A Radical Proposal to End the Minimum Wage
I am a registered Democrat. I have always been a Democrat. And at times I have been a professional Democrat. When I was 26 I quit my job working as a video editor on MTV’s hit docusoap “The Hills,” took a DRASTIC pay cut, and went to work on a passion project: helping to get Barack Obama elected President of the United States. Working to elect and reelect President Obama remains the single greatest professional achievement of my life. Obviously, I am a “woke liberal.” I believe that healthcare, including reproductive healthcare, is a human right. I believe in LBGTQ equality. I believe that everyone deserves access to quality education. I believe that the horrors of systemic intersectional racism in the United States are nowhere near amelioration. And I believe that voting should be easier than buying a gun. I am also a capitalist. I believe a free market counteracts war, that it serves to promote healthy competition and lift the quality of life by raising standards. And I believe that there is a happy medium that can be found, somewhere between the greed of unbridled profiteering and the naive magnanimity of Democratic Socialism.
Over the last few weeks, I have seen an increase in rhetoric from the American political left and center-left to raise the federal minimum wage to $15 an hour. I think this is a noble pursuit and would be a wonderful thing for low-wage workers who would see an immediate boost to their take-home pay. In the short term, this would help to curb income inequality. But I also know many small business owners, folks who own bars and restaurants, fitness businesses, and eCommerce entrepreneurs who fear an increase in the minimum wage would force them to cut employee hours or outright lay off their employees.
As I ponder both the positive and negative effects of raising the minimum wage, I am most struck by the problem that a minimum wage is trying to solve. American labor ought to have a high value. Businesses should not be allowed to mistreat and underpay their employees. But at the same time, the cost of labor in the United States is astronomically higher than in places like Mexico, India, and the Philippines. Too many jobs that could be done by Americans in fields like manufacturing or customer service are being shipped overseas because companies have deemed our wages too high to sustain a profit, and thus the US economy and our people suffer. At its core, a minimum wage is an altruistic idea with its heart in the right place. Equitably compensating workers is inherently a good thing. But a minimum wage also constrains Americans' ability to be more competitive in a global economy by allowing poorer countries without strict labor protections to undercut our wage scale, and jobs go to where labor is cheapest. Which started me thinking…
A few years ago, I became aware of the concept of Universal Basic Income (UBI). Former Presidential Candidate Andrew Yang appeared on the podcast I produce and at times co-host, and because of Andrew, I became enthralled with the notion that one way to lessen inequality in America was to institute a $1,000 per month UBI. I remember when Andrew first started peddling this idea that many people online began to criticize it as socialist or communist. Andrew would quickly respond that “$1,000 a month UBI isn’t socialism, $1,000 a month UBI is capitalism that begins at $1,000 a month and not $0.” Fast forward through the pandemic era and three rounds of COVID stimulus checks -- a form of UBI -- and suddenly a lot more Americans are agreeable to Andrew Yang’s prescient policy plank.
The purpose of a minimum wage and a universal basic income is to level the playing field and provide a base level of financial security. Now imagine if the US government were to guarantee that every citizen from the time they are born would be entitled to a $2,500 a month universal basic income (indexed to inflation/deflation). This would actually equate to being $100 more a month that an employee making $15 an hour working a 40-hour workweek would earn. Think about the financial security this UBI would provide. With this social safety net in place, we could eliminate both unemployment insurance and the federal minimum wage which would allow employers to lower the cost of their labor, allowing the free market to do its thing and generate more overall profits with those decreased labor costs, and in turn, would lead to lower prices with more money in people’s pockets which would increase tax revenue. Now this UBI should come with a few caveats. First, this UBI should be taxed as income. Second, when a person begins to generate income independent of the federal government, federal UBI payments should decrease, only supplementing a person’s income up to the $2,500 a month threshold, IE, if a person were to earn $2,400 in a month they would be entitled to a $100 UBI subsidy.
Now I’m not an economist, but all of these ideas sound like wins to me. More money immediately in the pockets of regular Americans, more financial security regardless of employment status. People would be empowered by UBI to pursue their dreams free from the stress of holding down a job they hate, while simultaneously driving down the cost of labor and thus lowering consumer prices. People would use that money to buy cheaper goods, pay sales tax, and enjoy their lives with more products manufactured in the United States. Doesn’t this sound like a great idea? What did I get wrong? You tell me.
Sign ~ Cosign: Tangent