Kevin Drum would like to see the minimum wage, whose real purchasing power has been badly eaten away by inflation, raised more often and more generously. I think I agree, but it’s hard to know without better quantitative models of the low-wage labor markets than we have. In principle, a higher minimum must elminate some marginal jobs, and no one seems to really know how many.
But if you think that raising the minimum wage is a good idea, Kevin’s idea for how to get it done — indexing the minimum to Congressional salaries — is probably a bad idea.
It certainly would have been over the life of the program: The 25 cent per hour minimum wage established in 1938 had a current-dollar purchasing power of $3.28, while the actual current minimum is $5.15. So the real value of the minimum wage is up about 60% over 65 years. That’s nothing to write home about: Over that period, real-dollar GDP per capita has about quadrupled, so a minimum-wage worker gets a much smaller share — less than half as large — of the larger national pie now than he did in 1938.
Congressmen, however, haven’t done even that well. In 1935, a Congressman was paid $10,000, which would be $135,000 in today’s money. A Congressman (or a Senator, Federal district court judge, or Exec. Level IV appointee — the Assistant Secretary of a Cabinet agency or equivalent) now gets $155,000, a real-dollar raise of only 15%.
So Congressmen have suffered a drastic deterioration in their relative earnings over time, and even more so by comparison with the rapid increase in top-level salaries as wage inequality has grown over the past two or three decades. The explantation isn’t at all obscure: the famous ability of Congress to set its own salaries means that Congress can’t vote itself a raise without running into populist demagogy. Some time ago, a formula was created by law that was supposed to take care of the problem, but nothing could prevent some showboating backbencher from offering an amendment every year to cut back on the sum generated by the formula. Anyone voting against that amendment would then be accused back home of “voting himself a big pay raise while the hard-working….” blah blah blah.
Since wages drive housing prices, the consequence of the relative deterioration of Congressional pay is that a Member without personal wealth and with a non-working spouse can’t carry the mortgage on a nice house in a nice neighborhood in Washington, even ignoring the fact that he also needs a second residence back in his district.
I’m not sure how much better, or more honest, representation we could buy ourselves if we paid our representatives as well, relative to the rest of the economy, as we did during the New Deal. But I’m sure that the less glamorous parts of the Federal government are suffering badly when a first-year associate at a top law firm or consulting firm is paid more than a GS-15 (the top Civil Service rank, equivalent to a full colonel or Navy captain). [GS-15 now pays $91,000, while the top law and consuting firms start at between $100k and $125k, plus bonuses.]
So here’s my amendment to Kevin’s proposal: Let’s key both the minimum wage and Congressional and other Federal salaries to per-capital gross domestic product. Otherwise the sheer competence of the federal government will continue to diminish over time as the talent drains out to the private sector.