There are a lot of important statistics that confirm just how out of whack the U.S. economy has grown during this modern Gilded Age we currently inhabit, but two factoids from a recent CNN story say an awful lot about where things stand: #1 – The U.S. unemployment rate just dipped to an 18-year low recently at 3.9%, and #2 – nearly 51 million American households (around 43%) don’t earn enough to afford a monthly budget that includes housing, food, child care, health care, transportation and a cell phone.
The answers to how this absurd situation came about can be found in several places. CEO greed is an obvious one. As the good people at Inequality.org (a project of the Institute for Policy Studies) recently reported, “In 188 of the first 225 major companies to report their CEO-worker pay ratios for 2017, typical employees would have to work over 100 years to match what their CEO makes in just one.”
Not surprisingly, the economic picture here in North Carolina is similarly disturbing. As a recent story by reporter Richard Craver of the Winston-Salem Journal confirmed, compensation for local CEO’s continues to rise, thanks mostly to big stock and stock-option awards.
Meanwhile, average families continue to struggle. A recent examination of county economic data in North Carolina by experts at the North Carolina Budget and Tax Center found, among other things, that:
- The richest five percent of households in North Carolina have an average income that is 28 times greater than the poorest 20%;
- Rent is unaffordable for 50.6% of North Carolina renters; and
- 7% of North Carolina children lived in poverty in 2016.
While several common sense policy options could make a difference in addressing this situation – expanded access to affordable healthcare, tax changes that would shift the load away from the poor and middle class and onto the wealthiest, expanded affordable housing investments, better investments in public education – the simplest and most obvious first step is to put more cash in the pay that struggling workers take home each week.
In other words, North Carolina should raise its minimum wage.
Consider the following:
- The minimum wage in North Carolina is $7.25 an hour (or $15,080 a year), the same as the federal minimum wage. That’s $1,000 less per year than the official and admittedly low federal poverty level for a family of one adult and one child.
- The minimum wage hasn’t come close to keeping up with inflation. The $1.60 per hour minimum wage of 1968 would’ve been $11.71 in March of this year, if it had kept up.
- An estimated 1.3 million people in North Carolina (roughly one-third of the workforce) would benefit from a $12 minimum wage as the ripple e?ect of raising the wage floor would give a boost to the many hundreds of thousands of working people making just above the minimum wage.
But even if one sets aside the issues of fairness and morality, there’s another reason for North Carolina leaders to move on raising the minimum wage that may surprise some at first blush: it’s actually good for business and the economy.
As Dr. Allan Freyer of the North Carolina Justice Center explained in an August, 2017 brief, economists have repeatedly found that those states that increased their minimum wages have actually seen better economic performance, lower unemployment, and higher job creation rates than those states that didn’t raise their wages.
With a few moments’ consideration, the reasons for this make sense.
First of all, raising the minimum wage creates more customers, more sales, and bigger profits. Studies indicate a $10 minimum wage would increase paychecks for North Carolina’s workers by $2 billion a year. That’s $2 billion in increased consumer spending at local businesses, boosting business sales, business profits, and creating more than 5,000 new jobs.
Second, raising the minimum wage helps small businesses reduce payroll costs by reducing employee absenteeism and turnover while simultaneously boosting productivity. Economists have long recognized that better-paid workers are more efficient, more effective, and more productive.
What’s more, these positive effects of a minimum wage increase tend to more than outweigh the additional wage costs to businesses. Where employers do feel at all pressured by rising wages, economists find that they are more likely to reduce worker hours than engage in layoffs – a pattern that almost invariably leaves workers ahead.
Add to all of this the overwhelming popularity of a minimum wage hike in the public opinion polls and the idea becomes all the more obvious.
The bottom line: As they approach the complex debates of the 2018 legislative session, state lawmakers would do well to remember that one of the most impactful win-win policy solutions would also be one of the simplest, fairest and most business-friendly.