http://www.epinet.org/content.cfm/webfeatures_viewpoints_minimum_wage_maximizing

By Amy Chasanov

For a while it looked like minimum wage workers might finally be getting a long-overdue raise. Now it appears that a vote on a minimum wage increase may be held up by partisan politics. In the meantime, poor working families keep struggling to meet their most basic needs.

It's been seven years since Congress increased the minimum wage-the second longest period without a boost since the minimum wage was enacted in 1938. (During the last seven years, however, lawmakers have seen fit to give themselves six raises totaling $23,400.) Inflation has entirely eroded the 1996-97 increase. Today, a single parent with two children who works a minimum wage job earns only $10,700 a year -- far below the poverty line of $15,670.

Most Americans believe it's wrong that a parent can work fulltime and still live and labor in poverty. In a recent poll by the nonpartisan Pew Research Center, 77 percent of all Americans believe increasing the minimum wage is an important priority.

Sen. Edward Kennedy's (D-Mass.) Fair Minimum Wage Act of 2004 proposes increasing the minimum wage from $5.15 to $7.00. Some Republican leaders and employer-backed organizations have come up with a disingenuous twist to their opposition, saying they're against such an increase because it would harm the working poor. But would it help or hurt low-wage workers to put a few more dollars in their paychecks?

Fortunately, we don't have to rely on guesswork-we've got history to guide us. Let's look at what happened after the increase in the minimum wage that took effect in 1996 and 1997. Unemployment went down -- not up -- for workers across the boards, including those on the lowest rungs of the economic ladder. Wages and incomes increased for everyone -- and, once again, low-wage workers were among the winners.

This experience doesn't prove that raising the minimum wage caused the boom of the late 1990's, although it did help that low-wage workers had more to spend on the necessities of life, pumping more money into the economy. But the economy's good fortunes from 1996 through 2000 do suggest that raising the minimum wage isn't the job killer than some conservatives claim.

And Sen. Kennedy's proposal would have less impact on the entire economy than the 1996-97 raise. Yes, his proposed increase from $5.15 to $7.00 is larger in dollar terms than the 1996-97 increase, from $4.25 to $5.15. However, it would help a smaller number of workers -- 7.4 million versus the last increase that helped 9.9 million workers. Because it would affect a smaller number of workers, it would have a smaller effect on the overall economy.

Opponents frequently argue that the minimum wage is poorly targeted, helping primarily teenagers and middle-income families who don't need it. Not true. While the minimum wage is not perfectly targeted, it is one of the best policy tools available to lift low-income families out of poverty. Of those who directly benefited from the 1996-97 increase, 70 percent were adults (20 and older). The benefits flowed primarily to the bottom of the income scale, with 35 percent of the income gains going to the poorest 20 percent of working households. Those same groups would benefit under the proposed increase.

Another common myth is that employers will fire (or refuse to hire) low-wage workers. But look back to the last increase - and see that similar predictions never materialized. And while employers' costs may increase, these costs can be offset by other benefits. The reason is simple: people aren't widgets and increases in wage rates can have positive effects on worker behavior. For example, Business Week reports that Costco pays its employees significantly higher wages and benefits than its major competitor, Wal-Mart, but Costco boasts lower employee turnover, lower recruitment costs, lower training costs, and higher profits per employee.

Opponents have recently argued that it's "classist" to believe that entry-level and low-wage workers cannot get a raise without a minimum wage increase.

Unfortunately, recent research shows that for some low-wage workers-particularly women, minorities, and the least-educated-the minimum wage affects not just their current earnings, but also their lifetime earnings potential. A nontrivial fraction of workers spend significant portions of their first 10 post-school, working years in jobs paying at or near minimum wage, so their current and future wages are intricately linked to the minimum wage.

While many Congressional Republicans may oppose an increase to $7, they are likely to offer an alternative. Be wary of the "sweeteners"-like corporate tax breaks or state opt-out provisions-that might be offered to appease the business community.

The 1996-97 minimum wage increase was part of the "Small Business Job Protection Act of 1996" that included an estimated $16 billion in corporate tax relief over 10 years. A minimum wage proposal during the 2000 presidential election cycle included an estimated $123 billion in tax reductions over 10 years, almost 11 times the value of the proposed minimum wage increase over that same time period.

Now is the time to raise the minimum wage, but we cannot afford further corporate tax breaks given the budget deficit and outrageously high corporate profits. Nor should we let states opt out of a minimum wage increase. Allowing such a loophole would erode the minimum wage floor, eventually rendering a federal minimum wage meaningless and leaving the incomes of millions of low-wage workers at risk.

It's time to give low-wage workers a raise without giving away the store to the special interests who want to hold the needy hostage to the greedy.

Amy Chasanov is deputy policy director of the Economic Policy Institute.

If the mods can move this to the political forum...

Thanks!
Kat

take care of my two kids.....  while she makes 3x my salary - AND I have them about 45% of the time....   hoo ha....   The STUPID negotiation lawyer agreed with her.  My lawyer- said....   alimony!   hummmm..... Fortunately neither lawyer won out...   but had I known then - what I found out immediately after the papers were signed........ mannnnnnnnnnnnnnn    


So It is very interesting what the law has to say about what it takes to live... depending on what they are looking at - In my public and private life - it never ceases to amaze me that our laws are not coordinated.... example is the minimum wage....   Does the Federal Reserve look at that when setting the prime rate?   hum?

Just  my rant for the day.... Back to our regularly scheduled programing......

At least I learned that without 20x20 hindsight

 you have my condolences

  Cm.

Anyone whose taken ECON 101 knows that raising the price of something causes consumption of it to drop. So Teddy wants to prohibit workers from working for less than $7/hr -- some of those workers will become unemployed and lose whatever chance they would have had to work their way into better paying jobs. Its disengenious to say minimum wage workers haven't had a raise in 7 years. She provides no statistics to show that the same people who had minimum wage jobs in 1997 are still in minimum wage jobs now. I would bet most have moved up.

you elect somebody, they go to Washington, they meddle with your life to convince people they are earning their pay.

The only solution is to refuse to work.   Go to Mexico.  Then come back illegally.  Draw welfare.  You're a US citizen, you can do that.   Eventually, make them house you in Chino.

Another problem with raising minimum wage is the cost increase it causes.  The owners of businesses that pay their staff minimum wages,  now increase the cost of their products.
Plus, if minimum wage does go up to 7 bucks an hour, most companies are not going to increase wages for those making  $7 or more.  So now more people are at minimum wage.

and so is Teddy "FB" Kennedy.

Analysis report of effects on mininum wage increase... not as bleak as you would think. http://www.uvm.edu/~vlrs/doc/min_wage.htm

As Congress considers raising the federal minimum wage from its current level of $5.15 per hour to $6.15, it is important to understand who will benefit from this increase. An analysis of low-wage workers shows that the main beneficiaries of this one-dollar increase would be working women, almost one million of whom are single mothers. In fact, of the 11.8 million workers who would receive a pay increase as the result of this higher minimum wage, 58% would be women, simply because, as a group, they earn lower wages than men. As a result, a minimum wage increase would help to reduce the overall pay gap between women and men.

Since the minimum wage is not indexed to inflation, when Congress fails to raise the minimum wage, these workers' purchasing power declines, as was the case over the 1980s. Even with the two increases thus far in the 1990s, the minimum wage remains 19% below its inflation-adjusted 1979 level. This decline in the minimum wage helps to explain the growth of wage inequality and the diminished earnings of low-wage female workers over the last two decades.

In 1979, a woman working at the minimum wage earned 70% of the hourly wage of the median female worker (the woman right in the middle of the female wage scale). By 1998, that ratio had fallen to 52%. Similarly, in 1979 a single mother working full time at the minimum wage earned enough to lift a family of three (herself and two children) above the poverty line. By 1998, however, the same family would be 18% below the poverty line. [1]

Table 1 shows the number and the share of working women in 1998 - nationally and in each state - that would benefit from the proposed increase. About 7 million women nationally - 12.6% of all working women - earn between $5.15 and $6.14, the wage range that would be directly affected by an increase in the federal minimum wage. [2] In lower-wage states, the share of women that would benefit from the proposed increase is typically higher than the national average. For example, one-fifth or more of working women would receive a raise after a one-dollar increase in the federal minimum in the following states: West Virginia (22.5%), Arkansas (21.9%), Mississippi (21.1%), Montana (20.8%), Louisiana (20.2%), and Oklahoma (20.0%). The states with the largest numbers of working women who would benefit from the increase are: Texas (669,000), California (572,000), Florida (414,000), New York (372,000), Ohio (345,000), and Pennsylvania (338,000).

Table 2 helps provide a clearer picture of the low-wage women who would benefit from the proposed increase (see column 1). The vast majority (75.3%) of these women are adults (age 20 or older). Although most low-wage women workers are white (65.4%), African American and Hispanic women are overrepresented in low-wage jobs. African American women are 13.1% of all women workers (see the last column of Table 2), but 16.2% of those in the range affected by the minimum wage increase; Hispanic women are 9.0% of all women workers, but 14.4% of low-wage women. Close to half (44.9%) of the female workers in the affected range work full time (35 or more hours a week), and another 35.0% work between 20 and 34 hours per week.

The next few rows of Table 2 show the industries and occupations where low-wage women tend to find work. An analysis by industry shows that most low-wage females are concentrated in retail trade, which employs 44.0% of those in the affected range. In contrast, a much smaller share of low-wage women work in the higher-paying manufacturing sector (8.4%). An analysis by occupation reveals that 28.3% of low-wage women are sales workers, with 16.4% working as cashiers. One-third of these women (32.5%) work in service occupations such as food preparation (16.1%). Finally, just under 4% of low-wage women are covered by collective bargaining through a union, in contrast to 16.2% of women earning $7.15 or more per hour.

Table 3 examines the parental and minimum wage status of workers age 18-64. Parents with children under 18 years old represent 32.9% of the beneficiaries of the proposed increase, while such workers represent 40.4% of the total workforce. More than two million married men and women with children would benefit from the proposed increase (and within these families, women are disproportionately the direct beneficiaries). Almost one million (967,000) single mothers would receive a pay increase as a result of a one-dollar rise in the minimum wage. Note that single mothers are over-represented in the affected workforce - they represent 10% of those affected by the increase but are only 5.7% of the overall workforce.

All of the evidence suggests that the minimum wage increase is well targeted, providing significant benefits to poor and middle-income households. Table 4 shows that about 18% of the benefits of a one-dollar increase would go to households with incomes below $10,000 per year; another 32% of the benefits would go to households with annual incomes between $10,000 and $25,000. In total, households making less than $25,000 a year would receive half of the benefits of a one-dollar increase. Among the affected single mothers shown in Table 3, 85% have household incomes below $25,000, underscoring the importance of the policy for these low-wage and low-income families.

Conclusion
Those who oppose raising the minimum wage typically argue that the increase will force employers to fire, or hire fewer of, those workers affected by the increase. The evidence, however, fails to support this claim. [3] Since the last increase, in late 1996 and 1997, employment rates of low-wage workers, and particularly single mothers, have increased dramatically, as the strong economy has bolstered demand in the low-wage labor market. In this regard, one of the main policy lessons from the current recovery is that the macroeconomy is the key determinant of employment opportunity for low-wage workers, most of whom are women. But, as the above evidence shows, the wage that these women receive is very much a function of where the minimum wage is set by Congress. Disregarding this reality can only serve to swell the ranks of the working poor. Raising the minimum wage will help to raise the incomes of many low-income families, especially those headed by single mothers.

by Jared Bernstein, Heidi Hartmann, and John Schmitt
http://www.epinet.org/content.cfm/issuebriefs_ib133

by setting a floor on wages, it ensures that all others will be benefited and not exploited.

If minimum wage were so awful, then you would have huge numbers of unemployed, but US unemployment is lower than in countries without the minimum wage.

I know it irritates you "free market" types, but the one of the main purposes of a government is to provide for the good of the people and in this case the good of the people is well served by a minimum wage, just as we are served by having minimum standards for building codes, food quality and a host of other functions that the law regulates.

That you Kate for posting this.

used by politicians to buy votes. The purpose of the American government is to protect liberty, not destroy it. Unfortunately whiners, egg heads and other shirkers have reduced it to a system of economic redistribution.

Oh, that's a good one.  Thanks, I needed that laugh.

when you are scrounging for food.

which is plain wrong.   Yeah, it'll raise salaries, but so will prices rise, and true, low wage jobs will be forced into the free-lance market, and there will be more emphasis on increasing productivity via machinery, flogging, etc, which is  one way for labor unions to draw a lower floor on existence - all others get institutionalized.

Legislation that has a real economic effect does not attempt to legislate prices - like anti-trust legislation.

So, where do you think the money comes from?  Do you think merchants will not pass the costs on to the very people who are being paid more?

What this is REALLY about is (a) making people think politicians are earning their pay, while (b) doing nothing more than shoving them into higher tax brackets.    

It would probably be more productive to do something that makes the worker more productive, like finance education.   Even then, it's a matter of moving money around.

The real problem is not so much the minimum wage, as the tax structure that concentrates wealth in a few hands by raping everybody else.   If that was financing productivity, that would be one thing - but it's more likely to go into yachts & Ferraris.

You gotta understand that professors, economists, psychologists, etc are no more scientists than lawyers are, and will argue either side just as quickly as lawyers do, according to who is going to pay them.

its purpose was to prevent blacks from entering the workforce to compete for union jobs. That's hardly a noble purpose.

Unfortunately the government can't legislate prosperity -- a lot of people will lose their opportunity to work if the minimum wage is raised, just like the original authors of the minimum wage intended.

EPI is hardly an unbaised source of information on this subject -- it is a think tank established for the sole purpose of putting an academic spin out in favor of higher minumum wages and a whole raft of other big government intrusions into the marketplace.

Among the problems with their analysis, the one that stands out most is paragraph 3. The woman getting minimum wage in 1979 is probably not still at minimum wage in 1998, she's moved on up to higher paying jobs. Unfortunately with a higher barrier to an entry level position (a $7 minimum wage) she might not get that opportunity.

-- Modified on 3/7/2006 3:55:29 PM

not that I would doubt an ulterior motive or effect.

I suspect that a lot of the real problem is among marginal workers, with marginal situations - the single mother (who may be that way for any number of reasons) who has bigger problems than just working - iow, social problems are likely more critical in this group than just economics.  Making the jump from welfare to self-sufficiency has to be harder because the bureaucracy penalizes making money, although it's a catch-22 for the govt...I've talked to people who would rather support strangers out of their own pocket than apply for foster care support, simply because the govt is such a PITA - OTOH, I don't know an alternative...

but the sure-fire solution is to make people more productive...part of that of course is values, like, what infrastructure do you value, do you want psych care with your medical insurance, etc...

But as we pointed out in another post, anybody that's making minimum wage has other problems, more likely social ones.   My suspicion is that the real issue is not so much that anybody is going to get fired, as that it creates a higher threshold obstacle to hiring people at the entry level, like apprentices, which of course only really applies in certain industries...

As a practical matter, if the person isn't productive enough, the employer will contract with them, eg piece rate, or go offshore, or that task or industry will be abandoned - perhaps not a bad thing, but you still deal with the fact that US workers still have to compete with Chinese workers - are you willing to pay more at WalMart?  I'm guessing not, from the way they have been doing; and what's the point in pretending that you can artificially change prices through legislation?

One of the things you have to understand is that poverty is relative - the people at the bottom will always be frustrated, but the question is, what can you do?   People are notoriously adaptable, and that includes beggars...

Is there anybody in the US who lives at medieval living standards, that you would regard as having an economic problem, not a social problem?   People survived the dark ages, and anybody I've seen that's living even at depression standards, has a social problem that keeps them there - drugs, lack of education, etc.   It's not passing the law that makes them worth paying - passing the law just puts a lower limit on who is worth hiring.  I suspect that doesn't affect the steady workforce as much as it affects the entry level, eg, HS dropouts, and pretty much puts them into the welfare/prison cycle.

Most of the people I know are working twice as hard as they were ten years ago already, between cuts in staffing, increased expectations, and competition.  

This country already has an issue with "productivity burnout", as it is seriously affecting our health, between stress (the #1 factor in health problems in modern society) and diet (the #2 problem...which is mostly due to people not having enough time and endless fast food alternatives being pitched to us by people like Paris Hilton).

Of course, we are constantly told that this is the reality of the "global marketplace", but where do you draw the line when you are the most affluent country in the world?  There is no way people in this country will or should have to work as hard as the deperate and impoverished in India, China, Central America, etc. etc.  Why should that even be a target?

There has got to be an answer, because we are becoming a society where the working class is on a habitrail, and if that is what all of our prosperity has accomplished, then shame on us.

running the minimum wage up?  Nope.  Deliberately destroying the economy?  Probably.

What you're really talking about is population pressure and competition for resources - perhaps not so much decreasing resources, as the plain old competitive impulse, to dominate space and spouses as a reaction to insecurity...

So all you have to do is change human nature, and you've automatically changed all the economics issues...

Yeah, a changed environment requires adaptive skills, like IGNORING PARIS HILTON'S ADVICE...

Yeah, I work harder, I have more, but I like what I do, I'd rather drop in the saddle than retire, and I don't give a shit because my g/f takes me out to Sunday brunch and then lies on the beach while I swim...it's the human half of me...

It's not something I figure -- its a fact. The minimum wage was pushed through by Southern Democrats and unions to keep the blacks down. Check it out.

most people's heads.

because I can't find anything, and hadn't heard that idea before.

-- Modified on 3/7/2006 9:28:52 PM

...your scrounging for food is technically not my problem.

the part about, "Am I my brother's keeper?"

If that doesn't do if for you, try Karl Marx.

It's all good!

...then do it and leave me out of it. I don't have a problem with your good intentions until your good intentions require a trip to my wallet.

It's that man upstairs.

(You know, Buddah, or whomever.)

...he and I had a falling out.

And God/Budda/Allah does NOT need my money. When will you people give up with that lame-ass arguement for stealing from others? Are you Mr. Fisher or Mr. Tammy Faye Baker?

-- Modified on 3/8/2006 8:42:47 PM

Type in minimum wage jim crow in google and see what you get.

Here is one cite:

AFL President William Green, testifying before the Senate Committee on Manufacturers on the Davis-Bacon bill, complained: "Colored labor is being brought in to demoralize wage rates [in Tennessee]." Congress. Senate. Committee on Manufactures. Hearinqs on S. 5904, 71st Cong., 3d Sess., Feb. 3, 1931, p. 10

There are plenty more where that came from.

I dunno that establishes it as the primary motive or the contemporary motive; I'm more inclined to think it's politicians trying to rack up points; and the effect is more likely to eliminate any OJT/apprentice type programs - whether that is good or bad depends on your views about a lot of issues...there's so many ways it's avoided, including the employment of illegal labor, that there's just another object lesson for people who think legislating prices is any different from pushing water....

Oh well, I've got to work on other issues...

You raise the minimum wage, you price some workers out of the market. Whether that is for good intentions or bad makes no difference to those that get screwed, none of whihc are elected or appointed governemtn officials. The bottom line is that the government can't legislate prosperity.