The Stimulus Is Only the Start

Perhaps we should be grateful for Joseph Tipaldo. He was, by all accounts, an awful man. But it was his theatrical, almost gleeful awfulness that eventually led to the establishment of the minimum wage. In 1934, Tipaldo ran the Spotlight Laundry, in Brooklyn. A New York law required him to pay the nine women who washed clothes for him a minimum of $12.40 for a forty-hour workweek. After a complaint, a state inspector came to make sure he paid the full amount. Tipaldo handed money to his staff in front of the inspector and then, as soon as the inspector departed, demanded that the women return much of it.

Tipaldo was arrested. But a consortium of anti-minimum-wage businesses funded an aggressive legal defense and, in 1936, the Supreme Court ruled that New York—like all other states—“is without power by any form of legislation to prohibit, change, or nullify” contracts between employers and employees regarding wages. In short: a 5–4 decision declared the idea of a minimum wage unconstitutional. It echoed many others from the prior several decades that had followed a “liberty of contract” theory. This idea held that, because the Constitution guarantees liberty, every American should have the freedom to come to whatever arrangement they want with their employer. In earlier rulings, the Court had quashed laws limiting work to sixty hours per week and curbing the use of child labor.

But, by the time of the Tipaldo decision, something had shifted politically in America, as the country struggled with the Great Depression. The principle behind the case undercut much of President Franklin D. Roosevelt’s New Deal agenda; its logic would proscribe almost all forms of government intervention in private transactions. F.D.R., who won reëlection in a landslide months after the ruling, announced a plan to pack the Court: adding additional Justices to overrule such decisions and pave the way for an expansion of the New Deal. Less than a year later, before any packing could commence, the Supreme Court reversed its position and upheld the legality of the minimum wage. A conservative justice, Owen Roberts (no relation to John), switched sides, forming a 5–4 majority in favor of Elsie Parrish, a maid who had cleaned toilets at the Cascadian Hotel, in Wenatchee, Washington; she was paid less than the state minimum wage, and was owed $216.19. And that cleared the way for the Fair Labor Standards Act of 1938, which cemented a minimum wage in federal law and, with amendments, helped ease inequality and continues to define workers’ rights today.

When President Joe Biden signs the COVID stimulus bill into law, on Thursday, he insured that 2021 would be a much better year for many Americans. But the measure will not dramatically ease inequality the way that the reforms of the late nineteen-thirties did. Senator Joe Manchin prevented this act from including an increase in the federal minimum wage, to fifteen dollars per hour. Even if that had passed, though, it would not have been enough. To significantly ease inequality, we need a much bigger, historic reframing of how we think about work and employment and equity. The minimum wage is a part of that, a necessary and important part, but alone it is not sufficient. Our economy has changed dramatically since 1937.

For decades, the minimum wage played a crucial role in lessening inequality. The period between the Depression and the late nineteen-seventies is called the Great Compression, when—for perhaps the only time in U.S. history—wages of the poor rose faster than wages of the rich. That doesn’t mean the rich weren’t, still, richer. But the growth in their wages was slower than the growth in poor people’s wages. That wasn’t solely because of minimum wage. But the idea that full-time work should provide a living wage and that the government should enforce that standard was transformative and essential.

Today the economy is increasingly moving away from a model in which workers receive hourly wages from a single employer. Someone who is selling crafts on Etsy or driving for two different ride-hailing apps, while also making deliveries for three other apps, often isn’t covered by the minimum wage. The minimum wage matters—but we need a new and stronger labor-protection system in the twenty-first century. And that focus was not addressed in the COVID stimulus package, and it remains the political and economic struggle ahead. The PRO Act, which passed the House this week, is legislation that does address it. It would allow gig-economy workers to more easily bargain collectively. But to move forward the bill needs the votes of at least ten Republican Senators, an unlikely prospect. Though, if Joe Manchin were so inclined, he could allow Democrats to eliminate the filibuster and pass the PRO Act with fifty votes. Manchin is something like an Owen Roberts of our age, a single man whose votes may determine if American workers’ conditions fundamentally improve.

The $1.9-trillion stimulus will indeed be a massive jolt to our economy. The consensus view of economists and economic analysts in a Wall Street Journal survey this week was that the measure will increase economic growth to its highest level since 1983. This will mean real and dramatic improvement in regular people’s lives. It could bring half of impoverished children above the poverty line this year. But the impact will peter out over time. During the pandemic, it has become increasingly obvious that deepening inequality is both reinforced by and further reinforces the unequal structure of our economy. There are workers who were able to quickly adjust to and even thrive in a global pandemic, because the central thrust of our current economy and technologies are like wind at their back, allowing their ideas and labor to move—at the speed of Zoom—to precisely those places where they are most valued. Meanwhile, others are stuck in a more tangible, physical economy, in which opportunity can evaporate in a moment. As John Cassidy has noted, far out ahead are the billionaires, six hundred and fifty-one of whom have collectively gained more than a trillion dollars in wealth during the crisis.

Starting in the late eighteen-hundreds, it took two generations for America to recognize the realities of industrial work, in which a tiny group of owners could impose unacceptable conditions on entire classes of workers. It took decades to discredit the concept of “liberty” justifying conditions in which a handful of wealthy owners determine how much people work and how much they’re paid. We are now in the midst of similarly radical change. We need a new mental, public-policy, and legal framework for understanding how opportunity, compensation, and abuse are distributed.

This bill didn’t do that. But a fight like this takes time, though hopefully not generations. We need to find ways to share risks and rewards; to offer health care, retirement benefits, and more for people who don’t have a single full-time employer; to guarantee a living wage for those who don’t make an hourly one, as well as for those who do. It’s not entirely clear how that will happen. That’s why it’s a tricky problem. And it requires a rethinking of the relationship between working people, those who pay them—companies and gig customers—and government. Joe Tipaldo, the greedy laundry manager, does offer a hint of satisfaction. He won his big legal victory and work picked up. He expanded his Brooklyn laundry and changed its name from Spotlight to Bright Light. According to a story in American Heritage magazine that chronicled the minimum-wage battle, Tipaldo predicted that his investment would pay off: “I expect to get it back eventually on what I save in wages.” But, over time, people apparently didn’t want to do business with a man who so giddily abused his workers. Three months after his Supreme Court win, Tipaldo told a reporter that his laundry had gone out of business and that he was out of a job. “I’m broke now,” he said. “I couldn’t stand the gaff.”

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