In real-dollar terms, the minimum wage of $7.25/hour is at its lowest point since shortly after its creation in 1938. It has been $7.25/hour since 2009. One of our major political parties, fearful of directing money to people who might actually need to spend it, has obstructed efforts to raise the wage to $15.
Isaac has devised a plan to satisfy the Republicans' philosophical objections and honor the memory of St. Ronald Reagan, all in one package. Let's begin by directing our thoughts to the Reagan administration, the Laffer curve, and the large tax cuts of that era. The theory of the Reagan tax cuts, honored in two later Republican administrations, is that by reducing income taxes on large corporations the tax savings would become free cash that would trickle down to the people who were actually doing the work.
That didn't happen.
I'd like to suggest a new metric for measuring the minimum wage, which is to measure it not in dollars but in how many hours of work at the minimum wage equals one year of a Congressional salary.
The base Congressional salary (leaders get more) is $174,000/year. The minimum wage is $7.25/hour. One year in Congress carries remuneration equal to 24,000 hours at the minimum wage.
Now go back to the first year of the Reagan era. Congresspeople received $60,662.50/year. The minimum wage was $3.35. One year in Congress in 1981 equaled 18,108 hours at the minimum wage.
The facile interpretation is that our Congresspeople are 33% more productive than they were in 1981, because they now earn 33% more than their predecessors did in 1981, in terms of the minimum wage. We have only to look at the Senate of the last few years to reject an explanation based on productivity. So let's go back to trickle-down economics.
If trickle-down economics had worked as Reagan and Laffer had predicted, then there would be few - maybe no - minimum-wage jobs remaining, because the price of labor would be higher in real-dollar terms than it was in 1981. The plutocrats would have taken the dollars showered upon them by the appreciative Solons and spent them pursuing labor, driving up wages. That wages did not keep up is a strong mark against the Reagan-Laffer theory.
But let us assume, as Mitch McConnell and his merry band of naysayers must, that the tax cuts in fact trickled down. In that case there would be no harm in raising the minimum wage to a level that assumes that the tax cuts did in fact trickle down. That level, I suggest, is the 1981 ratio, when the minimum wage was 1/18,108 of a Congressional salary. Today that's $9.61/hour.
If Senator McConnell is willing to adopt standard Republican economic theory, then he should be all in favor of raising the minimum wage to $9.61/hour, and to index it to equal at least 1/18,108 of a Congressional salary. If he continues to oppose raising the wage to keep up with costs, then we should insist that Congress adopt another Republican principle and tie Congressional salaries to productivity. One refinement would be to provide that if a session of Congress is less productive than the historical average, its leaders should get not more, but less, than the base salary. It seems unjust to call Senator McConnell a legislator when he's working as hard as he can not to legislate.