Billionaire Thinks Class War Is Near

Philly should raise its minimum wage ... or else, warns Nick Hanauer.



Workers want higher wages. Management claims they’re a bad idea. It sounds like the intro to a problem set from Econ 101, and it’s also the dilemma that’s been playing out in cities across the country with the so-called “living wage” movement.

After failing for years to boost pay for low-wage workers have failed, income inequality opponents are suddenly winning — in Seattle, in San Francisco and in Los Angeles, where City Council approved a plan last month to raise the city’s minimum wage to $15 an hour by 2020. Chicago, San Diego and Santa Fe all approved lesser minimum-wage increases recently.

Some, like the New Yorker‘s John Cassidy, read these developments as a significant turning national turning point:

Reacting to grassroots campaigns carried out by labor unions and other progressive groups, some of the biggest cities in America are now defying several decades of economic orthodoxy, as well as challenging a set of social norms that regarded low-wage jobs as unavoidable and acceptable.

One of the more unlikely leading voices for a jacked-up minimum wage is billionaire venture capitalist Nick Hanauer, who has taken to warning frequently of the class war to come, if income inequality isn’t addressed fast.

Hanauer is one of those rare rich guys who declares trickle-down economics a scam, even as he acknowledges living a “life that the other 99.99 percent of Americans can’t even imagine.” (If it’s not self-evident what that means, he owns a bank, a personal jet and multiple homes — just a few of the spoils he amassed from being one of the earliest investors of Amazon, and the principal owner of another multi-billion dollar company.)

Hanauer thinks that America is closer to the Arab Spring or the French Revolution than most people realize. As he wrote for Politco last year in a piece titled “The Pitchforks Are Coming”:

No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.

Now he’s telling the U.S. how to avoid doomsday. And he thinks raising the minimum wage — which he helped to get done in Seattle — is a good first step. Otherwise, Hanauer told Gawker earlier this week, “shit’s gonna hit the fan.”

He disagrees with the (Mankiw) textbook economic wisdom, which states that higher minimum wages are not beneficial to the overall health of the economy, because, A) other measures like the earned-income tax credit provide indirect relief for low-wage earners B) employers paying more to each individual within their workforce, will be forced to cut jobs. Instead, he argues — similar to any economic stimulus argument — that putting more money in the hands of lower-income people, means they’ll in turn spend it on some of the same businesses who are shelling out a bit more in wages. Thus, a higher minimum wage is an economic driver, not a job-killer. Hanauer told Gawker:

The person earning the federal minimum wage of $7.25 isn’t going out to eat at restaurants. They’re not taking piano lessons. They’re not going to the gym or the yoga studio … If you raise it to $15 an hour, they’re doing all of those things. And all of a sudden, not just business thrives, but small business thrives.

It’s give a little, get a little.

But if the progressive push for minimum wages needs a heat check, look no further than Philly. Along with New York, Philly is among the vast majority of cities that has not boosted the minimum wage. That’s in part because the power ultimately lies in Harrisburg. By law, municipalities are not allowed to act on their own with minimum wages, although some have wondered whether a court challenge could circumvent state lawmakers.

The local movement to raise wages lost a strong ally in City Councilman Wilson Goode Jr., who is now effectively a lame duck after failing to finish in the top five for at-large seats in the May primary.

However, Councilman Kenyatta Johnson has introduced a bill that would place a question (a non-binding referendum) on the November ballot asking Philadelphians whether they’d support a $15 minimum wage. If voters turn out to be overwhelmingly in favor, perhaps that’ll nudge Harrisburg to act (ha!).