The following is an excerpt from the Thom Hartmann Radio Program, 5/26/2015, which I edited for brevity and clarity. Thom discusses how raising the minimum wage creates a virtuous cycle.
Thom: If you go back and look at the history of the minimum wage, every time the minimum wage is increased, over the next three years... which is about how long it takes for something like that to work it's way through the economy... what you see are, two things... number one, you see consequential significant economic stimulation. Typically the economy will grow at least 2 or 3 percent, after every minimum wage hike.
Because people with minimum wage have more money in their pocket now to spend. That money then goes into the marketplace and creates demand. And the consequence of creating that demand is that it creates more demand for jobs as well. As there is demand for more jobs, because the economy has been stimulated, the competition [between companies for workers] goes up, which means all wages go up.
Whenever the minimum wage goes up... all the midrange wages all increase by roughly the same amount. There is a very simple economic reason for that which I just laid out.
If minimum wage had kept pace with productivity it would be at $17 an hour right now. If it had just kept up with inflation it would be at $12.60 an hour.
[End Thom Hartmann Rant]
Increasing the minimum wage creates a virtuous cycle that reverberates through the economy, which is why we need a minimum wage that is indexed to inflation.
On the other hand, not raising the minimum wage creates a vicious cycle.
|The Capitalist's Case for a $15 Minimum Wage: The fundamental law of capitalism is that if workers have no money, businesses have no customers. That's why the extreme, and widening, wealth gap in our economy presents not just a moral challenge, but an economic one, too. In a capitalist system, rising inequality creates a death spiral of falling demand that ultimately takes everyone down.|
Low-wage jobs are fast replacing middle-class ones in the U.S. economy. Sixty percent of the jobs lost in the last recession were middle-income, while 59 percent of the new positions during the past two years of recovery were in low-wage industries... By 2020, 48 percent of jobs will be in those service sectors.
Policy makers debate incremental changes for arresting this vicious cycle. But perhaps the most powerful and elegant antidote is sitting right before us: a spike in the federal minimum wage to $15 an hour. (The Capitalist's Case for a $15 Minimum Wage by Nicolas J Hanauer. Bloomberg Business 6/19/2013).
The plutocrats at the top of the foodchain don't care that they're destroying the American economy. Wealthy people can move anywhere in the world, and there are other markets to exploit. The rest of us, however, are suffering the consequences of their unbridled greed. It is time for us Americans to say NO to the world's oligarchy and do what's necessary to save our economy before it's too late.
Which would be to index the minimum wage to inflation and, more importantly (although these are two very important steps in saving America)... raise tariffs and bring our jobs home. If not we're screwed. America is done.