Monday, October 16, 2006

Minimum Wage Should Be Adjusted Upward--Now!

The Center for Public Policy Priorities (www.cppp.org) recently released a report on the status of workers in Texas who earn the minimum wage allowed by lay ("Why a Minimum Wage Increase Would be Good for Texas," October 11, 2006). What follows is a slightly edited version of this very challenging and helpful report.
___________________________________

Hundreds of thousands of Texas workers earn the minimum wage ($5.15 an hour) or just slightly above. The minimum wage is a poverty wage. Someone working full time on the minimum wage and supporting just himself would only earn a pre-tax income of $10,712 a year.

A minimum-wage worker trying to support his family would need to work multiple jobs and rely on significant public assistance, and even then probably wouldn’t make ends meet. Texas aligns its minimum wage with the federal minimum wage.

At $5.15, the minimum wage has not been raised in nearly 10 years and has lost purchasing power due to inflation. Texas can—and should—raise its state minimum wage to at least $6.15 an hour.

The minimum wage has lost significant ground to inflation: The purchasing power of the current minimum wage is plummeting . . . to its lowest level since 1955.

Even with such work supports as the Earned Income Tax Credit (EITC), minimum wage earnings fall short of the poverty line.

The public wants the minimum wage raised:

• Twenty-two states (plus Washington, D.C.) pay their workers a minimum wage of more than the federal minimum of $5.15 an hour. Six other states have minimum wage ballot initiatives set for November 2006;

• Nearly 60% of the U.S. workforce is covered by a state minimum wage higher than the federal standard; and

• According to an April 2006 Pew Charitable Trust national poll, 83% of the American public favors raising the minimum wage to $7.15 an hour, including 72% of Republicans and 91% of Democrats.

A fair minimum wage benefits business and the economy:

• Since 1998, states with higher minimum wages have seen more growth in employment and small business growth than $5.15 states. Minimum wage increases have not produced increased unemployment or employer hardship;

• Low-wage workers spend most of the increased earnings within the local economy, and would use additional purchasing power to stimulate revenues of local businesses; and

• A higher minimum wage has been proven to boost productivity while minimizing employee turnover and absenteeism.

Effect of Proposed Increase to $6.15:

In Texas, 523,000 workers—about 5% of total workforce—would be directly affected by an increase and would earn an average pay raise of $0.46 an hour. These workers currently earn less than $6.15 an hour. As the minimum wage floor is raised, another 543,000 workers currently earning above $6.15 an hour would be indirectly affected. The new floor would push their wages up an additional $0.23 an hour on average.

Demographics of Affected Low-Wage Workers in Texas

Most low-wage workers are adult, female, and work full time:

• 82% of low-wage workers are age 20 and over;

• 62% of low-wage workers are female; and

• 56% of low-wage workers are employed full time.

Most low-wage workers live in households heavily dependent on their earnings:

• 36% of (affected) low-wage workers are married;

• 34% of (affected) low-wage workers are parents;

• Low-wage workers contribute 63% of total household earnings; and

• More than 750,000 children live in households that would be affected by a minimum wage increase to $6.15 an hour.
_______________________________

I have to say, it is far past time to raise the minimum wage across the U. S. A plan to lift the minimum by $2.00 over the next 3-5 years is most reasonable.

What do you think?

18 comments:

RC said...

Larry:

I am not sure I agree with you. I have heard the issue argued in so many ways I get confused. My memory of economics 101 is a bit rusty. fMy gut says you are right because all you have to do is look at the history of big business and they don't do a lot that they are not forced to do, and so often the dire warnings of what will happen if the poor workers are given another crum or two never seem to materialize. Having said that, what I really want to say is that who can really make things like what you want happen? It is usually a politician. You are talking about laws and laws are inacted by elected officials. Larry, I might agree with you 50% of the time, and I know I miles apart from you theologically. I still am ticked about your glowing words about Borg, but you are an honest man who cares about people. If I really believed I were voting for an honest man who cared about people I would vote for him regardless of party. America has got to do better in the area of politics. People might vote the Democrats in this year but it will only be because they are more discusted with the Republicans. Larry, if you can get more done as mayor of Dallas how can you not run? Just some thoughts from your friendly Republican.

Janet said...

It seems to me that if $5.15/hour is below poverty level, then raising the minimum wage would decrease people's reliance on government assistance. Though I don't think $6.15 will get many out of poverty, isn't that what people are complaining about...poor people on government assistance?? However, I suppose since people have figured out that they can keep minimum wage low and continue to cut "social spending" without any big uproar, they get the best of both worlds (i.e. they're still keeping all of their money), huh? Sounds almost third worldish.

Frank Bellizzi said...

Larry, first off I want to say that I love the way the FACES of PEOPLE at the top of this blog helps to maintain perspective.

Second, I know next to nothing about the subject of this post. However, living the last 13 of 14 years in Connecticut, I often thought that the federal minimum wage, at current levels, was a bad joke and that it should either be raised to something reasonable or scraped all together. (For what it's worth, I was in favor of the former). Seems to me that the inequities/iniquities are going to catch up to this society sooner or later.

Ann said...

It seems to me that the information presented by CPPP calls into question many of the arguments against raising minimum wage, i.e. hurts business, bad for the economy, mostly teens working for minimum wage, etc. It puzzles me why it is so hard to see that any increase in a person's paycheck is spent.

I would like to think that lawmakers would be influenced by the numbers (#of people in favor of raising minimum wage), but until there is public outcry, nothing will change.

Larry James said...

Janet and Frank, thanks for your comments. I agree with both of you completely. It boils down to "bottom line" concerns for individual business owners and corporations.

RC, always appreciate your posts.

If you study the data from states that have raised their minimums above the federal level, you will see that all of the fears have proven to be unfounded--employment up, new job creation up, layoffs not affected, etc. We took a look at the Florida experience on this site several weeks ago. Their is no economic or moral justification for keeping the minimum at a level that pays a full-time worker just over $10,000 gross annually.

Sorry about the Borg deal! I suppose that I come to the subject with different assumptions. Borg has been a real help to me as I have dealt with scripture in view of my own training.

As to the race for Mayor, it just doesn't work at this point for me given all that is going on at CDM--plus, I doubt that I could prevail. Who knows about the future.

One final word about politicians. Honesty is very important. Equally important is the economic and public policy VALUES of a candidate. I want honesty, but I also want to know how the election of said candidate will impact low-income working people. This is of primary importance to me as a voter and as a member of the community.

Ann, you are correct on all counts.
Sadly, the middle class and especially the church remains silent in the face of the injustice suffered by the working poor in this nation. James 5:1-4 is pretty clear about the heart of God on this matter, to say nothing of what prophets like Amos tell us. But the church is lost in its "moral concerns" to the exclusion of the working poor. Then, when we raise issues about how the public policy must be engaged and changed to really address the problems, many Christians argue with me that "the church should and can manage the problems of the poor" without any government interference. I'll give them the benefit of the doubt at this point and just say that lots of church people are simply uninformed.

IBreakCellPhones said...

Is there a cascade effect on prices? IE, let's say I run a business, and my labor costs increase by 10%. What happens when my prices have to go up to meet that?

Larry James said...

Ibreakcellphones--thanks for the post! Glad to know you are still out there!

The question you asked always comes up, but the hard data does not support the fear. The economy just doesn't work this way. If employees earn more--yours and mine--guess what happens? You and I have a better chance of making more sales or doing more business. See my blog on July 18, 2006 for more details on this data-driven conclusion.

Daniel Gray said...

83%???? Yikes, didn't know that many people were in favor of the increase. And yet we're more worried about a gay marriage ban that 30% of Americans care about (I made that number up).

Sounds like an issue of people not letting their reps know what they want. If people just wrote to Congress like they did to Jimmy Stewart...

The more I think about it, I see a several dollar increase over a couple years as necessary. Raise it a dollar per year until it gets to a sustainable level, then tie it to inflation, so we don't have to stiff-arm congress for change every couple of years. (Tying it to inflation will be hard enough, though.)

As far as the 10% increase in labor costs, I'm starting to think that problem will be offset by increased spending/sales. Instead of buying Great Value and Malt-o-Meal products, I can now afford more costly/nutritious food, meaning Walmart sells more products, which offsets them providing their "associates" a more liveable wage. (Sorry for singling out Walmart.)

Hmm... lower turnover/better employee loyalty, increased spending leading to increased sales/productivity, less dependence on government services, and ULTIMATELY better lives for the working poor. I'm starting to think this minimum-wage-is-bad myth really is a complete fabrication.

Larry, you showed me the Florida report, but what other documentation is there for states that have raised the minimum wage? Any specific states you would suggest looking at? Does the CPPP link to individual state data?

Thanks for your constant work in debunking the lie.

Larry James said...

Daniel, thanks for posting.

I think if you Google something like "states and the minimum wage," you'll find the reports you need.

creg said...

If someone is doing work worth $5/hr, why should they be payed $6.15/hr or whatever the minimum wage is? If $6.15 is good, then isn't $20/hr better? If those stats about a minimum wage increase being good for business's are true, then why don't they raise wages themselves?

Larry James said...

Creg, thanks for the post.

Your question gets at the main problem. Inidividual businesses, as they contemplate having to give their lowest paid employees a raise, will usually resist. The benefit is to the overall economy. So, individuals who insist on squeezing the maximum out of their employees and their companies immediately will always be against any increase in minimum wage.

I like your idea about paying a wage relative to the value of the work performed. The problem is we will undervalue the work of manual laborers and service sector people in an unfair manner.

belinda said...

Strangely enough, most of the people who are against government subsidies are also against raising the minimum wage . . . could it be because it takes $$ from their own pockets?? Just asking. I hear people screaming that this is not the job of the government but the job of individuals, but yet refuse to help, saying the majority are should be responsible for themselves. It makes me so sad.

John Greenan said...

I saw a report in the Dallas Morning News this weekend that the Chinese government is considering legalizing "real" labor unions. That's probably the best development for increasing wages in this country that I've heard in the best decade.

John Greenan said...

BTW: Nobody hires a worker for $5 per hour if the value of that work is only $5 per hour--there isn't any profit in that.

In the law firms I used to work in, the rule of thumb was 1/3 for the worker, 1/3 for overhead, and 1/3 for profit. So a if I hired a young lawyer for $100,000, then I'd expect him to bill $300,000--100k for him, 100k for costs, and 100k for me.

Larry James said...

John, thanks, as always for your comments.

You nail the real issue here. The question is a value issue to me. How will labor be regarded in our naiton? And will labor be accorded a fair share of the profit resulting from work performed? Those who resist minimum wage increases or fairness have an eye on their own profit margin. Or, at least the profit margin is a higher priority than an equitable agreement about the value of work. I believe I am correct in saying that last year was the first year in U. S. history when salary and wages accounted for less than 50% of GDP (45% as I recall). The trend should be reversed.

Justin said...

Larry...

I'm distrustful of pretty much any organization at this point that is pushing either side. They all manipulate statistics to make their point. They all have studies that prove their point. Basically, unless someone has a degree in economics, and even if they do have one, I am skeptical of what they have to say.

Its important to note that several nobel prize winning economists agree that raising the minimum wage is bad for the poorest people and bad for the economy.

And I also haven't heard a satisfactory answer as to why the pro minimum wage raisers want 7 or 9 bucks an hour... why not 20 or 50 or 100... I mean, if raising the minimum wage doesn't hurt the poorest people and the economy, why not raise it to a wage that they would no longer be anywhere close to poverty?

Could it be because massive inflation occurs, massive job loss occurs, and the economy dives into depression?

Al said...

Larry, I am so encouraged by your ministry in Dallas. My wife and I work with the homeless here in Michigan, and the problem seems to be getting worse, not better!
As to the minimum wage, I just don't know. We have just had the first of three scheduled increases go into effect October 1st. We went from $5.15 an hour to $6.95 an hour. We are scheduled to go to $7.15 per hour on July 1, 2007 and to $7.40 per hour beginning July 1, 2008. We have had a very poor economy here in Michigan the last 4 or 5 years, it remains to be seen whether the increase will be an economic benefit to the state overall and the people individually. Will the current minimum wage workers get fewer hours per week? Many businesses say that's what they will have to do. They claim they will suffer, that they will have to do the same amount of work with fewer hours per worker. Because the new wage laws do allow for those under 18 years old to be paid at 85% of minimum wage, which is currently $5.91 per hour, I expect that many of the low paying jobs that would have gone to young adults will now end up going to those under 18 in order for businesses to save a few dollars.

Falantedios said...

Dear Larry,

Your blog consistently inspires compunction in my soul. I appreciate your passion and your desire to enlighten.

I'm a servant of God, laboring in the kitchen of the Chili's Grill and Bar in Frankfort, KY. I know that in my 12 years of experience in food service, what Al just described is pretty much exactly what happens.

People get raises, and their hours get cut, because the goal of management is to spend only a certain percentage (14-16%) of sales on labor. Productivity should be the goal, but usually, it is bottom line labor cost.

The goal seems to be to keep labor costs low by cutting hours until employees quit, where the cycle starts again. Increasing minimum wage only shortens the turnover cycle.

I'm not suggesting that I disagree in principle with increasing the minimum wage. I simply mean that if companies plan on squeezing their employees, there is little more that government can do than the improvements we can see since the Industrial Revolution.

The government can legislate many things, but compassion simply isn't one of them.

in HIS love,
Nick Gill
Frankfort, KY