Wednesday, January 14, 2015
By Derek Thomas:
On New Years Day, workers in Indiana joined a shrinking minority whose states' minimum wage is still equal to the federal (bare) minimum wage of $7.25. On January 1st, 2015, 3.1 million workers in 20 states received raises. For 2015, we've updated our blog with new data and added a 15th reason why the Indiana General Assembly should resolve to be the 30th state in the nation to reward hard working families by providing them with the long-overdue raise they deserve.
- Outdated: In no county in Indiana does the federal minimum wage of $7.25 support a single adult according to inflation adjusted data from our Self-Sufficiency Standard. The low is Vermilion County at $7.97, the high is $11.21 in Hamilton County and the statewide weighted (for population) median is $9.26.
- 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 $10.96 in 2014 dollars. Because the value of the minimum wage has been left to erode due to inflation, more workers are earning poverty wages.
- Low- to Mid-Wage Workers Earning Less: Real (inflation-adjusted) median hourly wages are down $0.84 since 2007, and 20th percentile wages are down $0.73. See interactive data here.
- 637,000: That's how many Hoosiers (23.4% of the workforce) would get a raise in 2016 if Congress raised the wage to $10.10 per hour, according to a 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). Fortunately, Indiana lawmakers can give a raise to Hoosier workers, instead of waiting for Congress to act.
- $1,000,000,000: According to the same analysis, this large scale policy tool for working families would equal a cumulative raise of nearly one-billion dollars for Hoosiers. Like 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.
- Quality of Life: Local economies win when families with the highest propensity to spend are able to spend money to meet their basic needs. Standard and Poor's cites rising income disparity as "contributing to weaker tax revenue growth", making it more difficult for state and local governments to invest in education and infrastructure.
- Inequality: Reducing the erosion of wages would be a good step towards reducing inequality. The U.S. Conference of Mayors cited the "dramatic decline" in the value of the minimum wage in their recent 'Income and Wage Gaps Across the US' report.
- It's Not Just for Teens Anymore: Contrary to common perception, less than a quarter of workers earning the minimum wage or close to it are teens; 56 percent are women, 28 percent are raising families and 44 percent have at least some college education. According to the Brookings Institution, "the 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."
- Gender Gap: Women earn just $0.73 cents to their male counterpart (the 6th largest gender gap in the U.S.). Because 2/3rds of minimum wage workers are women, raising the wage (and the tipped wage) is a good step towards equal pay. According to a GovBeat analysis of EPI's report, 20% of female workers in Indiana would be directly affected.
- Falling Behind: Measuring the ratio of the minimum wage to median wage is useful in determining the strength of the minimum wage. The average minimum-to-median wage ratio was 39 percent in Indiana in 2013 compared to 52 percent in 1979. According to the OECD, among advanced nations, U.S. is near bottom for minimum-relative-to-average wages of full-time workers - just better than Czech Republic and Estonia.
- 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 more than $19 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.
- 24 Years Without a Raise: Waiters and Waitresses in Indiana make $2.13 per hour (29% of the minimum wage). The last time they saw a raise was almost a quarter-century ago (1991), even as the industry has seen strong growth. According the National Women's Law Center, gender gaps and poverty rates for tipped workers are smaller in states whose tipped minimum wage are equal to the minimum wage.
- Race to the Bottom: 6.2 percent of Indiana's 1,731,000 hourly workers make at or below minimum wage. That's an increase from 5.2% and a larger share than all neighbor states and the U.S. average of 4.3% (6.2% represents 61,000 at minimum wage and 47,000 below minimum wage).
- Working Full-Time in Poverty: At $7.25 per hour, one person working full‐time (40 hours per week, 52 weeks per year) would earn just over $15,000 per year – so little that with one child they would be below the federal poverty line.
- Self-Sufficiency: In order to afford the Fair Market Rent for a two-bedroom apartment, a minimum wage earner must work 77 hours per week, 52 weeks per year. Increasing the minimum wage would help a family move closer to economic self-sufficiency.
A minimum wage that reflects the increased cost of living is fundamental to economic self-sufficiency. Recognizing this, more than half of all U.S. states now have minimum wages higher than the federal minimum for the first time ever. This year, several other states will be considering increases as well. Hard working Hoosiers don't deserve to be in that shrinking minority.