Strengthen the Middle Class and the Country With Higher Wages

The images of California’s remarkable but unstable prosperity are myriad and contradictory: the innovative tech companies changing the way we live; the movies, the shows, the video games we entertain ourselves with hour after hour; the beaches, the mountains, the deserts we visit to rejuvenate; the bioengineering firms making longer, healthier lives possible; the struggling immigrant, Black and rural communities.

But more change is on the horizon.

The Los Angeles City Council’s recent vote to increase the wage standard by 2020 to $15 per hour promises to transform our state’s prosperous but troubled low-wage economy. The vote is another chapter in an underreported story of economic progress led by immigrant and Black activists.

Their progress may well be a catalyst for the rest of the state and the nation.

It began in 2000, when 7,000 janitors cleaning Silicon Valley’s tech titans and Los Angeles’ office towers won unprecedented wage gains – for most, as high as 8 percent.

Then, in 2003, low-wage activists in thriving San Francisco established the first city minimum wage, increasing the local standard from $6.75 to $8.50 – a 26 percent increase in just one year. More than 54,000 workers saw their wages increased.

And in 2006, more than 2,000 hotel workers struggling to make ends meet at bustling Los Angeles International Airport successful campaigned to pass a living wage – in the first year, a $2,100 average increase.

These were significant gains for a relatively modest number of miserly paid workers. These workers moved forward while California’s middle-class progress slowed and then went in reverse.

Because of increasing productivity, there is more than enough money in the economy for every worker to prosper.

Los Angeles’ new wage standard takes these unheralded gains up a notch. According to a 2015 University of California study, more than 40 percent of Los Angeles’ wage workers will receive an increase. That’s a staggering percentage. They demonstrate what is possible.

Because of ever-increasing productivity, there is in fact more than enough money in the economy for every worker to prosper. The Economic Policy Institute calculates that we could have ended US poverty in the mid-1980s.

Imagine the progress we could have made since then in moving more workers into the middle class.

Since 1979, Californian workers’ productivity increased by 89 percent, while median total compensation increased just 3 percent. Most workers’ wages were not allowed to keep up with the cost of living – median real wages decreased by 5 percent. The 20th percentile real wages decreased by 12 percent.

According to the Federal Reserve, US corporations are sitting on an unprecedented $2 trillion in cash – money many of these corporations literally do not know what to do with. California’s regions are home to many of these fantastically prosperous corporations. Google is sitting on $17 billion in cash; Apple, $14 billion; Disney, $4 billion.

Yet to date, these prosperous sectors are not driving our region’s economy forward. They too often turn a blind eye toward the pay and working conditions of their suppliers and contractors.

Yes, as the Chronicle of Philanthropy reports, “young tech donors” are taking a leadership role in renewed efforts to disrupt poverty. And improving education and health care – here in the US and across the world – are critical parts of longer-term progress.

Yet, here in California, these corporations’ well-paid workers rely on service workers to prosper – to feed them at and after work, to clean up after them at home and in the office and to provide everything for them, from toilet paper to trendy clothes.

These service workers do not share in the prosperity they help create. Worse still, the corporations’ well-paid workers are driving up the costs for these struggling service workers and the rest of us. In tech hot spot San Francisco, Zillow reports rents were increased 16 percent in 2014.

It may seem counterintuitive to some, but increasing workers’ low wages is good for business as several studies have shown, including research on Los Angeles workers as well as a living wage study from 2003 on San Francisco airport workers.

Better paid workers will feel more motivated, increasing their productivity to their employers’ advantage. And businesses that increase wages will have fewer workers quitting, which will ultimately reduce new hiring costs.

Businesses in struggling neighborhoods will have customers buying more. And businesses in thriving neighborhoods will pass on some of the modest cost increases to their prosperous customers.

Everyone who works should not just escape poverty; they should enjoy economic security.

A few notable business leaders agree. The president of the San Francisco Chamber of Commerce co-authored a letter, calling on other cities and states to establish higher minimum wages, noting it was possible to “promote income equality” while “creating America’s strongest economy.” And Facebook recently announced it would require its contractors to pay $15 plus an array of job benefits.

Two generations ago, conservative economists such as Arthur Laffer promised prosperity would trickle down from the rich to the poor. It has not. And for a generation, liberal think tanks like the Economic Policy Institute countered that we needed to strengthen the middle class. That has proven harder than many thought.

There is another path forward. It is time to dramatically expand the great US middle class to include more wage workers. Everyone who works should not just escape poverty; they should enjoy economic security.

If prosperous corporations are not going to drive our economy forward from the front, it seems then that these service workers are going to have to drive it from the back.

Here is the irony of this moment; those who have been held back the longest – immigrants and Black people – are going to make prosperity possible for everyone else. Hard working, middle-aged White people, struggling to maintain their middle-class lifestyles, now have their fates intertwined with service workers.

The $15 wage standard in Los Angeles and San Francisco and the $12 wage standard in Oakland are significant steps forward. Those standards serve as an example for the dozens of cities in their regions.

And unions and community organizations need to establish still better standards in prosperous industries – in fast food, in big-box retail, as well as at seaports, airports and logistic centers. What promises to be the next chapter in the story of California’s economic progress could be the story for the nation as well.