Tuesday, February 18, 2014
SEE UPDATED BLOG: 15 REASONS TO RAISE THE MINIMUM WAGE IN 2015
By Derek Thomas:
In 2013, 13 states passed legislation to increase the minimum wage. In the spirit of 2014 (this post is a little late, but not too late), we've laid out 14 compelling reasons the Indiana General Assembly should resolve to be the 14th state to reward hard working families by providing them with the raise they deserve:
- Wage Erosion: When comparing the value of the minimum wage today with the minimum wage in 1968 and inflating it to 2012 dollars, the 1968 minimum wage would equate to $10.77. Because the value of the minimum wage has been left to erode due to inflation, more workers are earning poverty wages.
- Inequality: Reducing the erosion of wages would be a good step towards reducing inequality. Indiana saw the 6th greatest increase in income inequality from the 1990’s through mid‐2000’s. See 'Pulling Apart - an Indiana specific infographic from the Center on Budget and Policy Priorities.
- Working Harder For Less: Working families have not shared in the gains of productivity. If the wage floor in Indiana were indexed to Hoosier productivity, it would be about $18.75 per hour. From 2009 - 2012 alone, productivity increased by 4.5% for all occupations, while real median wages declined by 2.8%, according to the National Employment Law Project.
- Race to the Bottom: 5.2 percent of Hoosiers make at or below minimum wage. That's more than all neighbor states (excluding Kentucky - it's a tie) and the U.S. average of 4.7% (5.2% represents 50,000 at minimum wage and 43,000 below minimum wage).
- 637,000: That's how many Hoosiers (23.4% of the workforce) would get a raise according to a new report from the Economic Policy Institute. This includes those affected directly (436,000 making less than $10.10) and indirectly (201,000 making just above the minimum wage whose wages would be pushed up due to pay scale adjustments).
- $1,000,000,000: According to the same analysis, this large scale policy tool for working families would equal a cumulative raise of one-billion dollars. Like unemployment insurance benefits or tax breaks for low- and middle-income workers, raising the minimum wage puts more money in the pockets of working families when they need it most.
- 23 Years Without a Raise: Waiters and Waitresses make $2.13 per hour. The last time they saw a raise was 1991. See this analysis from Massachusetts Budget project: in the 7 states that require employers to pay tipped workers the same as all minimum wage workers, poverty is substantially lower.
- Not All Low-Wage Jobs Are Created Equal: Nationally, nearly 2/3rds of tipped workers are women, and Indiana is 1 of 5 states – along with Alabama, Arkansas, Louisiana and Mississippi – in which more than 7 in 10 minimum wage workers are women. According to this analysis of the EPI report from GovBeat, 20% of female workers in Indiana would be directly affected.
- Gender Gap: Suffice to say, with women earning just $0.73 cents to their male counterpart (the 6th largest gender gap in the U.S.), increasing the tipped minimum wage is a good step towards equal pay.
- It's Not Just for Teens Anymore: The Wall Street Journal showed this past weekend that less than 12% of those that would benefit are under 20 years old. From Sarah Jackson and Elizabeth at Brookings Institution on the recent shift in low-wage worker demographics: "The typical worker likely to be affected by a raise in the minimum wage today is a woman in her 30's working full-time, with a family to support." Speaking of families to support, Indiana is among eight states where over a quarter (25.5%) of children have a parent who would benefit from the minimum-wage increase.
- Self-Sufficiency: In order to afford the Fair Market Rent for a two-bedroom apartment, a minimum wage earner must work 76 hours per week, 52 weeks per year. Increasing the minimum wage would help a family move closer self-sufficiency.
- Falling Behind: According to the Organisation for Economic Cooperation and Development: Among advanced nations, U.S. is near bottom for ratio of minimum wage to median wage (0.38%) - just better than Czech Republic and Estonia.
- Public Support: American voters support 71 - 27 percent raising the minimum wage.
- The Results Are In: Opponents claim minimum wage hurts job growth. It's difficult to find an issue that has been studied more exhaustively. Here are just a few examples: "Empirical analysis strongly challenges the conventional wisdom that increasing the minimum wage hampers employment" (Indiana Business Research Center - 2008). And, here's an oft cited "natural experiment" from economist David Card: 'Comparing Regional Variations in Wages to Measure the Effects of the Federal Minimum Wage'. The conclusion: "a rise in the minimum wage increased teenagers' wages [and] no evidence of corresponding losses in teenage employment." Finally, here's a recent meta-analysis (study of studies) from John Schmitt at CEPR in which he similarly concludes, "the weight of that evidence points to little or no employment response to modest increases in the minimum wage."
After Hoosiers experienced some of the largest losses in household incomes in the nation, some of the largest increases in poverty and low-income individuals in the U.S., and rising inequality (in a state with a larger share of poverty wage jobs than the U.S. average and all neighbor states), the only question is, why not reward hard working Hoosier families with a quick and easy tool that would begin to make work pay, while not costing taxpayers a dime?