Democrats see student-debt forgiveness as a major priority for Joe Biden's first day in office, even though the policy would move vast wealth from the poor to the rich. One Vox writer has a solution: Give minimum-wage workers a little boost too.
Noting that the proposal to forgive up to $50,000 in student debt is far more popular with those with debt than those without, Vox business writer Emily Stewart suggested in a recent article that Democrats could pair it "with an action that would benefit non-college-educated people, such as requiring federal contractors to pay a $15 minimum wage."
Stewart's idea, however, highlights the surprising inequality at the root of a policy proposal championed by the progressives usually concerned with inequality. A minimum-wage hike would kill an estimated two million jobs, and its salary increases for low-skilled workers would take years to come anywhere close to the $50,000 progressives want to hand to the college-educated.
Take federal contractors, who under current law will make a minimum of $10.95 per hour next year, or $22,776 annually before taxes, assuming they work 40 hours a week. A bump to $15 per hour would boost a minimum-wage contractor's pre-tax wages by $8,424—meaning that, before taxes, he would need to work an extra six years to make up for the added $50,000 his college-educated peer would get possibly tax free.
The situation is similar for the roughly 400,000 workers making the federal minimum wage of $7.25 per hour. That amounts to $15,080 annually, which means the boost to $15 would net him an additional $16,120 per year pre-tax. But that still means he'd need to work another three years before he could collect an extra $50,000 in gross wages.
This slow drip of cash would go to a population that not only makes less than the average student-debt holder but is also less-educated. According to the Bureau of Labor Statistics, roughly a third of minimum-wage workers have education less than a high-school degree, compared with the nearly 4.5 percent who have a college degree.
Student-debt forgiveness, by contrast, would hand wealth disproportionately to the highly educated and wealthy, who are more likely to have college degrees in the first place. More than half of the debt is held by the top 40 percent of wage earners, and among working-age Americans, more than half of it is also held by the top 40 percent of wage earners.
As Stewart finds, it's unsurprising that debt forgiveness is popular mostly with those who have debt, not those without. It would be a win for the "professional class" that increasingly makes up the Democratic Party's base. But even a minimum-wage increase would take time to offset what the general public would have to pay for student-loan forgiveness.