A nationwide minimum wage of $12 per hour would shrink government, aid families, curb illegal immigration, spur high-tech investment, and boost GOP support among working-class voters, says Ron Unz, the California libertarian entrepreneur who wiped out his state’s Spanish-only K-12 classes.
The $12 wage would slash the huge taxpayer subsidies now given to companies that hire low-wage immigrants, and move tens of millions of Americans into the middle class and sharply reduce the 47 percent of the population who are now completely or partly dependent on federal handouts, Unz told The Daily Caller.
“Politics would be completely different… what you’re doing is reducing the 47 percent by 10 to 15 points and giving Republicans a chance to make their case about cutting government spending and reducing taxes,” he said.
Unz’s unorthodox proposal is likely to catch fire, partly because he’s working to put it on California’s ballot this year and force Democratic and Republican politicians to take sides by November.
Unz’s proposal ups the ante as Democrats push for a national $10.10 minimum wage during the 2014 campaign, amid public anger over the Obamacare takeover of the nation’s health sector.
The plan is also likely to get traction because it offers the public a good-news alternative to the business-backed campaign to triple the inflow of low-skill immigrant labor during the next decade. If implemented, the $12 alternative plan would instead flood American businesses with Americans who have dropped out of the workforce, and also push low-skilled illegals to the sidelines and eventually south of the border, he says.
Under the current minimum wage level of $7.25 per hour, roughly 1.8 million Americans under age 30 aren’t even looking for work.
This minimum wage argument is gaining ground among conservatives. This week, for example, conservative icon Phyllis Schlafly, called for an increase in the minimum wage. “Legislation to raise the minimum wage would elevate many low-wage earners above the income threshold that qualifies them for benefits and should result in reduced welfare spending,” said Schalfly, who earned the undying hatred of progressives in 1977 by blocking the Equal Rights Amendment.
“That’s a tradeoff Republicans could support,” she added.
Unz is an unorthodox conservative, who made his fortune in California by creating a financial-services software company
Politically, he made his mark in 1998 by ending the using the state ballot initiative to ban the union-backed practice of teaching immigrants kids in Spanish. The so-called “bilingual education” program paid teachers extra, but left huge numbers of Hispanics with little education and less chance of a middle-class career, he said.
Unz won by that ballot fight by rallying Hispanic parents to ban the crippling practice, and he expects to win the minimum-wage ballot initiative in November.
Unz also ran The American Conservative magazine from 2007 to 2013, and now runs his own website. The site’s authors are diverse, including Pat Buchanan and Ron Paul, as well as a slew of lefties, anti-Israel activists and biotech experts.
Conservatives don’t want government to micromanage Americans’ lives. They don’t trust bureaucrats or executives to act selflessly, and they don’t believe bureaucrats can make better decisions than adults, parents or entrepreneurs.
But Unz argues that a national $12 minimum wage rule is a least-worst option.
It would minimize the economic and political harm caused by the federal government’s expanding Rube Goldberg apparatus of federal regulations, programs, incentives, disincentives and taxes, he says. That huge mechanism is fiercely protected by the people who live off it — Democrats, progressives, unions, business groups, low-wage employers and the media, plus many Republicans — so it can’t be removed, but might be bypassed, he said.
For example, he says, the federal government subsidizes employers to import low-wage workers who are intended to compete against low-wage workers in Bangladesh, China and India.
The subsidy is provided by income-boosting welfare programs, which allows employers to pay the minimum wage of $7.25 per hour to millions of immigrants and low-skill Americans hired to sew clothes, fill packages, pick fruit, milk cows, flip burgers, install roofs and drive trucks, he said.
Those subsidies, including the Earned Income Tax Credit and food stamps, add up to roughy $14,000 for each household headed by an illegal immigrant, after including the value of taxes paid by the household.
“In 2010, the average unlawful immigrant household received around $24,721 in government benefits and services while paying some $10,334 in taxes,” according a report by the Heritage Foundation.
The government payments are high, partly because most immigrants have little education. “Half of unlawful immigrant households are headed by an individual with less than a high school degree, and another 25 percent of household heads have only a high school degree,” said Heritage.
Even legal immigrants are less educated than Americans.
Only about 36 percent of legal immigrant households are headed by a person with a college degree, according to the Heritage study. Those educated immigrants pay $24,529 more in tax than they get in benefits, but the other 63 percent of legal immigrant households cost Americans roughly $21,000 per household.
That’s almost the same as the $20,000 after-tax subsidy provided to the 40 percent of American-headed households that are headed by people with a high-school degree or less.
Much of those subsidies are taken from the 30.6 percent of American households headed by people with college degrees. In 2010, these households contributed an average of $30,255, according to Heritage.
Unz says immigration is usually good for the United States, but it can drive down wages for Americans.
Some of the companies who employ illegals “are competing on price with Bangladesh and India, and the only reason those companies are viable is that they are receiving massive subsidies from the U.S. taxpayer,” Unz said.
“Not only are they driving down the wage of native-born Americans, they’re also drawing much more money from the government than they’re providing in taxes,” he said.
But if the minimum wage is $12, executives won’t be able to build their business on cheap labor, and they’ll be forced to focus on higher-quality, high-tech, higher-productivity jobs don’t drain money from other Americans’ pockets, Unz said.
A $12 minimum wage will force companies to lay off some workers, but most of those workers will be the low-skilled illegal immigrants who are already costing taxpayers so much in taxes, Unz said. “Job losses, I think, would be very low… maybe 1 percent,” he said.
The losses would be “vastly disproportionally concentrated at those very low levels” where illegal immigrants are hired, he said.
Some workers will be replaced by cheaper machines, such as robots or software, he said. But the demand for new machinery will spur high-tech companies to hire well-paid American technicians, designers and production workers, he said.
That replacement process is already underway, because many jobs held by immigrants and native workers are being taken over by new generations of cheaper machinery.
Without some special accommodations, a $12 wage will make it difficult for some teenagers, ex-convicts and other low-skilled Americans to get a start in the workplace, Unz said. But those people are already being excluded from jobs by employers’ ability to hire subsidized legal and illegal immigrants for only $7.25 an hour, he said.
If government subsidizes a continued influx of low-skill workers, taxpayers will just have to aid a larger population of low-skill workers who can’t compete with cheap machines or perform high-skill jobs.
By using a $12 wage to curb the influx of low-skill labor, “we will become more of a regular developed wealthy nation, rather than a nation that is trying to compete with Bangladesh on pricing,” he said.
Consumers won’t be hurt by the $12 wage because wages are such a small part of consumers’ costs, he said. The $12 wage would only add a dime to the price of a hamburger, 2 percent to the price of fruit, and 1 percent to the price of products at Wal-Mart, he said.
The $12 wage won’t harm business, Unz said. Most merchants and employers will recoup their increased costs because local consumers will have $150 billion more each year to spend at their stores, and they’ll have a more productive staff, Unz said.
Also, the federal government’s demand for business taxes will lessen, because welfare spending will be sharply cut, he said.
The $12 wage won’t force companies to fire illegals, but it will prevent companies from hiring immigrants to undercut Americans’ wages, he said.
The hike will also vastly increase the number of Americans willing to work —- and ensure that many employees will have an incentive to directly and indirectly pressure employers and politicians to follow immigration law, he said.
Companies that want to hire legal or illegal immigrants won’t be able to evade the $12 wage as easily as they evade immigration law, Unz said. That’s because legal and illegal employees will have a huge financial incentive to sue employers who cheat, he said. In contrast, Americans and illegal immigrants have no ability or incentive to make employers comply with immigration law.
Progressives and many Americans view illegal immigration as a victimless crime, but readily see wage-cheating as a drastic violation, he said. That means progressives, journalists and unions will rise to defend defrauded $12 workers, instead of welcoming vibrant and Democratic-backing illegals, he said.
The changed attitudes will deter illegals from migrating to the United States, sharply reducing welfare costs paid by state and federal taxpayers, he said.
Workers’ increased wages will also reduce federal spending via welfare programs, such as the EITC.
The annual savings might amount to $50 billion, Unz said.
The Center for Budget and Policy Priorities estimated that 18 percent of federal transfer payments, worth roughly $400 billion per year, go to the working poor. The estimate includes Medicare, which is denied to illegals.
The Heritage Foundation estimates the government spends $900 billion per year, to provide cash, food, housing, medical, and other services to roughly 100 million low-income Americans.
The $12 wage would allow a two-earner married couple to bring home $50,000 a year, and would push them up into the lower middle-class — and give them an new incentive to consider the GOP’s position on taxes, spending, education, family issues and lousy government services, he said. “It gives Republicans and conservatives a much better chance.”
“A huge part of the GOP base is lower-wage white workers… those are the people who would benefit enormously from a hike in the minimum wage, and I think many of the people they vote for would recognize that, if the issue is out there,” he said.
Roughly 30 percent of wage-earning Americans — or about 25 million people — would get a pay increase of up to $5, he calculated.
The pay increase would also build Americans’ confidence and satisfaction.
Many Americans remain reluctant to apply for jobs where they get paid $7.25 to work in dead-end, low-status jobs alongside foreigners who barely speak English, Unz said. But they’ll revive their local economies, and vote for supportive politicians, if they’re getting $12 per hour to work alongside fellow Americans and legal immigrants, he said.
“I think something like this would be enormously popular among ordinary Americans and [legal] immigrants… I don’t think there would be any opposition.”
The wage hikes are very popular among voters and among Republicans. For example, a January poll by Quinnipiac showed 52 percent support among GOP supporters. A Gallup poll from December showed 59 percent GOP support.
But there’s plenty of opposition among the business groups who have enormous sway with top GOP legislators.
The groups have allied with progressives to push a Senate-backed immigration bill that would triple the influx of legal, low-skill labor over the next decade. If approved by the House, the bill would award permanent work permits to 33 million foreigners, and temporary work permits to 11 million foreigners.
That’s enough workers to replace every teenager in the United States, or almost enough to replace every worker between 20 and 30.
Marty Regalia, the top economist the U.S. Chamber of Commerce, dismissed Unz’s plan as a tax on small business, and a loss to national economic power, or Gross Domestic Product.
“You can get into a debate as to whether [immigrant workers] are illegal, undocumented, whatever they are, but the fact of the matter is if they contribute to GDP when they are in the system working, and they don’t contribute to GDP when they’re not, and I’m worried about GDP growth and job growth, why would I [not use them]?” he asked TheDC.
Rep. Eric Cantor, the GOP’s Majority leader, claimed Friday that “immigration reform could be an economic boon to this country.”
But American voters’ aren’t concerned about national GDP. They’re worried about their weekly income, and the ability of their friends and kids to get decent jobs.
Regalia also acknowledged that unproductive immigrants may impose a cost on Americans. “If I’m in a rowboat, and I’ve got seven or eight oars… [and] if that oarsman tends to continually hit this oarsman and ruin the efficiency of this side of the boat, then I can see reasons for moving them, for transferring them, or whatever,” he said.
The chamber’s advocacy for cheap labor is echoed by top GOP leaders.
Republican Rep. Paul Ryan, the GOP’s budget chief, told National Journal that low-skill, low-wages workers are needed to keep some industries operating. “You raise wages too much in certain industries, then you’ll get rid of those industries, and we’ll just have to import,” said Ryan, who is the House’s chief advocate for extra foreign labor.
In his home state of Wisconsin, dairy farmers need cheap labor, Ryan claimed. “If they can’t find workers, then they can’t produce, and we’ll end up importing,” he claimed in July. In fact, farmers are increasingly replacing their immigrant labor with robot cow-milkers, boosting the cows’ productivity and their own quality of life.
Florida Sen. Marco Rubio is also a strong advocate for extra low-skill labor. In 2013, he backed the Senate’s immigration plan that would triple legal immigration to 33 million over the next decade, and recently proposed a plan to greatly expand federal subsidies for the resulting low-wage employment.
“I am developing legislation to replace the earned income tax credit with a federal wage enhancement for qualifying low-wage jobs,” he said in a supposed anti-poverty speech on Jan. 8
“This would allow an unemployed individual to take a job that pays, say, $18,000 a year – which on its own is not enough to make ends meet – but then receive a federal enhancement to make the job a more enticing alternative to collecting unemployment insurance,” he said.
It would also allow companies to pay their workers only $9.35 per hour, or $18,000 a year, knowing that other Americans would be taxed to keep those workers out of penury.
Unz dismisses Rubio’s plan as welfare for workers and a subsidy for low-wage employers.
“It is appalling that Republicans [leaders] these days are endorsing more welfare as the answer to our problems,” Unz said.
“It is important that America starts thinking of itself as a country like Switzerland, rather than a country like Bangladesh.”