’t enjoy being a kid. Being an unremarkable boy with a single mom, little money, and no access to public transportation meant the Wonder Years in West L.A. were mundane. However, at the same time, shows like Dynasty, Dallas, The Love Boat, and Fantasy Island outlined my escape route — money. And the way you got money was … work. Note: It still is.
By 9 years old, I had a paper route and walked three dogs. I bought packs of Bubble Yum for 15¢ and sold individual pieces to classmates for a nickel. By senior year in high school, I graduated to box boy. I’d leave University High at noon to work in the mailroom at Southwestern University of Law and, by early evening, bomb to the Westwood Chart House where I was a barback. The summer before college, I shrink-wrapped software boxes for a firm run by Scientologists. They were nice. And strange.
In college I was a trainer at LA Fitness, an usher at the Avco Cinemas, and changed/cleaned beer taps in bars in downtown L.A. Walking into bars in Compton at 11 a.m. mid-week was an illuminating experience. By this point, I had access to the UCLA athlete’s job board. Every weekend, I’d put on white shorts, K-Swisses, and a white polo and head to the Mondrian, where I was a pool boy. Twice a week, for $30 in cash, I’d put on a suit and venture to a posh home in the Flats of Beverly Hills. I’d go upstairs where an elderly woman would be dressed to the nines, lying in bed. I’d scoop her up and carry her downstairs and into the back seat of a Rolls Royce. Her driver would transport us to Scandia (a fancy restaurant in L.A.) where I’d (again) carry my client into the restaurant and seat her at a table with six to eight friends/admirers. The woman in my arms was Lillian Hellman (ask your parents). I sold commemorative gold coins over the phone. I was a sperm donor — $40/shot. So I have somewhere between 2 and 2,000 kids. But that’s another post.
This kaleidoscope of work paid me enough, with $5,000 in student loans and Pell Grants, to get through UCLA with little/no help from anybody. My first job out of UCLA and business school enabled me and my girlfriend, who worked at Arthur Andersen, to buy a home in Potrero Hill in San Francisco for $285,000 at the age of 28. Imagine any young person being able (today) to get through college and buy a home in San Francisco with their own earnings.
The assault on the prosperity of the young is especially mendacious, as it’s taken place in concert with the greatest increase in national wealth registered in history. Be clear: This has been purposeful. Americans over the age of 70 are 72% wealthier than 40 years ago, and people under the age of 40 are 24% poorer. Money is the transfer of time and work. To give someone or something money is to love them. And America loved me, connecting my effort with prosperity. At an early age, I understood the assignment.
Our youth now are depressed, anxious, obese, and broke. It’s not globalization, network effects, or some other bullshit narrative fomented by the incumbents. It’s the wealth transfer, and, like I said, it’s been purposeful. And the most elegant, effective means of reversing this lack of care/regard/love for the young in America would be a massive increase in the minimum wage. It would be costly — and worth it.
Life is so rich,
P.S. Jessica Tarlov and I unpack the Harris/Trump debate on our newest podcast: Raging Moderates. Listen here on Apple or here on Spotify
P.P.S. Section is hosting an event on September 25 on Augmenting Human Creativity with AI, featuring SonyAI’s chief scientist. RSVP here — it’s free.
