TPP entry could hurt rising minimum wage trend domestically
The past year has been a big one for low-wage workers and labor advocates in the United States. A number of states, including Alaska, Nebraska and South Dakota, have approved minimum wage increases. In other states, where politics have impeded statewide wage increases, county lawmakers have taken it upon themselves to enact increases. In last year’s midterm election, voters in San Francisco and Oakland, California, backed minimum wage increases to $15 and $12.25, respectively. Last month, in Los Angeles, Mayor Eric Garcetti signed a law that will gradually increase wages to $15 an hour. And just this week, Portland, Maine, became the latest U.S. city to pass a minimum wage increase. On Monday the city council there voted to lift the city’s wage floor from $7.50 to $10.10 an hour starting January 1, 2016.
For years, economists have maintained the importance of raising the minimum wage, which has lost value over the last few decades. The federal minimum wage value peaked in the late 1960s. Had it kept up with inflation and productivity, it would be well above $20 an hour today. But instead, the nation’s wage floor has remained remarkably low. In 2015, a full-time worker making the federal minimum wage of $7.25 will earn about $15,000 a year. That’s well below the federal government’s poverty threshold of $23,500 of annual income for an individual.
Low minimum wages are depressing the economy and hurting the middle class. As the cost of living has skyrocketed over the last few decades, particularly in urban areas, more low-wage workers have turned to taxpayer-funded subsidies to get by. But if and when a domestic problem occurs, such as increased poverty due to low wages, policies can be modified to help solve them. Federal, state and local governments all have the power to enact laws that have positive ripple effects across their economies. What Americans don’t have control over are the policies set in other countries. And America’s next plunge into an international trade agreement could be a major blow to the recent wage and labor progress made on U.S. soil.
President Obama was recently given fast-track authority for international trade agreements. This means he will have the power to negotiate trade deals with just a “yes” or “no” vote from congress, which will have no ability to modify the deal. The president will likely use this authority to enter the U.S. into the Trans-Pacific Partnership, or TPP, a massive trade agreement encompassing 12 pacific-rim nations.
When it comes to labor, the White House is selling the TPP as a progressive deal that will strengthen earnings and secure jobs in the U.S. But past trade deals have proven to be more bust than boon for many American workers. After the U.S. entered the North American Free Trade Agreement, many workers lost their ability to negotiate higher wages. In a report from the Economic Policy Institute, author Jeff Faux writes: “…NAFTA strengthened the ability of U.S. employers to force workers to accept lower wages and benefits. As soon as NAFTA became law, corporate managers began telling their workers that their companies intended to move to Mexico unless the workers lowered the cost of their labor.”
But even without pressure from employers to keep wages down, low-wage American jobs could still be at odds with competition from other TPP countries. Of the eleven countries currently in TPP negotiations with the U.S., eight of them have minimum wages that are less than the American federal minimum wage of $7.25. According to Pennsylvania Senator Rob Casey, “Seven of these countries have minimum wages [of] $3 an hour, or no minimum wage at all. Two countries have minimum wages below $1 an hour. This is a prime example of how this potential trade deal could undermine U.S. jobs.”
America’s already low wage floor is hurting the nation���s chances of solving extreme income inequality. But from what we know so far about the TPP, this deal could only compound the problem. Pushing for higher minimum wages of $10, $12 or $15 an hour may further discourage companies from hiring American workers under the TPP. After all, why would an employer choose to pay those wages when there are workers willing to do the same work for just $2 or $3 an hour overseas?
Photo: Fibonacci Blue | Strike and protest for a $15/hour minimum wage at a McDonalds restaurant in Minneapolis, Minnesota.