This is John Driscoll again. If you remember, I’m the Patriotic Millionaire who wrote to you a few weeks ago to give you a full rundown on the state of wages in America, and why there’s a strong business case for paying people higher wages.

It’s been almost a week since Representative Summer Lee (PA-12) introduced the American Stability Act with the support of our organization and a (growing!) number of cosponsors. For this week’s Closer Look, I’d like to explain why the American Stability Act is just what the doctor ordered to help businesses and the broader economy thrive.

As a reminder, the American Stability Act would make five key changes to our tax and wage systems. It does the following:

1. Establishes a Cost-of-Living Exemption for federal taxes equal to the median cost of living for a single adult with no children ($41,600/per year). The tax benefit is phased out between 100% and 200% of this exemption.
2. Shifts the tax burden onto taxpayers making more than $1 million a year by implementing a 3% surtax on incomes over $1 million and an additional 5% surtax on incomes over $15 million.
3. Replaces the federal minimum wage with a new “Stability Wage,” which is tied to the median cost of living in the US for a single adult with no children. (Today, with North Carolina being the state with the median cost of living, this wage would be $20 an hour.)
4. Indexes the Stability Wage to either annual inflation or to the increase in the average wage for all workers (whichever is higher).
5. Eliminates most exceptions to wage law which allow employers to pay some classes of workers less than others, e.g. tipped workers.

As time goes on and the bill gains more attention, we fully anticipate being confronted by critics about its groundbreaking wage elements. Specifically, we expect to have to answer the age-old argument that raising wages will hurt businesses and stifle broader economic growth. But I have that answer now, so on behalf of our whole membership, I want to get a jump on things in dealing with our future critics.

I have firsthand knowledge of what raising wages for workers can do for a business. Twelve years ago, I was the newly-minted CEO of CareCentrix, a healthcare services company with hundreds of employees that was bleeding financially when I stepped in. On Day One, I was faced with the enormous task of turning the company around, and investors were demanding that I cut costs and potentially lay off workers to do it.

I didn’t listen to them. Instead of heeding their advice, I chose to freeze executive pay increases, use the savings to invest in our employees, and raise our company’s minimum wage from $7.25 to $15 an hour. The results were nothing short of amazing. In just a few short years, CareCentrix tripled in size and quadrupled in value before it was eventually sold to Walgreens, largely thanks to the excellent work done by our employees who were more focused, motivated, and productive with a basic level of economic security under their belts.

This really isn’t rocket science. Contrary to what some people might believe, a company’s success does not happen from the top down but from the bottom up, and I would say this is particularly the case for customer service-oriented companies like mine. CareCentrix would not have survived or succeeded without our hardworking employees providing critically needed at-home care to patients. As all of us learned during the COVID pandemic, companies’ greatest assets are their employees. And that’s why it’s imperative to properly invest in them, enough so that they can do their jobs without any undue stress caused by lack of finances. Employees that make enough money to be financially secure are more focused at work, leading to higher productivity, higher customer satisfaction rates, and at the end of the day, higher profitability.

So that’s the business case for raising wages. Now let me make the macroeconomic one.

In an economy based on consumer demand, it’s very inefficient to have a ridiculously small number of people with a lot of money, and a lot of people working full time but still not making enough to afford even their basic needs. Money spent on stock buybacks and CEO compensation might make a small number of rich people very happy, but they do almost nothing to boost the economy as a whole. If that money was instead invested in the working and middle classes through higher wages, we could build more consumer demand to boost all sectors of the economy.

Compared to millionaires, low- and middle-income workers spend a much larger percentage of their income each year on necessities. When they have extra dollars in their pockets from increased wages, they will undoubtedly spend them. According to the Federal Reserve Bank of Chicago, a $1 raise for a minimum wage worker boosts consumer spending by no less than $2,080 per household. That’s a significant amount, especially if you multiply it by millions of people who would be getting raises (most much larger than $1) with a Stability Wage. It certainly goes a long way in increasing consumer demand, boosting local economies, and creating jobs. The benefits of having a larger consumer base with enough money to spend at their local businesses will help our economy grow and benefit businesses much, much more than having to pay higher wages will hurt them.

The American Stability Act has the ability to correct the things that are most wrong with the American economy today. If our goal is to generate broad-based economic growth, ensuring that workers make enough money to meet their basic needs and aren’t forced into poverty by their federal income tax bills is the way to do it.

I recently took to social media to get the word out about the good that the American Stability Act would do. Check out that video below: