Sen. Elizabeth Warren Asks Why Minimum Wage Isn’t $22/hr

Owen Poindexter
Senator Elizabeth Warren continued her streak of turning senate hearings into some of the best entertainment around when she asked why it is that the minimum wage isn't $22/hr., given that that's where it would be if it had risen along with productivity, starting in the 60s.

Senator Elizabeth Warren (D-Mass.) continued her unlikely streak of turning senate committee hearings into fascinating entertainment. This time, it was as a member of the HELP (Health, Education, Labor and Pensions) Committee, and the subject was the minimum wage. She asked this question to Dr. Arindrajit Dube, a University of Massachusetts Amherst professor who has studied the economic impacts of minimum wage:

"If we started in 1960 and we said that as productivity goes up, that is as workers are producing more, then the minimum wage is going to go up the same. And if that were the case then the minimum wage today would be about $22 an hour. So my question is Mr. Dube, with a minimum wage of $7.25 an hour, what happened to the other $14.75? It sure didn't go to the worker."

Warren is not actually making the case for a $22/hr minimum wage. What she is saying is that the work that an average American does has increased dramatically in value over the last fifty years, but that excess value hasn't been claimed by the workers. Warren doesn't say explicitly that the "other 14.75" an hour (the difference between $22/hr. and the current minimum wage of $7.25/hr) goes to the richest people in the country, but Dr. Dube responded by bringing up the wealth gains of the top 1%:

"That's correct, since the early 70s, what we have seen is a divergence in the prosperities of different sections of our population, so, for instance, had the minimum wage kept pace with productivity, you're correct, it would have stood at $22/hr today. Now, the answer to your question, who got the other fourteen dollars ["and 75 cents" Warren interjected], we can answer with the following comparison: had the minimum wage grown at the same pace as incomes going to the top 1% of the taxpayers, the minimum wage would have stood at $33/hr. before the recession in 2007."

Emphasis mine. Sen. Warren went on to ask if studies had shown an increase in inflation as a result of changes in the minimum wage, and Dr. Dube replied that there had been little to no change found in inflation due to increases in the minimum wage. She also asked about restaurant employment, a sector of note because restaurants employ a lot of minimum wage workers, and Dr. Dube replied that in the aggregate, restaurants do not hire fewer people as a result of a higher minimum wage.

On the inflation point: inflation is measured by the cost of everyday goods (i.e. a gallon of milk) and how they change over time. It is remarkable (and good) that increases in the minimum wage do not cause these sorts of increases, but even if increasing the minimum wage did cause inflation, it would be limited to a direct correlation with the purchasing power of the bottom 80% of Americans.

Warren is making the case for an increase in the minimum wage to $10/hr. by pointing out that America could theoretically afford a tripling of its minimum wage to $22/hr. Warren has shown a willingness to make a case for truly populist policies, and she is learning the political game more and more. It's why Senate Republicans probably wish they had allowed her to be appointed to head the Consumer Financial Protection Bureau, and why people won't shut up about the possibility that of her running for President in 2016.