Raising the federal minimum wage to at least $15 an hour will lift millions of Americans out of working poverty – and it’s scaring a lot of special interests who profit from keeping people poor. In this series, we’re dismantling the myths, one by one, that Raise the Wage opponents use to try and stop 40 million workers from making the money they deserve.
This week, we’re tackling the marginal utility of money.
If someone handed you $400 right now, what would you do with it?
This may sound like a trick question, but it’s actually a good way of understanding one of the most common and most frustrating barriers to raising the minimum wage.
For the vast, vast majority of Americans, if someone handed us $400, we would immediately put that money to good use – toward groceries, rent, fixing our cars, or making a mortgage payment. Even if we’re living in relative comfort, an extra $400 would make most of us feel a little bit more secure in our monthly budgeting.
But what if you handed $400 to a multi-millionaire? Someone who has more than enough money to live comfortably for the rest of their lives, who could stop working at that very moment without worrying about having a roof over their head or putting food on the table – someone who could drop a few hundreds out of their wallet and not even notice? That $400 might be a nice surprise (let’s face it, everyone likes money), but it wouldn’t make a difference to their lives at all.
Basically, $400 means two completely different things to two people in completely different financial situations. While every dollar counts for the average American, hundreds, thousands, and even hundreds of thousands of dollars are drops in a bucket to America’s wealthiest individuals. This is called the marginal utility of money.
Let’s take that example and apply it to the minimum wage. Right now, in 2019, a full 40 percent of Americans couldn’t come up with $400 in an emergency. Not coincidentally, nearly half of all working Americans currently make less than $31,200 a year – the annual salary of working on $15 an hour.
This is exactly why raising the wage to $15 an hour is the bare minimum we can do for American workers. It is the bare minimum they need to live with the dignity all humans deserve and make the most basic of ends meet. Our current federal minimum wage of $7.25 an hour nets a worker just $15,080 a year – a wage that is not enough to ensure the economic security of a single adult with no children anywhere in the country.
So why don’t 15 Democratic Senators understand that, and why are they unwilling to cosponsor the Raise the Wage Act in the Senate?
You guessed it – the marginal utility of money skews how the vast majority of these holdouts view the issue.
It’s no secret that millionaires are over-represented in Congress, and it’s also well-known that when it comes to making decisions that actually work for working people, Congress lags a bit behind. The psychological effect produced by the marginal utility of money can help explain why these 15 Democrats don’t seem to think it’s a matter of urgency to give 40 million workers a raise – because to them, a few more bucks an hour is a drop in the ocean. When you have millions upon millions of dollars, it’s hard to understand how much a single dollar is actually worth.
We need to make them see that it’s not just raising the wage a couple of bucks – it’s zero hour for America’s working poor. Of the 15 Senate Democrats still opposed to the Raise the Wage Act, 12 are multi-millionaires, and all but one have net worths at least in the hundreds of thousands of dollars. It’s no wonder they can’t sympathize with America’s working poor.
Take a look for yourself:
- Sen. Michael Bennet (CO) —– $15 million
- Sen. Tom Carper (DE) —– $5.2 million
- Sen. Chris Coons (DE) —– $4.8 million
- Sen. Catherine Cortez Masto (NV) —– $3.92 million
- Sen. Maggie Hassan (NH) —– $6.11 million
- Sen. Martin Heinrich (NM) —– $363K
- Sen. Doug Jones (AL) —– $12 million
- Sen. Joe Manchin (WV) – —– $3.3 million
- Sen. BobMenendez (NJ) —– $423.5K
- Sen. Jeanne Shaheen (NH) —– $7.1 million
- Sen. Krysten Sinema (AZ) —– $-30k
- Sen. Jon Tester (MT) —– $3.9 million
- Sen. Tom Udall (NM) —– $5.2 million
- Sen. Mark Warner (VA) —- $238.2 million
- Sen. Angus King (ME) —- $3.8 million