The Minimum Wage and Your Purchasing Decisions

By Susan Taylor

One of today’s interesting economic and political shifts is the growing momentum to raise the minimum wage. Roughly 2.5 million low-wage U.S. workers saw at least a small minimum wage hike go into effect Jan. 1 this year, bringing to 21 the number of states with a minimum wage above the federal level of $7.25 per hour. Though many of those minimums are only modestly above the federal wage floor, other areas are making bigger changes. Washington, DC, and two adjacent Maryland counties have already voted to raise their minimum wage to $11.50 per hour, effective in 2016. In his first week in office, Seattle’s new mayor began developing plans to pay all city workers at least $15 per hour.

ST minwage real500

Growing wage inequality has been the focus of recent speeches by people ranging from representatives of fast food workers’ groups to President Obama and Pope Francis. Sensing the swing in momentum, Congressional Democrats have floated a proposal to raise the federal minimum wage to $10.10 and index it to inflation going forward.

Many news sources outline the various data and economic arguments for or against a higher minimum wage. Social investors probably have a range of opinions on any particular piece of legislation, but it seems we have already expressed our support for a higher minimum wage in some quite tangible ways.

We support a higher minimum wage every time we shop for fair trade products.  The business practices of fair trade markets raise and stabilize the incomes of small-scale farmers and artisans.  Higher wages mean better housing, health care, and education for their families.   Fair trade markets mean communities can actually plan—impossible without stable incomes—for investment in broader community needs, such as a school or medical clinic or community center.

But fair trade products sometimes cost more and sometimes aren’t quite what our connoisseur tastes crave.  Fair trade markets don’t exist for all products, of course, but do we buy fair trade products when we can? Even if it’s not our ideal choice? Even if it’s not the cheapest choice?  If so, then we, in practice, support wages above the market minimum.

We support a higher minimum wage every time we buy from a locally-owned business. Buying from local businesses shows that something matters to us other than minimum price. If we were chasing the lowest price, most products could be purchased through an online clearinghouse or at a big-box retail store at an apparent price—the labeled price—that is cheaper than buying from a locally-owned business.

But is it really cheaper? Cheaper for whom?

It has become increasingly apparent that those lowest-wage-lowest-price businesses are passing their true labor expenses on to our communities in the form of food stamps, Medicaid, earned income tax credits, and other programs put in place to assist poor families. It’s a structure that essentially subsidizes the businesses for paying their employees below-subsistence wages, while all the gains of lowest-wage-lowest-price strategies pass through to corporate management and shareholders.

But wait, we are shareholders.  However, as NI investors and advisors, we don’t hold shares in just any business. We support a higher minimum wage every time we invest in mutual funds that screen for fair labor practices. By consciously choosing investments based on criteria in addition to expected return, we are voting with our dollars that while return matters, it isn’t the only thing that matters.

We could knock ourselves to the floor by patting ourselves on the back so hard, so let’s keep it real: If legislation passes to raise the federal minimum wage, we could see higher prices and lower corporate profits.  This isn’t necessarily the case, as shown by a review of the economic research; there are many variables and many possible outcomes. But if we do see higher prices at our locally-owned store, will we punish that store by searching out a lower price? Will it present a conflict for us if lower profits affect the returns on our investments? Are we looking for minimum price or a fair price? Are we looking for maximum return or a just return? How much is enough?

Trackback from your site.

Susan Taylor

Welcome to my archive of newsletter articles and blog posts. For more information on my service offerings, please go to my advisor webpage.

Leave a comment