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Economists and Workers Both Say: Raise the Minimum Wage

Economists insist wage increase is good fiscal policy; small business owners rally alongside workers

- Jon Queally, staff writer

Marking the third anniversary since the last national minimum wage increase, low-paid workers and living-wage advocates across the country on Tuesday are calling out for a renewed focus on the paltry, sub-poverty earnings that millions of Americans are expected to get by on.

Advocates of the increase argue that if the minimum wage had kept up with inflation since 1968, its historical high point, it would now be over $10.50 per hour. Marches and rallies are planned, according to McClatchy, at congressional district offices and at businesses that pay low wages. In Chicago, protesters will hold a trolley tour of low-wage employers, while activists in Pittsburgh will rally for higher wages outside City Hall. Similar events are planned in dozens of cities, including New York, Washington, Miami, Kansas City, Mo., Sacramento, Calif., and Philadelphia.

"We're having this national day of action to get a message to our elected officials that we are serious about how the minimum wage is not a livable wage," said Cathy Kaufmann, deputy Ohio director of the Fight for a Fair Economy, part of SEIU, or the Service Employees International Union.

At $7.25 an hour, the current minimum wage comes to just $15,080 a year for full-time work -- a figure still below the official poverty line.

Recent studies by the Center for Economic and Policy Research shows that the "minimum wage is now far below its historical level by all of the most commonly used benchmarks – inflation, average wages, and productivity."

And Holly Sklar, director of the Business for a Fair Minimum Wage project, adds that though "worker productivity grew 80 percent from 1973 to 2011" the average worker's wage -- adjusted for inflation -- "fell 7 percent."

In a column highlighting the economic inequality engendered in the minimum wage and calling for its increase, economist Dean Baker and CEPR co-director writes: "At the current rate of $7.25 an hour, a full-time year-round worker would have gross pay of less than $15,000 a year. This is less than half of what the average Fortune 500 CEO makes in a day. It would be hard enough for a single person to survive on this income, imagine trying to support a child or even two on this money."

Advocates of the increase argue that if the minimum wage had kept up with inflation since 1968, its historical high point, it would now be over $10.50 per hour. This, they say, despite the fact that today’s low-wage workers are older and better educated than in the past. Had the minimum wage also risen in step with low-wage workers’ age and educational attainment since 1968, it would even higher in 2012, approaching $11 per hour.

Opponents of minimum wage increases have long argued that such adjustments impact hiring, but much economic research contradicts such claims.

"Increases to minimum wage have not produced the loss of jobs in the ways that opponents of these types of proposals predict," said Jeannette Wicks-Lim, an assistant research professor at the University of Massachusetts' Political Economy Research Institute.

Wicks-Lim said the recent research shows minimum wage laws enacted in the past "have not had a negative impact on workers' job opportunities."

“Businesses don’t expect the costs of energy, rent, transportation and other expenses to remain constant, yet some want to keep the minimum wage the same year after year, despite increases in the cost of living,” said David Bolotsky, founder and CEO of UncommonGoods and a member of Business for a Fair Minimum Wage. “That kind of business model traps workers in poverty and undermines our economy.”

Supporters will lobby for a provision of the Rebuild America Act, introduced in the Senate this year by Senator Tom Harkin (D-Iowa), calling for the federal minimum wage to be increased to $9.80 per hour by 2014.

In June, Congressmen Jesse Jackson, Jr. (D-Ill.), John Conyers (D-Mich.), and Rep. Dennis Kucinich (D-Ohio) introduced the “Catching Up to 1968 Act of 2012” (H.R. 5901) – legislation to raise the federal minimum wage to $10 per hour.

In the Republican controlled House, the bill has gone nowhere.

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Small business owners made the following statements in support of Tuesday's action and the call for an increase of the minimum wage:

David Bolotsky, Founder and CEO of UncommonGoods in Brooklyn, New York, said, “Businesses don’t expect the costs of energy, rent, transportation and other expenses to remain constant, yet some want to keep the minimum wage the same year after year, despite increases in the cost of living. That kind of business model traps workers in poverty and undermines our economy. The minimum wage should require that all businesses pay employees a wage people can live on.”

Camille Moran, Owner of Caramor Industries and Four Seasons Christmas Tree Farm in Natchitoches, Louisiana, said, “A minimum wage increase is long overdue. It’s not right or smart for any business to pay a wage that impoverishes not only working men and women and their families, but also impoverishes our communities and our nation. Boosting the wages of low-paid workers who could then purchase the goods and services they need is the best medicine for our ailing economy.”

Julie Paez, Owner of Big Bad Woof pet supply stores in Hyattsville, Maryland and Washington, DC, said, “Paying employees a living wage makes good business sense. It helps keep qualified employees – cutting down on training expenses – and helps foster company loyalty, which, in turn, produces higher sales and increases customer retention. It's a win win.”

Lew Prince, Managing Partner of Vintage Vinyl in St. Louis, Missouri, said, “The evidence that trickle-down economics doesn’t work is all around us. People are falling out of the middle class instead of rising into it. Putting money in the hands of people who desperately need it to buy goods and services will give us a trickle-up effect. Raising the minimum wage is a really efficient way to circulate money in the economy from the bottom up where it can have the most impact in alleviating hardship, boosting demand at businesses and decreasing the strain on our public safety net from poverty wages.”

Marilyn Megenity, Owner of Mercury Cafe in Denver, Colorado, said, “We opened our doors in 1975, and I know that raising the minimum wage is not only affordable to restaurants and other businesses – it’s crucial for our economy. It's important that all employees be able to make a decent wage, in order to pay rent and all the other costs of living. Our government needs to take charge of this now, just as it did in the past. We cannot continue a minimum wage that keeps even people who are working full time, year round in poverty.”

Brian England, Co-Owner of British-American Auto Care in Columbia, Maryland, said, “Have you ever wondered why every time you visit some businesses the staff has changed? Well chances are it is because they only pay an inadequate minimum wage. Instead of paying a fair wage, they are inviting costly constant turnover and unreliable customer service. In raising the minimum wage, we should be moving people away from just surviving. We should be moving working Americans as far away from needing the social safety net as possible. Raising the minimum wage raises everyone up.”

Jim Wellehan, President of Lamey Wellehan Shoes in Auburn, Maine, said, “Our family business is nearly a hundred years old, and clearly our country does better when all believe that their hard work will bring good results for them and their loved ones. Now, as Bloomberg BusinessWeek Magazine reports, the USA has higher income inequality and lower social mobility than most industrialized countries. If you are born poor, you are quite likely to die poor. Raising the minimum wage is a step to correcting this worsening situation. And the ability of a broad segment of our society to have a bit more spending money will benefit every area of our economy. Our increasingly unequal economic structure has no long-term viability.”

Joseph Rotella, Owner of Spencer Organ Company in Waltham, Massachusetts, said, “As a small business owner and an American, I support proposals to raise the federal minimum wage to at least $9.80 by 2014, because I strongly support workers being able to earn a living wage. America should be a country where no one who puts in a fair day's work can't afford to make ends meet, and no business owner who offers a living wage has to be undercut by competitors who do not. Not only is increasing the minimum wage the right and fair thing to do, but it will also help stimulate our struggling economy by putting more money into the hands of workers who need to spend it.”

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