Special Report

How to Save the Global Economy: Raise the Minimum Wage. A Lot.

Americans can't spend, their government won't spend, and the tax cuts of both George W. Bush and Barack Obama are set to expire soon. The U.S. Congress can't pass an infrastructure bank, and the country can't fix the banking system or the foreclosure mess. Everything is blocked up. Is there anything we can do that would make a difference?

Yes. Raise the U.S. minimum wage. By a lot -- let's say, to $12 an hour, from the current rate of $7.25.

Ron Unz, publisher of the American Conservative, put this idea in my head, and the more I think about it, the better it seems. Unz was writing in the context of the politics of immigration; he's worried that the U.S. government's current strategy of walls and deportations is alienating Hispanics from the Republican Party and will eventually destroy the GOP. This seems correct, though I don't much care. But then Unz argues that a high minimum wage would be a self-enforcing deterrent against abusive employers seeking cut-rate help. Jobs for the undocumented would dry up. Those who hold onto their jobs -- the vast majority of low-wage workers and especially those with U.S. citizenship, English fluency, experience, and skills -- would gain a big advantage. Correct again, and this time I do care.

The plan isn't just good for Republicans -- it's good for the economy. What would workers do with the raise? They'd spend it, creating jobs for other workers. They'd pay down their mortgages and car loans, getting themselves out of debt. They'd pay more taxes -- on sales and property, mostly -- thereby relieving the fiscal crises of states and localities. More teachers, police, and firefighters would keep their jobs.

Would this hurt competitiveness? Not at all. That's an issue for manufactured goods and traded services like insurance and banking, sectors in which everyone already earns far more than $12 an hour. The jobs we're talking about are in non-traded services like checkout clerks, haircutters, domestic help, and food-service workers -- you can't run a deep fryer in Terre Haute from Bangalore.

Would prices go up? Some would. But rich people can afford it -- and workers would have extra income to pay the higher prices, so most of them would come out ahead. Women in particular would benefit because they tend to work for lower wages. With more family income, some people would choose to retire, go back to school, or have children, making it easier for others who need jobs to find them. Working families would have more time for community life, including politics; Americans would start to reclaim the middle-class political organization that they once had. Because payroll- and income-tax revenues would rise, the federal deficit would come down. Social Security worries would fade.

Most of all, a big jump in the minimum wage would be a reparation. It would be a payback to those who have suffered from the economic crisis: the working population. It would be an act of justice.

Michael Williamson/The Washington Post

Special Report

How to Save the Global Economy: Spend $1 Trillion on the Future

It may seem obvious, but three years and counting into the economic crisis we need to say it: An economy that's not growing fast enough will struggle to pay its bills and create jobs. And that's exactly what's happening. Growth in the developing world, while still well above that of advanced countries in 2011, was hit hard by the extreme volatility in international financial markets, which in turn hurt domestic demand in many emerging-market economies and also had spillover effects in terms of capital flows and trade. Meanwhile, the International Labor Organization estimated a 2011 global unemployment rate of 6.1 percent -- that's 203.3 million people out of work.

Clearly, something must be done -- and here's an idea that could benefit economies large and small, wealthy and poor: a massive global investment in infrastructure, financed with the creativity required in this age of austerity and aimed at jump-starting growth.

Higher growth can only be realized through worldwide investment, yet as long as factories continue to carry spare capacity and homes and office buildings remain vacant, the private sector is unlikely to lead the way. Governments must play an active role, and the solution could take the form of a global infrastructure investment initiative of at least $1 trillion. A worldwide initiative of this type has not been attempted before. There are, however, proposed infrastructure plans for East Asia, Europe, and the Middle East. We should make these plans real, and global, by building consensus among multilateral development institutions, as well as through the G-20 and other important groupings.

Investments in infrastructure projects create jobs and growth now and enhance productivity in the future. For example, in the United States, just $1 billion in new investment in transportation, school buildings, water systems, and energy could create 18,000 jobs, mainly in the construction and manufacturing sectors, which have been particularly hard hit by the recession.

Infrastructure improvement is needed to keep advanced countries competitive. With government budgets tightening, however, such an initiative would need to rely on self-financing infrastructure projects, such as toll bridges and high-speed trains, or use innovative financing mechanisms that encourage private participation.

It's also vital to promote and facilitate infrastructure investments in developing countries where bottlenecks and low productivity choke off growth. In countries like Nigeria and Tanzania, lack of access to water, sanitation, roads, and electricity not only impinges on the daily lives of hundreds of millions, but also renders firms less competitive. How can you compete if you don't have electricity? Many businesses are never started because the required infrastructure services are not available. A little creative financing could go a long way.

It's time for rich and poor countries alike to join hands to literally build the future. Infrastructure investments in developing countries will increase demand for capital goods such as the turbines and excavators that are often produced in the United States and Europe. Infrastructure investments in developing countries will boost exports, manufacturing employment, and growth in high-income countries, while reducing poverty and enhancing growth in the developing world. It's a win-win solution. So what are we waiting for?

Kevork Djansezian/Getty Images