The Beginnings of a New New Deal
The next step after Covid relief: relieving employers of health insurance costs — and allowing them to finally pay workers $15/hour
Allow me to explain.
The huge federal economic relief package that’s about to be enacted, thanks exclusively to Democrats, will give three-quarters of Americans a nice extra piece of the national economic pie, those $1,400 checks. Huzzah.
But just this once. What we need are some permanent changes in how we slice our economic pie for when we aren’t coping with pandemic emergencies. It is a truth not yet universally acknowledged in America that all economies are political economies, that our economy is a complex man-made system that gets perpetually tweaked — and sometimes redesigned and rebuilt, as it was during the last quarter of the last century by and for big business and the rich.
The big permanent systemic change that got cut from the CARES Act was a doubling of the federal minimum wage, to be phased in over four years, to $15. As you may know, the minimum wage used to be the equivalent of more than $12, and was still more than $10 when I had a minimum-wage job in the 1970s. But then starting in the 1980s, when that last radical economic redesign-and-rebuild got going, Congresses and presidents allowed inflation to do the dirty work, lowering the low-wage floor by a third (and occasionally more), to where it remains today, $7.25 an hour.
The argument against raising it to $15 is that businesses won’t be able to afford it. South Dakota Senator John Thune suggests it “would put many of them out of business,” such as the small-town restaurant where as a teenager 40 years ago he worked as a cook for only $6 an hour — which he apparently didn’t realize was, back in the Dazed and Confused era, the equivalent of $23 an hour.
The main referee on potential economic impacts of proposed federal laws, the Congressional Budget Office, tries to look at the whole economic machine, the system. And they estimate that a $15 national minimum wage would increase the incomes of 27 million low-paid Americans in all, bettering their lives as well as those of tens of millions of family members. More than a million people, half of them children, would be lifted out of poverty. And the aggregate extra amount that all American employers would have to pay those 27 million American workers? Just $22 billion more a year — a mere one-quarter of 1% of U.S. salaries and wages. Or looked at another way, one-tenth of the money that Jeff Bezos and Elon Musk made during 2020.
The CBO also estimates that a $15 minimum wage would render some people unemployed more of the time — for instance, instead of 10 million unemployed workers in a given week, they think it’d be 11.3 million. This is naturally the CBO number Republicans and much of the press focuses on: OMG, 1.3 million jobs gone! Perhaps. But the authors of the most recent big scholarly meta-analyses that underly the CBO study conclude that the relationship between minimum-wage levels and employment levels “are both statistically insignificant and very close to zero,” and while for restaurants and bars it is “somewhat larger” it’s “still not statistically significant.” And consider the actual lives of many of the people working minimum-wage jobs. If during one year they work full-time for 10 months at $7.25 an hour, they earn $12,500. But if instead, they worked for eight months at $15 an hour, they’d earn $21,000, an income 68% higher — even though their two fewer months of work would add to that higher unemployment number for those two months.
But don’t stop there: it’s an economic system. You want to make sure businesses survive and prosper by keeping their costs down? Fine, instead of worrying about the raises that some businesses would have to start paying their cheapest employees, why not relieve all American businesses, especially small ones, of the cost of directly paying anything for their employees’ health insurance premiums? In other words, a health system like one of the various kinds every other rich country has.
U.S. companies that offer health insurance — and it’s only 56% of employers — now spend an average of more than $5,000 a year for each single employee and more than $15,000 for those with families. That adds up to an annual cost approaching $1 trillion.
Thus my proposed grand bargain: A livable minimum wage that would increase what businesses spend on workers by $22 billion a year (and by the way, could save the government that much or more in reduced anti-poverty costs), coupled with a single-payer health care system would reduce what businesses spend on workers’ health care by dozens of times that amount.
As it happens, growing majorities of Americans now support a $15 federal minimum wage (including Republicans) and also think it’s the federal government’s responsibility to make sure that all Americans have health care coverage. So give the people what they want. As a famous Democratic strategist famously almost said, It’s the political economy, stupid.