President Franklin Roosevelt set the first mandated minimum wage 75 years ago at $.25 an hour. Since then, it’s been raised 22 times and is now $7.25 an hour. President Barack Obama is pushing for $9 an hour. Supporters say the increase is critical to the welfare of nation’s working poor and would also be a boost for the economy, but others argue it’s an increase many businesses, especially small businesses, can’t afford. Seth Harris, Acting Secretary of Labor, talks about the minimum wage, labor standards in the U.S. today and prospects for the U.S. job market.

Guests

  • Seth Harris acting secretary and deputy secretary of Labor.

Featured Clip

Acting Secretary of Labor Seth Harris explains the Labor Department’s rules for unpaid internships and what interns should do if they have questions about a program’s legality.

Transcript

  • 10:06:55

    MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The minimum wage was last raised in 2009. Acting Secretary of Labor Seth Harris is making the case it needs to be raised again, both for the people working at the lowest end of the pay scale and for the health of the overall economy. He joins me in the studio to talk about labor laws, job growth and why he believes the U.S. needs a higher minimum wage.

  • 10:07:29

    MS. DIANE REHMDo join us, questions, comments. Call us on 800-433-8850. Send us an email to drshow@wamu.org. Follow us on Facebook or send us a tweet. Good morning, sir. It's good to have you here.

  • 10:07:48

    SECRETARY SETH HARRISGood morning, Diane.

  • 10:07:49

    REHMGood to have you here. Before we begin our conversation, let me just tell our audience that the Supreme Court has ruled that DOMA, the Defense of Marriage Act, is unconstitutional as a deprivation of the equal liberty of persons that's protected by the Fifth Amendment. It was a 5-4 decision. And the ruling states that DOMA singles out a class of persons deemed by a state entitled to recognition and protection to enhance their own liberty.

  • 10:08:36

    REHMThe opinion and its holding are confined to those lawful marriages. And now good morning again to you. I'm glad to have you here. I understand that Tom Perez has been nominated to be secretary of labor. In the meantime, you have been acting for how long?

  • 10:09:03

    HARRISI've been acting since the end of January, around Jan. 22.

  • 10:09:07

    REHMSo what's the holdup?

  • 10:09:10

    HARRISWell, we're hoping the Senate is going to act on Tom Perez. He's a terrific public servant. He's a genuine expert in this field, and he'll do a terrific job. So we're hoping we'll get a vote very soon.

  • 10:09:23

    REHMYesterday, you were testifying on Capitol Hill about the need to raise minimum wage. Tells us why you believe it must be raised.

  • 10:09:36

    HARRISI've been travelling around the country meeting with minimum wage workers who talk about the excruciating choices they have to make between buying fresh food for their kids or clothes for their kids. Do they fix their so they can get to work? Do they fix the heat so they'll be warm in winter? It's the kinds of choices that in the wealthiest nation on Earth that people who are working full-time, taking responsibility for themselves, shouldn't have to make. So we need to raise the minimum wage.

  • 10:10:06

    HARRISFifteen million Americans would benefit from the President's proposal to raise the minimum wage from 7.25 an hour to $9 an hour. He's also proposed indexing the minimum wage thereafter so that the minimum wage would go up with the cost of living after that. So as the price of milk, the prices of gas go up, minimum-wage families will be able to keep up.

  • 10:10:26

    REHMHow many people were there at the hearing, and what was their reaction?

  • 10:10:34

    HARRISWell, the hearing room was packed. Actually, there were people lined up well down the hall trying to get into the hearing. This is a very popular, important issue for the American people.

  • 10:10:42

    REHMHow many members of Congress?

  • 10:10:45

    HARRISWe had three senators including Chairman Harkin and then the ranking member Sen. Alexander, so four senators were there while I was there. But then there was a panel after me and several other senators, as I understand, showed up after that. So it's a pretty popular issue.

  • 10:10:59

    REHMAnd what were their reactions?

  • 10:11:02

    HARRISThey're enthusiastic about an increase. Sen. Harkin, of course, is the sponsor of the leading bill in the Senate to increase the minimum wage along with Congressman Miller in the House. Sen. Warren was very tightly focused on the concerns about tipped workers, the waiters and waitresses who actually have a minimum wage of -- a cash wage of $2.13 an hour. They can be paid -- they have to be paid at least the federal minimum wage, but tips can make up the difference. And so she was very focused on that issue.

  • 10:11:33

    HARRISWe had a god discussion about that. Sen. Murray was quite focused on what the effect would be on local communities, and on the economy as a whole. When you put money in the pockets of minimum-wage workers, what they've told me is they're going to turn right around and spend it at the local grocery stores, the local gas station. That's going to help their local economies to grow. It will help our economy as a whole to grow if we put more money in the pockets of these consumers.

  • 10:11:58

    REHMWere there any Republicans present?

  • 10:12:01

    HARRISRight. Sen. Alexander, the ranking Republican was there. He was not supportive of an increase in the minimum wage. He thinks that is going to cause people to lose jobs. I tried to respond to him that there's been study after study after study by independent economists showing that if you raise the minimum wage, we don't lose jobs.

  • 10:12:22

    HARRISAnd, you know, that was the story that had been told for many decades, but the independent economic research shows that that just isn't true that we actually see families benefit. We see small businesses benefit. We see the economy doing better. It's not a panacea for economic problems, but it definitely leaves families better off. It leaves communities a bit far.

  • 10:12:42

    REHMBut that has always been the argument that small business would have to layoff people in order to increase the minimum wage.

  • 10:12:54

    HARRISYeah. There's a set of arguments that lobbyists in Washington have filed away in their filing cabinets that they pull out anytime anybody proposes an increase in the minimum wage. But I met with some small business owners last week to talk about an increase in the minimum wage. And there's a new poll that shows that two-thirds of small business owners actually support an increase in the minimum wage. Eighty-five percent of them report that they're paying more than the minimum wage right now.

  • 10:13:20

    HARRISThe main reason they support it is two reasons. One is they think it's fair. They just think it's the right thing to do. And the second is they know it will put more money in the pockets of consumers. And so they will end up with that money. That money will be spent in their stores, and they will be better off as well. So I was surprised by that because we hear all the time from people inside the Beltway, oh, small businesses oppose. Small business is for an increase in the minimum wage.

  • 10:13:45

    REHMI'm sure we'll hear from some of those small business owners as we go on. This is the 75th anniversary of the Fair Labor Standards Act. Talk about the act, its history and what it did for labor.

  • 10:14:05

    HARRISWell, I think it's one of the most important laws in all of American history. It actually began in the -- around 1910 when there were efforts in states to regulate minimum wages at that time because of some Supreme Court decisions. It's interesting we're talking about the Supreme Court today. You could only regulate wages for women and children. And there were efforts in Massachusetts and other states to raise the minimum wage.

  • 10:14:26

    HARRISOne of the leading activists in that effort was Frances Perkins, who worked with Gov. Franklin Roosevelt on trying to solve problems for low-wage workers in New York state. When President Roosevelt was elected, he asked Frances Perkins to come with him and to be his labor secretary, the first woman ever to serve in the cabinet. And she said, I'll come if I can work on a law that sets minimum wages, a ceiling on hours and addresses this terrible problem with industrial child labor.

  • 10:14:58

    HARRISSo she took the lead with President Roosevelt, pushing very aggressively. And then in 1938, the law was passed, and it set the first ever national minimum wage at 25 cents an hour. It set overtime pay for any hours worked over 44 hours in a week. Now, obviously, it's 40 hours in a week. And it also outlawed exploitative child labor. So it was really a landmark law, a tremendously important law.

  • 10:15:20

    REHMHuge, yeah. How many workers today are working at minimum wage?

  • 10:15:28

    HARRISIt's -- it depends on how you count it. So it's a -- there are several million who are working right at the minimum wage, some below because they are tipped workers. There are 15 millions workers in this spread between $7.25 and $9 an hour who would benefit from the increase that the President is proposing. But it also has an effect on other workers as well.

  • 10:15:51

    HARRISSo what we found is when you raise the minimum wage, those who earn -- excuse me -- slightly above the new minimum wage often also see an increase in their pay because their employers want to differentiate them from other workers in the workplace. So they give them a little bit of a bump, 25 cents, 50 cents, so they benefit as well, and obviously families benefit and communities benefit.

  • 10:16:13

    REHMHere's the issue about tips, when, for example, one goes to a hairdresser and a shampoo person washes your hair, you tip that person individually. Say that person is making 2.25 an hour, how does the front desk count all that and work that in so it comes up to 7.25 an hour?

  • 10:16:45

    HARRISWell, that's actually the problem with this tip credit is it's really quite complicated. The rules have become quite complicated over time. And so there are rules that allow tip pooling so that if you give a tip to the person who washed your hair or the person who delivered your meal in a restaurant, that money doesn't necessarily go directly to that person. It goes into a pool that's shared by everybody who is a tipped employee in the workplace. So it's shared.

  • 10:17:14

    HARRISThe rule in the federal law is that every employee has to get at least $7.25, but the employer is allowed to make up $5.12 of that using the tips that you and I leave for the hairdresser, for the waiter or waitress. Honestly, I don't think that people who leave tips think that that's what their money going for. We're subsidizing the employer's wage. So I just think that's a surprise to tip leavers around the country. And what it means for waiters and waitresses and other tipped employees is that their wages actually end up being a lot lower.

  • 10:17:49

    HARRISIt's very difficult for us to enforce. We fear that a lot of folks are not actually getting 7.25. They end up with a lot less because employers are not as meticulous as they need to be about ensuring that they're paid the minimum wage.

  • 10:18:02

    REHMSo you're saying that if minimum wage were raised from 7.25 to $9, how might the law itself be changed?

  • 10:18:16

    HARRISOur hope is that for tipped workers that we would see them get a raise as well. Sen. Harkin and Congressman Miller have proposed an increase for those workers. The president has said he supports an increase for those workers so that the cash wage is substantially higher, they're guaranteed more money.

  • 10:18:31

    REHMActing Secretary of Labor Seth Harris. When we come back, we'll talk more, take your calls, your email. I look forward to speaking with you.

  • 10:20:05

    REHMAnd welcome back. Acting Secretary of Labor Seth Harris is here with me. This is the 75th anniversary of the Fair Labor Standards Act, first passed in 1938 under FDR with the help of then labor secretary and the first woman appointed to that position Frances Perkins. For those of you who have not yet heard, the Defense of Marriage Act has been ruled unconstitutional by the Supreme Court by a 5-to-4 vote. Now, back to you, Secretary Harris. What types of workers are specifically not covered by minimum wage other than tipped workers?

  • 10:21:06

    HARRISThe most prominent group, the group that we spent the most time talking about recently is home health care workers who are caught up in an exemption in the law called the -- some people call the companionship exemption. It was a provision that was originally included in the law to exempt babysitters and people who gave fellowship to older people.

  • 10:21:29

    REHMFellowship is an interesting word.

  • 10:21:32

    HARRISRight. It's not a phrase that we use that often now to talk about, particularly about people who are doing work.

  • 10:21:37

    REHMYeah.

  • 10:21:37

    HARRISAnd it's not an accurate description of what's going on in that industry for home health care aids right now, who, many of them, are providing medical services. But they're certainly doing what -- all of the rest of us would describe as work, cleaning, cooking, other kinds of provision of help. Those workers don't get the minimum wage, and they don't get overtime protection. So we are now working on a rule that would, for the first time, include those workers under the protections of the Fair Labor Standards Act to assure that they got the minimum wage and assure that they got overtime.

  • 10:22:09

    REHMSo would the -- let's see. I know that some agencies sort of oversee that kind of home health care work and workers. How would that be changed?

  • 10:22:26

    HARRISWell, the relationships would remain the same, but those agencies would be required to pay these workers at least the federal minimum wage or overtime premium pay if they were working more than 40 hours in a week. And that would be true for all of these home health care workers whether or not they work for a third party agency. If they work directly for a family, they would also benefit. Interestingly, the biggest problem in the home health care industry or home health care occupation is not overwork.

  • 10:22:58

    HARRISIt's actually underwork. Those folks actually don't get -- many of them don't get 40 hours in a week. So we hear a lot of concerns expressed that this is going to be a serious problem for elderly people and people with disabilities who get this care because they won't get the services they need. What we're actually going to see, I expect, is more sharing of work, that we'll have more workers involved, more getting full-time hours as a consequence to the rule.

  • 10:23:20

    REHMIt really does take a lot of work on that home health care workers' back to accomplish everything that needs to be done. Now, let's talk about interns and the whole of question of, what happens with those interns whether they get paid at all?

  • 10:23:47

    HARRISThat's true. We -- there was a recent decision in a New York court on a case involving the movie "Black Swan," where there were unpaid interns working for -- I believe it was Fox Searchlight. And the court held using a six-factor test that the Labor Department developed that these interns were workers, that they were not in an educational environment, that they had to be paid at least the minimum wage, and they had to be paid overtime if they were working more than 40 hours in a week.

  • 10:24:16

    HARRISYou know, this internship rule -- the set of rules governing internships have been in place for many decades now, and they're fairly straightforward. And that is, if you are running a program that looks like an educational program, that's like a sort of a clinical program that you might find in a law school or medical school or a journalism school, and it's for the benefit of the intern, not for the employer, and it's not replacing a workers who had been there.

  • 10:24:43

    HARRISThey're not doing the same kind of work that others are doing in the workplace. It really is educational. That's probably going to be OK under the law. But if you have somebody who's doing essentially what everybody else is doing in the workplace, and it's not really educational, and then there's no connection to an educational institution, and they are, you know, maybe laid off a couple of people and these interns are replaced, that's going to be problematic.

  • 10:25:07

    REHMYeah, yeah. And how does that intern know to raise questions?

  • 10:25:15

    HARRISWell, they can contact the Labor Department's Wage and Hour Division. We have offices around the country, and we can help them figure it out. We also have information available on the Labor Department website, which is www.dol.gov. We've laid out all this information. Again, it's been around for a good long time. But I understand the frustration of a lot of younger workers who are struggling now to find jobs.

  • 10:25:37

    REHMRight.

  • 10:25:37

    HARRISThey really are having trouble finding employment, including folks who are coming out of undergraduate institutions, even some graduate schools. So it's appealing to go to find -- sort of get your foot in the door...

  • 10:25:48

    REHMSure.

  • 10:25:49

    HARRIS...with the internship, particularly in an exciting job, like working on the "Black Swan" or working in a lot of MTV or other places. So those folks really need to think about whether or not they really want to push to get paid in that workplace. They should. The law requires them to be paid if they're working as workers. But, I think, there's a hesitance among some young workers because they're worried about how they're going to get their career started. So we're not getting a lot of complaints, frankly, from interns. We got a few, but we don't get a tremendous number of complaints.

  • 10:26:21

    REHMInteresting. How do you separate interns from volunteers?

  • 10:26:27

    HARRISWell, right. So everything I just said applies only to for-profit organizations. If you are a not-for-profit organization with the government, in most cases, it's perfectly OK for people to volunteer for you. So I hope I didn't just set off a panic on Capitol Hill because there are interns all over Capitol Hill. That's perfectly OK, and that's a terrific way to get an experience.

  • 10:26:47

    HARRISThe only limitation is you're not allowed to volunteer if you already work for the organization. So a paid firefighter can't volunteer his services to his fire company. But you can intern with any kind of governmental organization to be perfectly ok under the Fair Labor Standards Act.

  • 10:27:04

    REHMOK. And then there's this classification of exempt. What does that mean?

  • 10:27:12

    HARRISThere is a group of workers, executive, administrative and professional workers, who are exempt from overtime protections. Minimum wage isn't as much of an issue because they tend to be white-collar workers who are paid well above the minimum wage. And this is a class of workers that we think of as lawyers and accountants and doctors, who -- or managers in a workplace -- who really are -- they're so well-paid. They're salaried workers. They shouldn't really need to have protections.

  • 10:27:39

    HARRISPart of the problem is that they're -- we find an unfortunate degree of -- excuse me -- misclassification in the workplace where you have people who are assistant managers in a fast food restaurant, perhaps, who are treated as they are -- as though they are exempt under the law. They're given some job classification, some job requirements that make them look like they are supposed to be exempt. That's really where it comes in. They're earning very small amounts of money, 20, $25,000 a year. But they don't get overtime, even though they are working overtime hours.

  • 10:28:11

    REHMSo that's a deliberate misclassification.

  • 10:28:15

    HARRISWe do find an unfortunate level of misclassification both misclassification to exempt people from overtime protections and, in some cases, to exempt them entirely from not just the Fair Labor Standards Act but from out -- from under the definition of an employee, which -- if you're an employee, the employer has to pay an employment insurance taxes. They've got to pay Social Security and Medicare taxes. The worker does as well. They've got to pay workers' compensation premiums.

  • 10:28:43

    HARRISSo by calling a worker an independent contractor rather than an employee, an employer can save an immense amount of money and get a competitive advantage over its other employers in the industry. So we see a lot of misclassification in that field as well and...

  • 10:28:59

    REHMBut how do you catch it? How do you find it? How do you -- surely, the Department of Labor does not itself have unlimited resources to go out and find these misclassifications.

  • 10:29:15

    HARRISUnfortunately, we have very limited resources. We have about 1,000 investigators protecting 140 million workers in more than seven million workplaces, and we're enforcing several different laws. But we are in partnership with the IRS. We're in partnership with 14 states on misclassification. We rely very heavily on workers to identify problems. We do directed investigations in industries where we expect to see large amounts of misclassification.

  • 10:29:44

    HARRISConstruction being one industry where we find it a good bit. So we are being proactive, but we're also trying to reach out and partner with agencies and organizations that we think can help us find the problems.

  • 10:29:55

    REHMAnd speaking of reclassification, what happens when the Affordable Care Act goes into effect? Do you expect that perhaps those employers with 50 or more employees are going to reclassify employees as part-time or working less than 28 hours?

  • 10:30:24

    HARRISRight. Well, we're hearing a lot of anecdotes that that is happening in the economy right now, but I have to say we're not seeing evidence in the data that that's happening. We're not seeing, for example, a significant increase, a disproportionate increase in the temporary help industry. So folks…

  • 10:30:40

    REHMNot yet.

  • 10:30:41

    HARRISNot yet. So we're not seeing big growth in Manpower and Kelly Services and other of these temporary help agencies. That would be another way to bring down the number of employees you have. We're not seeing a disproportionate growth in part-time work as opposed to full-time work. In fact, we're seeing more full-time work than we had expected. So we're not seeing that kind of evidence.

  • 10:31:00

    HARRISIn reality, the president's health care law, the ACA, has been a tremendous help. Eight in 10 Americans have benefited from this law. They have -- they're getting preventative care for free that they haven't gotten before: mammograms and cancer screenings. Children up to the age of 26 can stay on their parents' insurance. They couldn't do that before. You can't discriminate on the basis of a pre-existing condition anymore.

  • 10:31:25

    HARRISThe Department of Health and Human Services just reported a few weeks ago, a couple of weeks ago, that the ACA has resulted in $3.9 billion in savings in premiums for consumers, including $500 million in rebate checks being sent out to millions of households around the country. So the ACA's already benefiting Americans all across the country. Now we're focused on implementation.

  • 10:31:51

    HARRISWe have healthcare.gov available right now. People who are interested in learning about health care should go to healthcare.gov. That's also where people will be able to go to enroll in health care, in their health insurance marketplace, in their state, or if it's a federal program, they can enroll there. So we're now focusing on getting as many people enrolled as we can. Enrollment will open Oct. 1. So I want to push everybody to focus on healthcare.gov. That's where they can get this information.

  • 10:32:19

    REHMAnd in the meantime, the Republican-led House has voted 37 times to overturn the Affordable Care Act. Doesn't that lend to confusion among people, you know, who are thinking, is this thing really going to be the law?

  • 10:32:44

    HARRISWell, we're gonna have to overcome that. I -- it's hard to explain -- in my view, it's hard to explain why it's productive for our country to repeatedly vote for a law that's not going -- repeatedly vote to overturn a law that plainly is not going to be overturned, a law that is helping millions of Americans, that's putting more money in consumers' pockets, that's making sure that premiums are being spent on health care and not on profit or on administration, that's making sure that people are protected from cancer of varying sorts, that ends discrimination against women.

  • 10:33:15

    HARRISIt's hard to see what's good about those kinds of votes, but we do have to overcome the confusion. That's why I want to encourage everybody. Go look at healthcare.gov.

  • 10:33:23

    REHMAnd you're listening to "The Diane Rehm Show." In 2011, Wisconsin Gov. Scott Walker revoked collective bargaining rights for many state employees. Talk about the role of collective bargaining in labor conditions today.

  • 10:33:48

    HARRISRight. I -- what happened in Wisconsin was really a shame, and there was an effort also in Ohio and other states to further degrade collective bargaining. The number of workers in unions in the United States or the percentage of workers in unions in the United States has declined quite precipitously since the middle 1950s. It's down by almost two-thirds, a little over 11 percent now. That's a bad thing for our country.

  • 10:34:13

    HARRISIf you think about the outcomes for union workers, they're paid more. They're more likely to have health insurance. They're more likely to have pensions. They're more likely to have protections against safety and health violations. They're more likely to have paid leave. They're more likely to have family and medical leave. They're likely to have all of the good things that we think make up a middle class existence in the United States.

  • 10:34:37

    REHMBut they've lost so much clout.

  • 10:34:39

    HARRISThey have indeed, and that's a shame for our society. It's actually, I think, a significant contributor to the state of our economy, the long-term state of our economy. Incomes have been flat in America for most workers for decades. That's partly because union density, as it's called, is down significantly. And here's the piece of it that I don't fully understand. You know, the collective bargaining is a system of private dispute resolution in the workplace.

  • 10:35:07

    HARRISUnions representing workers and employers work together to solve workplace problems in the workplace, and the people who know the most are solving the problems. Government has no role in that system. So small government conservatives who attack collective bargaining are putting us in a position where there's a greater demand on government to get involved in workplaces.

  • 10:35:30

    HARRISPeople are asking for more government because they can't solve problems through their unions in the workplace. It just -- from a small government perspective, it doesn't make sense. We want unions and workers working together with their employers to make their workplaces as fair and as productive as possible.

  • 10:35:46

    REHMAll right. I'm going to open the phones, take a call from Fred in Kalamazoo, Mich. Good morning. You're on the air.

  • 10:35:59

    FREDGood morning, Diane. How are you doing?

  • 10:36:00

    REHMGood. Thanks.

  • 10:36:02

    FREDFirst of all, I just wanna say, I really love your show, and I listen to it every day.

  • 10:36:05

    REHMI'm so glad. Thank you.

  • 10:36:07

    FREDI just have one comment to make as an employer. I find that when I pay my employees better than minimum wage, I don't have to worry about them taking stuff from me that would mess up my budget, 'cause a lot of times when employers that pay employees, give them that minimum wage, they try to subsidize their income by taking stuff from the employer like food or whatever, things that they need that they can sell. I find that when I pay my employees better than minimum wage, they feel part of the company, and they feel good about themselves.

  • 10:36:43

    REHMFred, how many employees do you have?

  • 10:36:47

    FREDRight now I have five.

  • 10:36:49

    REHMOK.

  • 10:36:50

    HARRISWell, Fred, first of all, thanks for that testimony. It's perfectly consistent with what I heard from the small business owners I've met with and what we're hearing all around the country. When you pay workers a wage that allows them to live in dignity and to support their families, they're more productive. Their morale is higher. They're less likely to quit. Your point is that they're less likely to supplement their income in a way that you don't want them to. It results in good outcomes for employers, not just for workers. So I think you're exactly right.

  • 10:37:20

    REHMActing Secretary of Labor Seth Harris. We'll take a short break and be right back.

  • 10:40:05

    REHMAnd welcome back to our conversation with acting Secretary of Labor Seth Harris. Let's go right back to the phones. To John in Miami, Fla. Good morning. You're on the air.

  • 10:40:23

    JOHNHi, Diane, Mr. Secretary. Thank you very much for taking my call.

  • 10:40:27

    REHMSurely.

  • 10:40:28

    JOHNI wanted to comment on kind of the income disparity between hourly workers and top paid executives of corporations in the U.S. It seems like there's a movement now for a social capitalism that has a lot more responsibility towards their employers. It seems like it's coming up in the country, and the consumers are kind of pushing towards that movement.

  • 10:40:52

    JOHNAnd now the government is acting accordingly, rising hourly pay towards a more reasonable and a better pay for everybody involved. I just kind of want to see what your comments are in that kind of new movement of capitalist -- of social capitalist.

  • 10:41:12

    HARRISJohn, I think, that's a terrific question. I think there is a tremendous amount of frustration in our country with income inequality and with stagnant wages. Wages, as I said earlier, have been flat for most workers for decades now, and they are struggling to stay in the middle class. So there is a, I think, a big push around the country to -- both on job creation but also on trying to raise workers' wages. You know, 70 percent of the American economy is built on consumer demand.

  • 10:41:44

    HARRISAnd when you say consumer, you've got to think, middle-income family, working family, minimum-wage family. Those are the people who are spending the money that helps our economy to grow. They're -- as the president said in the State of the Union address, we need to grow the economy from the middle class out because the middle class is the engine of economic growth. That's what he meant. More money in their pockets will help them to help the economy to grow. So it helps everybody.

  • 10:42:09

    HARRISUnfortunately, that's not where we are right now. That's why he's pushing for a minimum wage increase. That's why unions are such an important part of our country -- country's economy. That's why skills training is very important. That's another important path to raising wages and also helping workers to find jobs.

  • 10:42:24

    REHMHere's an email from Leslie, "Please include in your discussion the fact that restaurant workers' minimum wage is well below the national minimum wage."

  • 10:42:41

    HARRISRight. This was our discussion earlier...

  • 10:42:42

    REHMTips.

  • 10:42:43

    HARRIS...about tips. Exactly right.

  • 10:42:43

    REHMYeah. Same thing. Here's an email from Mike in Jacksonville, Fla. He says, "It absolutely burns me up when I hear people saying companies can't afford to have minimum wage increase. A $2-an-hour increase for one employee amounts to just $4,000 a year." Is that correct?

  • 10:43:10

    HARRISThat's exactly right.

  • 10:43:11

    REHMOK.

  • 10:43:11

    HARRISAnd a full time worker works 2,000 hours a year on average.

  • 10:43:14

    REHMOK. Even if a company like McDonalds employs 20 or more employees in each store, they throw away more money in unpurchased or defective food than the cost to pay the employees, and these amounts would hardly affect their multi-billion dollar profit margin. Even a very small company which would only have a few employees should easily be able to absorb the cost. Can't make that generalization for everybody, but from a common sense point of view, it would seem to be accurate.

  • 10:44:01

    HARRISI think Mike is making an important point that -- and this is a little-discussed part of the minimum wage because frequently the minimum wage discussion goes where you and I went right at the beginning, Diane, is to talk about small businesses. The reality is that the large majority of minimum wage workers are working for large brand name corporations that are...

  • 10:44:19

    REHMLike Wal-Mart.

  • 10:44:20

    HARRISRight. That are seeing record profits where corporate profits are at record or near record levels. Wall Street is doing just fine although it's bouncing around a little bit now. But minimum wage workers are not sharing in that production. They're not sharing in those profits. So, this increase would give them a little bit so that they can get the basic necessities in their life and, as they've said to me, get a little bit of breathing room.

  • 10:44:41

    REHMAll right. Here's an email from Dawn. She's talking about affordable care. She says, "Your guest is delusional if he really think this act will benefit people. It's actually hurting a lot of people because employers are keeping their employee hours under 30 per week. Now the people still don't have insurance and they earn less money as well."

  • 10:45:15

    HARRISWell, Dawn, I hope I'm not delusional. The phenomenon that you're talking about, which is hours going down, we're just not seeing it in the data. I worry about it, and I know the president doesn't wanna see that happen as well. But we -- we're just not seeing evidence of effects on employment. We're not seeing evidence of effects on hours.

  • 10:45:35

    HARRISWhat we are seeing is millions and millions and millions of Americans who need preventive health care, who need access to insurance that's been deprived -- they've been deprived of because they have pre-existing conditions, people who are getting more money in their pockets and are getting lower premiums because of the health -- the increase in health care cost, for the first time, is lower, has gone down because of the ACA, not just because of the state of the economy. But the ACA is bringing down the rise in the cost of health insurance in America.

  • 10:46:06

    HARRISSo millions and millions and millions of Americans are benefiting from this law, and we're not seeing the negative effects that we hear so much about. But there's just not evidence of it right now.

  • 10:46:14

    REHMAll right. To Athens, Ga. Good morning, Erica.

  • 10:46:20

    ERICAGood morning, Diane. Good morning, Mr. Secretary. I just wanted to speak to the tips wages. I run a restaurant and have for 20 years, and all of my tipped employees make well above the minimum wage. We pay taxes for them based on real earnings and receive a credit in the form of the FICA tip tax credits, and I think that that's the best way to handle it.

  • 10:46:49

    HARRISI appreciate that, Erica. I congratulate you on being a responsible employer. I've met with some employers last week who told me the same thing. There's this argument out there that you just plain -- ordinarily can't compete if you pay your workers fairly, you pay them a decent wage. I think you're disproving that. The employers I met last week are disproving that. You can behave responsibly and pay people what they deserve and what they need and still compete in a -- and the restaurant industry is a very competitive industry.

  • 10:47:16

    REHMBut, Erica, how do you think a hike in the minimum wage would affect your employees?

  • 10:47:24

    ERICAIt will cause prices to go up everywhere else. We don't really -- we don't have anybody making minimum wage. Everybody is making above that. But the businesses that will be affected by that will be forced to pass that cost on to consumers. And I think in the long run, it's a sort of a tax in disguise because it'll also raise the income taxes earned by the government, and it'll cause prices to go up for consumers and less money will be spent.

  • 10:47:53

    HARRISWell, let me take the second part of that, first, Erica, because -- legitimate concerns you've raised. First is most low-wage workers actually don't end up paying any income taxes because they are able to benefit from the earned income tax credit or they don't earn enough to have to pay income taxes. With respect to prices going up, again, we don't see a lot of evidence of inflation resulting from an increase in the minimum wage because the amount of money involved is not huge.

  • 10:48:17

    HARRISIt's just not a tremendous amount of money. What we see is, in a few places, you know, you may see four, five cents on a burger or on a pint of beer in a few places. But in a lot of places, because you have a fairly competitive product market, you actually don't see prices go up that dramatically. And for the largest corporations, they frankly just take it out of profits because they don't wanna to lose their competitive edge.

  • 10:48:38

    REHMSo you're saying that prices could go up.

  • 10:48:43

    HARRISIt could go up a little bit. I'm not -- I don't think they're gonna go up much, frankly.

  • 10:48:46

    REHMAll right. Let's go to Appomattox, Va. Good morning, Steven.

  • 10:48:52

    STEVENGood morning, Diane. I'm a huge fan.

  • 10:48:54

    REHMThank you.

  • 10:48:56

    STEVENMy question for Secretary Harris was, you know, a minimal increase in the minimum wage for many low-income families who supplement their income though governments programs like Medicaid and WIC, how -- my question -- what effect a raise in the minimum wage would have on that, and would those programs be adjusted to compensate for the small increase in the amounts of money that people make?

  • 10:49:39

    HARRISSteven, another very important point that you're making. You know, people just need a certain basic amount of money to be able to live in our society. You know, they need money for food. They need money for rent. They need money for transportation. They need money to be able to take care of themselves and their kids. If they don't get that money from work, if their employers don't pay them enough to give them the sustenance that they need, the money is gotta come from somewhere. So either it's from charity or from community-based organizations or it's from government programs.

  • 10:50:08

    HARRISSo to the extent that the minimum wage raises people out of poverty and helps people to support themselves and lift themselves out of poverty through work, there will be less demand on government resources, less demand on things like SNAP, which is the new name for food stamps, and Medicaid and other programs, housing assistance where people have to turn because they simply don't have enough money to be able to support themselves.

  • 10:50:31

    HARRISSo we're all subsidizing. The fact that the minimum wage right now is too low, we're subsidizing it through our tax dollars, we're subsidizing it through our charitable giving instead of employers taking responsibility for supporting their workers.

  • 10:50:43

    REHMThanks for calling, Steven. To Chris in Charlotte, N.C. Good morning to you.

  • 10:50:51

    CHRISThank you, and I really enjoy your show.

  • 10:50:53

    CHRISThank you, Chris.

  • 10:50:55

    CHRISMy question for your guest is if $9 an hour is gonna be so beneficial for workers and it's not gonna be detrimental to small businesses, why not raise it to 25, 30 or $40 an hour? That way, it's better for everybody.

  • 10:51:12

    HARRISWell, that's a fair criticism of the argument that I've been making that it's good for the economy to put more money in the pockets of workers. There is a point at which you are have -- going to have an effect on employment in the economy. If you raise the minimum wage too dramatically, you really can have this disemployment effect that is talked about so much when the minimum wage is raised.

  • 10:51:36

    HARRISThis increase that the president has proposed is right in line with the last several increases, the one that was signed by President George W. Bush, the one that was signed by President Bill Clinton. It's a moderate increase that won't have those kinds of disemployment effects. So we wanna keep it in the range where we're not gonna have significant negative results if we do it. And we think $9 is the right level.

  • 10:51:59

    REHMAll right. And thanks for calling, Chris. To an email from Michael, "Would an increase in the federal minimum wage cause inflation?"

  • 10:52:13

    HARRISI don't think it will. Again, it's not enough money to really affect an economy the size of ours in a dramatic way. As I said, we could see a few very small price increases in a few places where you have a very large density of minimum wage workers, but it's just not enough to affect the economy as a whole.

  • 10:52:31

    REHMAll right. To Cleveland, Ohio. Good morning, Kirby.

  • 10:52:37

    KIRBYGood morning, Diane. Good morning, Mr. Secretary.

  • 10:52:39

    HARRISGood morning.

  • 10:52:40

    KIRBYHi. I just had a quick comment on unions in our country. I'm actually from Strongsville, Ohio, and I was a part of a teachers strike going on for about eight weeks. This year, I'm a graduating senior. And at first hand, I saw the union hatred by conservatives in our country and in my city. And I was wondering if that is just like a mild psychology type of thing going on, or why this union hatred has been -- has just been so much more prevalent nowadays compared to -- because unions were such a big part of our country in our growth and everything.

  • 10:53:18

    HARRISThat's, I think, an excellent question. And I'm not sure I know exactly where it comes from. There was a time, not too long ago, when unions found support in both parties, unions were close -- particularly the building trades unions, for example, were very close with a lot of Republicans. The union for which I used to work, the Seafarers Union, another Maritime's unions, worked very closely with Republicans.

  • 10:53:42

    HARRISLike many things in modern life, collective bargaining has become quite seriously politicized over the course of the last 20 years. And the labor movement has become a much more fixture of the Democratic Party. And the value of collective bargaining to productivity in our country, to job growth in our country, to building up our middle class, that's been lost in this fight over politics.

  • 10:54:05

    REHMAnd you're listening to "The Diane Rehm Show." Let's go to Anniston, Ala. Good morning, Russ.

  • 10:54:15

    RUSSHi. I'm -- I heard you talked about struggling workers at the beginning of the show. And I'm here to tell you that I'm a small business owner, a business of one. I sell vinyl records -- classical music and rock 'n' roll and jazz -- on eBay. And I make some days $30 total sale. Now, I don't have any health care, I don't own a car. I used the library services, the computer at the library. I walk everywhere. And I'm here to tell you that part of the equation is the spending side.

  • 10:54:43

    RUSSYou have to focus on smart consumer behavior. I'm a vegetarian, I don't buy meat. I eat very -- I live very inexpensively, and I also can report that I live -- I feel like I live like a teen.

  • 10:54:57

    REHMCongratulations to you, Russ. I think the whole idea of learning to live within our means is very important.

  • 10:55:09

    HARRISI think it absolutely is. And this has been a big debate in Washington over the last several years, the debate over federal spending in particular. And the president has proposed a strategy for solving our deficit problems, our long-term deficit problems, but in a balanced way that assures that we're still investing in working families, still investing in the middle class, still investing in job growth. Let me also say that I've met with minimum wage families around the country.

  • 10:55:35

    HARRISAnd the way they survive, the ingenuity that they have to bring to these situations to find ways to make life bearable for their children and for themselves, relying on the support of family, relying on the support of churches and synagogues and mosques, finding creative ways to get cheaper food and to, you know, save a little bit of money on transportation. People out there are really struggling to get by in trying to find innovative ways to do it. And I think we need to do that as well.

  • 10:56:02

    REHMAbsolutely. And final email, which I'll ask you to respond to, from Amy in Indiana. She says, "It seems to me if the minimum wage is increased, two things will happen. One, employers will not hire as many people, putting more workers out of a job. And two, I will slide closer to the poverty level because that line will be higher but my wages won't increase." Very briefly.

  • 10:56:40

    HARRISI don't think the poverty line works quite that way. It's -- I think it's designed to assess what it costs to live in America if you have two children or three children or just one child. I don't think we are gonna see jobs lost. I think we're going to see really no meaningful job effect if the minimum wage goes up. But a lot of families in situations like Amy's are gonna be a lot better off.

  • 10:57:00

    REHMActing Secretary of Labor Seth Harris, thank you for being here and for responding to all those questions.

  • 10:57:11

    HARRISThank you, Diane.

  • 10:57:12

    REHMAnd thanks for listening all. I'm Diane Rehm.

  • 10:57:16

    ANNOUNCER"The Diane Rehm Show" is produced by Sandra Pinkard, Nancy Robertson, Denise Couture, Susan Casey Nabors, Rebecca Kaufman, Lisa Dunn and Danielle Knight. The engineer is Erin Stamper. Natalie Yuravlivker answers the phones.

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