Christine Owens: Minimum-wage earners falling further behind
Two years ago this week, 4.5 million of America’s workers enjoyed a modest pay increase, as the federal minimum wage rose from $6.55 to $7.25 an hour. The increase was the final of a three-step boost enacted in 2007. Of those getting a bump in pay, more than three-quarters were adults, nearly two-thirds were women, and nearly half a million were single parents with children under 18.
Yet during the past two years, these working families have seen the real value of their wages fall. Minimum-wage earners working full-time make roughly $15,000 a year. Had the minimum wage rate kept up with inflation, their paychecks would have increased by $800 this year. Instead, our nation’s lowest-paid workers have had an even harder time providing basic needs for their families. This is one more reason that Main Street is having a tough time recovering from the economic calamity brought on by financial collapse.
CEO compensation grew 23 percent in 2010, while pay for the average American worker grew only half a percent. Minimum wage workers have fared even worse: Since the 2009 increase, the real value of the minimum wage has fallen 5 percent.
The decline in value of the minimum wage during the past four decades has been even more dramatic, as prices for goods and services have risen much faster than the wage floor. If the minimum wage had kept up with inflation since the late 1960s, it would be $10.38 today. Yet, roughly a quarter of the nation’s work force is now earning less than that.
Instead of keeping the minimum wage current, Congress has acted just three times in the last three decades to increase it. The deterioration of the wage floor has helped fuel a level of economic inequality not seen in this nation since the early 1900s—the era of sweatshops and robber barons. With more and more income and wealth being transferred from working families to the super-rich, our economy, our democracy and the American way of life are under threat.
Some will say this is not the moment to be concerned with the minimum wage. But restoring the value of the minimum is in fact a key building block of sustainable economic recovery.
Businesses and economists agree that lack of demand is the primary driver of the stalled recovery and high unemployment. Without customers lining up for goods and services, employers will not expand their production or their payrolls. Raising the minimum wage would put more money in pockets of the lowest earners who have little choice but to spend their wages immediately. The Economic Policy Institute estimates that raising the minimum wage to $9.50, as President Obama proposed during the 2008 presidential campaign, would generate more than $60 billion in new consumer spending.
Wielding outdated economic theories, opponents claim that raising the minimum wage will cost jobs and slow rehiring. The tired canard that the minimum wage causes unemployment recently received national attention when reporters revisited 2005 testimony in which Congresswoman Michele Bachmann argued that eliminating the minimum wage would wipe out unemployment entirely. This extremist view was roundly criticized, yet many corporate interests still promote the dogma that raising the minimum wage reduces employment.
While simplistic supply and demand theory suggests that employment will fall as wages rise, this 18th century model fails to capture the complexities of how the labor market works. Two decades of rigorous empirical research has revealed that increases in the minimum wage have not cost jobs or slowed rehiring, even during times of high unemployment.
Since the end of the recession, corporate profits have recovered and CEO compensation has skyrocketed. Corporations are sitting pretty on nearly $2 trillion in assets that they refuse to use to expand production or rehire because the rest of America has little cash of their own to spend on goods and services. Raising the minimum wage will help Main Street share in—and power—a robust economic recovery. It’s the least we can do for those with the least means to stay afloat and get ahead in a brutal economy.
Christine Owens is executive director of the National Employment Law Project.
Kent Ross | Fair wages help small business
As a small-business owner, I find that people expect me to grumble about the increase in the federal minimum wage to $7.25 an hour as of July 24. But I’m not grumbling. In fact, I think it should be raised further.
Every time the minimum wage goes up, I find that new customers come to my bicycle shop because they have more money to spend, and some of my old customers buy more when they visit. With the economy in the slump it’s in today, this kind of boost in consumer spending not only helps individual entrepreneurs, but helps the country as a whole to recover. Continue reading “Kent Ross | Fair wages help small business” »
New minimum wage good for business
The local Chamber of Commerce will tell you that the increase in the federal minimum wage that goes into effect today will spell doom for business and industry. Another perspective is that putting more wages in the pockets of working-class families will boost consumer buying power and push the economic recovery that is slowly taking shape into action. Continue reading “New minimum wage good for business” »
Chamber urges local business, industry to comply with new minimum wage
Eye-catching headline there, huh? Kind of akin to, Commonwealth’s attorney urges local residents to comply with murder laws. I wish I was making this up, of course.
“Despite these sobering statistics, Congress has not delayed the impending minimum wage increase. Thus, employers should comply with the new federal rate,” read a memo from the Greater Augusta Chamber of Commerce that was sent to members Thursday afternoon. Continue reading “Chamber urges local business, industry to comply with new minimum wage” »
Eli Markham: Raising wages for a real recovery
Posted by afp on September 2, 2011 · 1 Comment
There are 14 million Americans officially counted as unemployed — many of them for over six months. If you count people who have given up looking for work, the number of Americans out of work climbs to over 17 million. Even people fortunate enough to keep their jobs have seen wages frozen or even cut. Families across the country are struggling to make ends meet.
The future promises even more pain. As the funds from the federal stimulus package expire, state budgets are collapsing. According to the Center on Budget and Policy Priorities, the total budget deficit from 42 states and the District of Columbia is $103 billion. One of the worst states is New Jersey, whose $10.5 billion gap is nearly 40 percent of its budget. Nearly every state is facing a budget crisis this year brought on by evaporating tax revenue. State governments across the country will be forced to cut local jobs — teachers, state troopers and nurses — to balance their budgets. So will municipal governments. Hundreds of thousands of laid-off state and city employees will join the 14 million already on the unemployment rolls.
But one group is doing better than ever: corporations. By the third quarter of 2010, non-financial corporate profits had recovered to $776 billion, or 5.3 percent of GDP — the highest level since the dot-com bubble. Profits for large corporations have recovered more quickly and more strongly than any other part of the economy. Businesses that pay minimum wages are especially profitable right now. Wal-Mart, McDonalds, Sodexo, Yum Brands (the operator of Pizza Hut, KFC, Taco Bell and other fast food chains) and Target all made greater profits last year than they averaged from 2002 to 2006. Why are corporations making record profits but not hiring new workers? It’s an economic problem: lack of demand.
The average American has over $10,000 in debt. Their house value has plummeted and they see no chance of getting a pay raise in the near future. As a result, they’re not likely to spend a lot of money. Businesses know that, so they aren’t investing in new technology or new employees. Instead they’re just hoarding cash, waiting for the day when consumers start spending again. But consumers aren’t going to start spending again until businesses start hiring and raising wages.
It’s a classic collective action problem. Everyone — including the corporations — would be better off if they started hiring again, but each business is maximizing its own short-term profits by being thrifty. Their hoarding has put the economy in a hole.
This was the same problem America faced during the Great Depression, and the government solved it with a massive fiscal stimulus. The government paid people to build bridges and tunnels and dams, which then gave them money to go out and spend. Unfortunately conservatives in Congress have decided to focus on the debt instead of the economy — the equivalent of mowing the lawn while your roof is on fire — and the large fiscal stimulus the country needs faces strong opposition in the House of Representatives. State governments, most of which are constitutionally mandated to run a balanced budget, are likewise unable to spend.
But there’s a policy tool that costs the government nothing and could get the economy moving again: the minimum wage. The Economic Policy Institute estimates that President Obama’s 2008 campaign proposal to raise the minimum wage to $9.50 by 2011 would have generated more than $60 billion in new consumer spending.
Without some help, American workers can’t get themselves out of this hole, and each month we delay sees greater numbers of American workers losing their employment, more families depending on low-wage jobs, and greater numbers of American children going hungry. If we want to help Main Street recover, we should raise the minimum wage. Even if we are politically unable to do so at the federal level, raising the minimum wage state by state would still make a great difference.
Eli Markham is a researcher with The National Employment Law Project.
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