The Majority of the Country Doesn’t Make a Living Wage

To determine whether this is true, you need to first define a living wage, and then second determine how many people receive less than it. Kessler decides to use the MIT Living Wage calculator and a two-adult, two-child family to define a living wage:

The MIT Living Wage calculator, run by Amy Glasmeier, a professor of economic geography and regional planning, says the living wage in the United States was $16.07 per hour in 2017, before taxes, for a family of four (two working adults, two children). That means both adults together would need to make at least $32.14 before taxes to cover basic necessities.

From this paragraph, he concludes that the living wage is $16.07 per hour. But the actual living wage here is clearly $32.14, i.e. the hourly wage a full-time worker would need to make in order to comfortably sustain a family of four. Glenn decides to divide that in half because he wants to say two adults might be working full time. But why would you do that anymore than you would divide it by 2.5 on the assumption that one of the kids also has a part-time job?

You can combine multiple below-living-wage jobs in order to get a total family income above a particular income threshold, but each particular job still pays less than a living wage as it is ordinarily understood.

Once you have defined the living wage amount, you need to determine whether the majority of workers receive less than it. Kessler cites Brookings’ Ryan Nunn, whose analysis of the Current Population Survey says that 32.3 percent of full-time workers receive an hourly wage below $16.07. But that same calculation from Nunn shows that at least 80 million of around 115 million full-time workers (70 percent) receive an hourly wage below $32.14, which again is the living wage necessary for a full-time worker to support a family of four.

Kessler’s mistakes go beyond using $16.07 instead of $32.14, though. He also errs in deciding that someone receives a living wage provided they make $16.07 per hour without any regard for how many hours they work. Someone who receives $16.07 per hour or even $32.14 per hour does not make a living wage if they only work ten hours a week. And of course getting enough hours is a struggle for some people, with the rise of just-in-time scheduling practices by employers.

It would be reasonable to argue that it is not necessary for each individual worker to make enough to support a family of four on their wages alone. After all, a social-democratic society would kick in a lot of stuff like free health care, free child care, and a child allowance that would make individuals much less dependent on wage income to make ends meet. But insofar as we are trying to determine whether most workers make a living wage so defined, they clearly do not, and AOC is thus clearly correct.

Less Than the Minimum Wage

Kessler says that Amazon and Walmart do not pay less than the minimum wage. Kessler’s argument here is initially just clear pedantry, deciding that “the minimum wage” refers to the statutory minimum wage, rather than “the living wage,” even though that’s what is being talked about throughout the rest of the statement.

But what’s funny here is that Kessler is even arguably wrong to say Amazon pays the statutory minimum wage. The company no doubt pays its statutory employees an amount above the state and federal minimums. But Amazon has a lot of people who work for it in varying ways that are independent contractors, and some of them do not make the minimum wage. Most prominently, Amazon’s Mechanical Turk workers do not make the minimum wage. But also some of Amazon’s last-mile delivery drivers work as independent contractors for third-party firms that do not always pay the minimum wage. Amazon logistics contractor XPO seems to get sued for this behavior rather frequently.

So AOC is even right on the most pedantic interpretation of minimum wage.

Companies Benefit From Wealth Transfer

Kessler takes on AOC’s other claim — that companies like Amazon and Walmart in effect receive a wealth transfer from the means-tested benefits received by their workers — by saying that:

Even if Ocasio-Cortez were right about the minimum wage, her contention that those companies are benefiting from a wealth transfer is dubious. Economic theory generally assumes all costs and benefits of labor-related taxes and benefits are borne by labor — i.e., the worker, not the employer. So wages would be largely unaffected if taxes went up or public assistance went up. And the worker would still get paid the same, even if they had to carry the burden of new taxes or received enhanced benefits.

The problem here is that, if we are going to use economic theory to settle this debate, then it is true that benefits like Medicaid and food stamps do not benefit the employers of those that receive them. But that same economic theory says that the Earned Income Tax Credit (EITC), which is also received by low-wage workers, does benefit employers by permitting them to pay lower wages than they would without the EITC. The EITC allows low-wage employers like Amazon and Walmart to save on wages because of its phase-in structure, which differs from the structure of benefits like food stamps and Medicaid.

So once again, AOC is technically correct on this narrow point. And Kessler is wrong.