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How The Minimum Wage Battle Will Shape 2016 U.S. Election

With the primary season about to kick off, questions about economic inequality — and the fact that even with jobs, many Americans can't climb out of poverty — are taking center stage.

Demonstrating in NYC for a raise in the minimum wage.
Demonstrating in NYC for a raise in the minimum wage.
Elsa Conesa

NEW YORK — The countdown has started. In less than three weeks, Iowa voters will be the first to choose their candidate for each party. Will Hillary Clinton beat her very left-wing rival Bernie Sanders hands down? Who, among Donald Trump, Ted Cruz and Ben Carson, will fly the Republican flag?

The date is eagerly awaited, but not for the reasons one might imagine. The first signal sent by the "purple state" (it's neither decidedly Democrat nor Republican) will, of course, provide a first glimpse of what the rest of the race might look like. But it will also offer a hint as to whether the solid economic recovery that can be seen in employment or growth figures, month after month, has become a daily reality for Americans.

With a job market close to full employment (5% of people unemployed), a GDP that has increased by 2% in five of the past six quarters, and productivity on the rise, the U.S. economy is indeed showing all the signs of a recovery. And yet, seven years after the financial crisis, the country still bears the stigma of what Americans call the "Great Recession."

Working poor

The middle class, the unfailing symbol of American prosperity, took a serious beating during the "subprime" aftermath. With so much of its wealth invested in real estate, the middle class still hasn't recovered its median income of the 2000s. Most importantly, inequalities increased. In 2015, according to an in-depth study published in December by the Pew Research Center, the middle class, as a percentage of the country's total adult population, dipped below the all-important 50% benchmark — for the first time in 40 years.

This statistical erosion, which happened in favor of two extremes, is both good and bad news for the country. It shows that that number of wealthy Americans increased more rapidly than the poor. But it also shows that a proportion of the middle classes, the less educated, has dipped into poverty. According to the same source, 20% of American adults now live near or under the poverty line. And many of these poor Americans are employed: three-quarters of the people who resort to welfare programs, including for daily meals, are part of homes where at least one person works, according to a study by the University of California, Berkeley.

"It's the hidden cost of cheap labor," explains the author of the study, who values the cost of the support of these poor workers at $150 billion per year for the community.

In this context, it hardly comes as a surprise that the debate on the minimum wage has reemerged. Like gun control and abortion, the issue is predictably and historically divisive. Since the financial crisis, however, the debate has grown even more intense.

At $7.25 per hour, the U.S. federal minimum wage is indeed one of the lowest in the industrialized world. Despite several attempts by President Barack Obama, it hasn't been raised since 2009, prompting the managing director of the International Monetary Fund, Christine Lagarde, to take the unusual step of calling for an increase that "would lay the foundations for sustainable growth." Some economists broke minimum wage down to the GDP per capita in OECD countries, and deduced that the American minimum wage should — in theory — be closer to $12.

A minimum wage movement

The terms of the debate in the United States are similar to those in Europe: supporters of a minimum wage increase say it's impossible to live decently when earning just $7.25 per hour, even working full-time, even in the poorest states. Opponents, on the other hand, fear that a higher minimum wage will ultimately lead to job losses, which would affect the least qualified — most fragile — populations.

"I hate to say it, but we have to leave the minimum wage the way it is," Donald Trump said last November. "If you raise the minimum wage, you're going to make people more expensive than machines," his rival Marco Rubio added. While leading Democratic candidate Hillary Clinton remained cautious on the issue, The New York Times, in an editorial published on Dec. 26, pleaded in favor of a $15 minimum wage.

The national debate may seem to be at a standstill, but, curiously, local representatives have taken the lead. These past few years, more than half of the country's states, including Republican states, implemented a minimum wage superior to the federal minimum (from $8 to $10). And some major cities, such as Seattle, San Francisco or Los Angeles, are planning on reaching $15 in the next five years. Many companies have also chosen to offer more competitive wages: in Silicon Valley, of course, but also in less flourishing industries, such as distribution or catering, where the job market is starting to become strained. Walmart, Costco, Gap and even McDonald's offer more than minimum wage.

The results of these measures generate as much debate as the minimum wage issue itself. In the meantime, the movement is expected to continue in 2016: four states, including New York and California, as well as nine major cities, will vote on whether or not to establish a $15 minimum wage. Admittedly, this ballot in itself won't set a new standard. But they should keep the debate alive for at least another year — in Iowa and beyond.

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