A Plutocrat's Case for Raising the Minimum Wage

The Seattle-based tech entrepreneur Nick Hanauer was riding in a black Uber SUV to the private-jet terminal at Dulles International Airport, outside Washington, D.C., when I asked him whether he really thought his was the best face for the movement to raise the minimum wage to $15. He was on his way to New York for dinner with Joseph Stiglitz, the Nobel Prize–winning liberal economist known for his critiques of globalization and free-market economics. Hanauer is generally unimpressed by politicians, who have been begging him for money for many years, but the prospect of dining with Stiglitz had him giddy. “He’s, like, God,” Hanauer said.

At my question, Hanauer, who is 56, with blunt features and a pouf of dark hair, paused to collect his thoughts, then leaned forward in his leather seat. “A guy like me—a very successful capitalist, somebody who knows all the rich people—is the best face for the message of reforming capitalism, right?” he said. People might dismiss the argument coming from a fast-food worker or a labor leader. “I’m the one who can say, ‘It doesn’t have to be that way,’ ” he continued. “When they say that the better profits are, the better it will be for everybody, I’m the one who can say ‘That’s a lie.’ ”

Plenty of rich guys set out to change the world; Hanauer is faring better than most. He has managed, from his perch in Seattle, to build a formidable political operation, backing a series of winning candidates and ballot initiatives. He helped set in motion the campaign to raise the minimum wage to $15, which has already succeeded in several cities and is making progress in others. He spearheaded a new gun-control measure in Washington State that is inspiring similar efforts across the U.S. Rob Stein, the founder of the Democracy Alliance, a liberal donors’ network on whose board Hanauer sits, told me, “I don’t think anybody in America in the last five or six or seven years has been as successful at this brand of philanthropic activism as Nick has been.”

Hanauer could be described as a guns-and-inequality-obsessed analogue to Tom Steyer, the San Francisco hedge-fund tycoon who’s spent millions advocating for new climate-change policies, or a Democratic counterpart to the right-wing Koch brothers. “Every battle he has waged that I’m aware of—education, guns, the minimum wage, overtime, his economic framework—on every one he has had tangible success,” Stein said.

Hanauer attributes his worldly success to having been both lucky and good. After college, he spent several years working for his family’s pillow-making business, Pacific Coast Feather, before going into the tech industry. He proceeded to found and sell several companies, but it was his early investment in Amazon that made him truly wealthy. While still in his 40s, Hanauer decided to devote no more than a third of his time to “things associated with increasing my net worth,” as he puts it; the other two-thirds he would spend on intellectual endeavors and public service.

For a while, his activism followed a fairly conventional limousine-liberal path: donations to Democratic politicians, initiatives for education reform. He helped fund a 2010 ballot initiative, led by Bill Gates Sr., the Microsoft co-founder’s father, that would have raised income taxes on high earners in Washington State, only to see the measure lose by nearly 30 points. Hanauer attributed this trouncing to the cautious, poll-tested way that paid political consultants had waged the campaign. “It was the worst campaign ever run,” Hanauer told me. “It was run in this awful, triangulating way.”

The defeat persuaded Hanauer to switch to a more aggressive tack, and also convinced him that the public debate over economics needed to change fundamentally. In two books co-written with Eric Liu, a policy adviser in the Clinton administration; in op-eds for Bloomberg View and Politico (and for The Atlantic’s Web site); and in public speeches, Hanauer has argued that the conventional narrative of economic growth is misguided. “The other side thinks that growth produces a thriving middle class,” he told me. “That’s not true. That’s wrong and backwards. A thriving middle class is the source of growth in a technological, capitalist economy. Investing in the middle class is the most pro-business thing you can do.”

The intensity Hanauer brings to his case has not always been well received: A 2012 TED talk—in which he proclaimed, “Rich people don’t create jobs”—was briefly deemed too “partisan” for the conference’s organizers to post on their Web site. But although his attacks have cost him a few wealthy friends, he is quick to point out that his views no longer seem as outré as they once did.

Hanauer has been called “America’s premier self-loathing plutocrat,” a description he relishes, though he is not embarrassed by his wealth. (He has, in addition to his jet—a Dassault Falcon—multiple yachts and vacation houses, none of which he hesitates to discuss.) His tone is blithely optimistic, in the West Coast techno-utopian vein, and he has little patience for people he perceives to be Luddites. “In a sufficiently prosperous society where people specialize sufficiently, and where enough of the crappy work is done by machines, all work becomes art,” he told me at one point. Earlier in the day, I’d seen him engage in a heated discussion at the Brookings Institution over whether robots threaten employment, a concern that he said reflected “this idiotic fear of technology.”

Hanauer first proposed a serious push for a $15 minimum wage in a presentation to the Democracy Alliance in 2012. At the time, many Democrats and union heads were busy debating whether $10 was too high a goal. But he was onto something: As striking fast-food workers across the country began rallying around calls for $15 an hour, Hanauer and David Rolf, a labor leader, kicked off an organizing drive in the small airport community of SeaTac, Washington, that resulted in the country’s first law mandating a $15 minimum wage. Seattle followed suit, as did Los Angeles and San Francisco; other cities and states, including New York, are now considering $15.

At the same time, he launched a media campaign to get the Obama administration to raise the threshold below which salaried workers must be paid overtime. (For years it had been stuck at $23,600.) “When we realized that the Labor Department had the ability to raise it, we also knew that, given the dynamics of the Obama administration, they were going to negotiate with themselves and talk themselves into raising it to, you know, $25,300. Because ‘businesses will be mad,’ ” he said with an eye roll. Hanauer decided to go big, joining forces with liberal think tanks to advocate a jump to $69,000 (a threshold calculated to extend overtime rates to the same share of the workforce that received them in 1975). In June, the White House announced that it would raise the cutoff to $50,440, which Hanauer calls “a miracle.” Once the regulations are finalized, the move could increase the income of nearly 5 million workers.

Dramatically raising workers’ wages, Hanauer argues, won’t lead to fewer jobs, as his opponents claim. It will lead to more jobs, because workers who have more money will create demand for more products and services, thereby creating a “positive feedback loop” of prosperity. He and Liu call their theory “middle-out economics,” a term President Obama began using during his 2012 campaign, juxtaposing it with the “trickle-down” ideas of the right. In this, they are appealing to the self-interest, rather than the charitable sense, of the rich. “It is not a case based on niceness and compassion; it is a case based on winning,” Liu told me.

Hanauer’s theory is not exactly mainstream. Even Stiglitz is, in Hanauer’s view, too trapped in the prison of neoclassical economic assumptions to embrace it. Alan B. Krueger, a former chair of Obama’s Council of Economic Advisers and a co-author of a seminal 1994 paper finding that small minimum-wage increases do not decrease employment, warned in an October New York Times op-ed that a $15 minimum wage could be risky. Hanauer cites with particular bitterness a meeting shortly after the 2012 election between Valerie Jarrett, the senior Obama adviser, and a group of labor leaders. According to two sources in the room, Jarrett responded to a suggestion that the minimum wage be raised by saying the economy was still far too fragile. “The president’s closest adviser believes, in her heart, that if poor people do better, that will be bad for the economy,” he told me, practically spitting with disgust. “That’s fucked up! That’s fucked up,” he said. “It’s bullshit. But that’s how deep that stuff goes.” (Jarrett, who declined to comment on the record, has publicly voiced support for raising the minimum wage.)

In December 2012, in the wake of the elementary-school massacre in Newtown, Connecticut, Hanauer decided to also tackle gun control. Two of his acquaintances had been randomly shot to death that year, and he believed the public debate on guns was overdue for an adjustment similar to the one he was trying to pull off with economics. In his view, the gun-control movement had been wasting its time pushing for federal legislation and arguing with the NRA about the Second Amendment. “That was a fool’s errand—it’s absolutely impossible to prevail fighting in that way,” he told me. He concluded that state-level ballot initiatives to expand background-check requirements for gun buyers might be more successful. “When you have an easily identifiable problem, a set of solutions that’s wildly popular, and you can’t get politicians to pay attention—that’s what ballot initiatives are designed for,” says Zach Silk, a political strategist who previously ran Washington State’s successful ballot campaign for gay marriage and who heads Civic Ventures, Hanauer’s seven-person political operation.

Hanauer’s first gun-control initiative, which proposed expanding background checks and closing the so-called gun-show loophole, passed in 2014 with the support of nearly 60 percent of Washington voters. Its success immediately got the attention of the rest of the gun-control movement; Hanauer is now working with national groups to advance similar proposals in five states in 2016, and at least as many in 2018. He believes this state-level activity will move public opinion to a tipping point, and sap the resources of the NRA by engaging gun-rights advocates in an expensive, multifront war. By focusing on public health rather than rights, “we’ve gone from an argument we can’t win to one we can’t lose,” Hanauer said. “That’s how we’re going to beat them.”

As our Uber driver sped down the highway, I asked Hanauer what propels his activism. “I think one part of it is, I’m a really happy person, and I really like to be around other people who are happy,” he said. He thought some more, and a grin crept onto his face. “If I’m really being honest, part of it is a moral sensibility about wanting to remake America,” he said. “And part of it is I just love to win.” Soon after that, the SUV pulled up to the jet terminal, where several similarly appointed vehicles were waiting, and the happy capitalist left to board his plane.