Solvency – Economic Inequality

Brishen Rogers 17 (Associate Professor, Temple University Beasley School of Law), “What the Minimum Wage Debate Gets Wrong,” 08/03/2017, Boston Review, https://www.bostonreview.net/articles/brishen-rogers-min-wage/

But as the late Iris Young put it, “the subject of social justice is wider than distribution.” A just state will not simply guarantee equal rights and a fair distribution of material resources, but will also combat pernicious forms of “private” power that lead to oppression and rigid status hierarchies. Young is far from alone. Elizabeth Anderson has argued that an egalitarian politics must ensure “equal citizen[ship] in a democratic state,” Martin O’Neill has argued that it must eliminate “stigmatizing differences in status,” and Nick Bromell has defended the “democratic value of dignity.” For now, call this an ideal of “equal economic citizenship.”

As I’ve argued in past work, minimum wage laws and other basic employment regulations help ensure equal economic citizenship in a few ways. First, they signal that one’s work is respected and valued, contributing to workers’ dignity. George Bernard Shaw captured this well when he quipped that “when domestic servants are treated as human beings it is not worthwhile to keep them.” There is, of course, a dark side to focusing on workers’ dignity. Our country has always reserved the most “dignified” jobs for white men and hasn’t treated the domestic labor of women and people of color as “work” in its public discourse, or as “employment” under the law. And we’ve kept welfare benefits to a bare minimum, undermining recipients’ dignity. But the path to a better politics of work and welfare isn’t through “leveling down,” that is, making all jobs mediocre. Rather, it is through “leveling up”: instituting policies that value and reward other types of work.

Second, minimum wage laws help align power and responsibility in the labor market by forcing firms and wealthy individuals to share profits with workers. The Congressional Budget Office estimated in 2014 that most costs from a proposed minimum wage increase would be borne by wealthier individuals, not workers, because companies respond to increases by lowering or freezing executive salaries, or by accepting lower profits, and therefore lower returns to finance. While tax-and-transfer policies can have a similar net effect on distribution, they do not target the worker-firm relationship directly. Instead, all transfers are filtered through the state, an alien institution.

Minimum wages increase family income distribution---raises families above the poverty line

Arindrajit Dube 19 (Ph.D. in Economics from the University of Chicago, professor of economics at the University of Massachusetts Amherst, known internationally for his empirical research on the effects of minimum wage policies, among the foremost scholars regarding the economic impact of minimum wages), 2019, American Economic Journal: Applied Economics 11(4), “Minimum Wages and the Distribution of Family Incomes”, pg 268–304

There is robust evidence that minimum wage increases over the past 30 years have boosted pretax-and-transfer incomes at the bottom of the income distribution. Across specifications with alternative assumptions about the appropriate counterfactual, I find that minimum wages reduce the shares with family incomes below 50, 75, 100, and 125 percent of the federal poverty threshold. The long-run poverty rate elasticities range between −0.220 and −0.459, and all of these are statistically significant. I also find that a higher minimum wage improves the family income distribution in the sense of first-order stochastic dominance. The clearest increases are for the tenth and fifteenth quantiles, with elasticities ranging between 0.152 and 0.430 across alternative models. While these results hold across a range of specifications, the preferred specification with a rich set of controls suggests an elasticity of around 0.359 for the tenth quantile of family incomes. Overall, around a third of the income increases resulting from minimum wage changes accrue to those in the bottom 15 percent of the family income distribution (roughly corresponding to those with incomes under the federal poverty level), while around 80 percent accrue to those in the bottom third of the family income distribution. At the same time, I also find evidence that there are sizable offsets in public assistance in response to minimum wage gains. For those in the bottom fifth of the distribution, around 30 percent of the income gains are offset through reductions in noncash transfers as well as tax credits. These offsets seem to be the largest near the federal poverty threshold—consistent with losses in eligibility in programs such as SNAP.

What do these estimates imply about the likely impact on poverty from an increase in the federal minimum wage from the current $7.25/hour to, say, $12/hour? Taking into account the state minimum wages as of January 2017 suggests that this policy would raise the effective minimum wage—i.e., the maximum of federal or state standard—by 41 percent (or 0.34 log points). Using the longrun minimum wage elasticity for the poverty rate of −0.446 from the preferred specification and a 12.7 percent poverty rate among the non-elderly population in 2016 suggests a 1.9 percentage point reduction in the poverty rate from this minimum wage increase. Given the roughly 270 million non-elderly Americans in 2016, this translates into 6.16 million fewer individuals living in poverty. We can also expect the same minimum wage increase to raise family incomes by 12.2 percent at the tenth quantile of the equivalized family income distribution in the long run. For the tenth quantile, this translates into an annual income increase of $2,140; after accounting for the offset due to reduced tax credits and transfers, this amounts to an increase of $1,826.22 Therefore, the increase in the federal minimum wage can play an important role in reducing poverty and raising family incomes at the bottom. To put this in context, Hoynes, Page, and Stevens (2006) estimates that EITC reduces non-elderly poverty rate by around 1.7 percentage points. They also find that (means tested and non-means tested) cash transfers reduce it by as much as 3.8 percentage points, while noncash transfers (other than Medicaid) reduce it by around 0.9 percentage points.23 In other words, a substantial increase in the minimum wage would likely have an impact on the non-elderly poverty rate comparable to means tested public assistance programs.

The income estimates in this paper do not factor in changes in prices due to minimum wage increase. However, the expected increase in the overall price level from this policy is quite small when compared to the income gains for those at the bottom of the income distribution. For example, in a simulation study using input-output tables, MaCurdy (2015) calculated that the bottom quintile faced a 0.5 percent increase in prices from the 21 percent increase in minimum wage in 1996—an elasticity of around 0.02. The preferred long-run elasticity for the tenth quantile after public offsets is around 0.256, or more than an order of magnitude larger. Therefore, netting out the likely price increase would not substantially affect the estimates of the real income gains for the bottom quintile of the income distribution. However, it does mean that some (possibly much) of these income gains at the bottom are likely borne by middle and upper income consumers through small increases in prices.

Raising the minimum wage pushes families over the poverty line

Center for American Progress 18 (independent, nonpartisan public policy research organization), “Blueprint for the 21st Century; A Plan for Better Jobs and Stronger Communities,” 05/14/2018, https://www.americanprogress.org/article/blueprint-21st-century/#:~:text=The%20Blueprint%20for%20the%2021st%20Century%2C%20or%20Jobs%20Blueprint%2C%20proposes,of%20bargaining%20power%20of%20those

Minimum wage increases are also effective at lifting families out of poverty. A working paper by Arindrajit Dube—an economist at the University of Massachusetts Amherst—for the Washington Center for Equitable Growth examined state-level minimum wage increases and found that raising the minimum wage led to increases in family income for those near the bottom of the income distribution. Using these findings, Dube estimated that raising the federal minimum wage to $12 per hour would bring 6.6 million individuals out of poverty and raise family incomes of those at the tenth income percentile by over $2,100, even after taking reductions in government assistance into account.261

Solves inequality and the economy

Shalal 22 [Andrea Shalal; Andrea Shalal reports on the White House, global trade and economics, the IMF and the World Bank, for Reuters; 4/14/22; “Reducing inequality, hiking minimum wage could boost U.S. economy -White House”; ]

WASHINGTON, April 14 (Reuters) - Boosting enforcement of antidiscrimination and antitrust laws, raising the federal minimum wage and higher unionization rates could substantially boost U.S. economic growth, a new report by President Joe Biden's top economic advisers concludes. The annual Economic Report, prepared by the Council of Economic Advisers, argues for restoring the public sector as a partner in long-run growth, and adoption of policies aimed at curbing the disproportionate market power of companies and employers that limits economic equality. “The government has a role to play in reducing inequality,” Cecilia Rouse, who chairs the council, told Reuters, stressing that ending lingering disparities in the U.S. labor market and racial wealth gaps would "absolutely" boost U.S. growth and competitiveness after years of weak progress. “The real point is that these imperfections in the market have real economic costs in terms of our GDP growth," she said, citing research by San Francisco Federal Reserve President Mary Daly, which concluded that systemic disparities cost the U.S. economy nearly $23 trillion over the 30-year period from 1990-2019, and providing more equitable access to labor markets would add $790 billion to the U.S. economy annually. Biden welcomed the report in a statement, and vowed to continue working to deliver "more equitable growth" and expand the productive capacity of the U.S. economy. The report delves deeply into the impact of non-competitive labor markets, the market power of employers and monopolies in maintaining inequality in wages, and unfair hiring practices that ultimately curtail economic growth for all. "The costs of ignoring these structural forces are increased inequality and reduced economic growth and output," the report concluded, citing inefficient labor market outcomes, misallocated talent, suppressed innovation and reduced incentives for investment in human capital. It noted that nearly 20% of U.S. workers reported being bound by noncompete agreements that limited an employee's ability to join or start up a competing firm, and said employer market power was responsible for keeping wages 15% below where they would be in a perfectly competitive market. It said government actions could curtail these market forces through increased enforcement of current labor protection and antidiscrimination laws, support for greater unionization, which can lead to higher wages, and raising the federal minimum wage from $7.25 an hour, where it has been fixed since 2009.