Monday, May 8, 2017

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17 Reasons to Raise Indiana's Minimum Wage in 2017

May 2017 | Amy Carter & Maria Laster


The past three years, the Indiana Institute for Working Families has given more and more reasons to increase the minimum wage. This year, we updated the list and added two new items with one theme: public health. As minimum wage debates continue, the positive public health outcomes cannot be overlooked or denied. Read on to see a compelling, though not exhaustive, list of seventeen reasons to raise the minimum wage in 2017.

1.    Working Towards Self-Sufficiency - 40 Hour Work Week: There is not one county in Indiana where working full time (40 hours/week) at the minimum wage of $7.25 per hour is sufficient to support even a single adult, as shown in our Indiana Self-Sufficiency Standard 2016 report. A single adult has to work a median 48 hours per week at the minimum wage in order to be self-sufficient. The number of hours increases significantly - to 108 hours - for a single adult with one preschooler and one school-age child. For a family with two adults, a preschooler, and a school-age child, each adult would need to work 64 hours for the family to be self-sufficient. Let’s raise the minimum wage to a level that allows Hoosiers to spend time with the families for which they are working so hard to provide.

2.    Working Towards Self-Sufficiency – Housing: A full-time (40 hours), minimum wage ($7.25) worker in Indiana earns about $1,160 per month. The median Fair Market Rent for a single adult in a one-bedroom home across Indiana’s counties is $486, equaling 42% of a minimum wage worker’s monthly wages. The rule of thumb for housing says that no more than 30% of a worker’s monthly income should be spent on rent. However, national data shows over a third of US households faced housing cost burdens (meaning spending more than the rule of thumb) including 17% that are severely burdened (spending 50% or more of income). In order to afford the Fair Market Rent for a two-bedroom apartment, which is what a family with children needs, a minimum wage earner must work 77 hours per week, 52 weeks per year! The minimum wage needs to be closer to $14 in order for a minimum wage worker to afford housing at less than 30% of their income.

3.    Working Towards Self-Sufficiency – Childcare: In Indiana, the cost of childcare almost exceeds monthly earnings for minimum wage workers. In 2015, the average cost of childcare for families with one infant and one four year old was over $1,300/month! Comparing that expense to the monthly minimum wage for a full-time worker, $1,160, it is not difficult to see why families are not self-sufficient. Childcare tax credits and state childcare vouchers can help, but not all children receive vouchers. In January 2017, Indiana had 4,385 children on Child Care Development Fund (CCDF) waitlists.  National data from 2015, the most recent year for which we have data, suggests that with the current investment in Child Care and Development Block Grant (CCDBG), only 15% of children eligible for child care assistance are getting support. A raise in the minimum wage could help make childcare more affordable for those at two and three times the federal poverty level, thus leaving spots open to increase access for low-income families who want this aid.  

4.    Public Opinion: A strong majority of Americans support raising the minimum wage. According to a 2015 New York Times poll, 71% of respondents favored raising the minimum wage to $10.10. The Bowen Center for Public Affairs at Ball State University found in their 2015 Hoosier Survey that 64% of respondents were supportive of a minimum wage raise to $10.10. While Democrats and Independents were more favorable, almost 46% of Republicans were in favor. It’s time for legislators to listen to their constituents.

5.    Tipped Workers – 26 Years Without a Raise: Waitstaff in Indiana are paid $2.13 per hour by their employers (29% of the minimum wage) according to the Department of Labor. Tips are expected to cover the difference between that wage and minimum wage; if they don’t, employers are to cover the difference. The last time tipped workers saw a raise was a quarter-century ago (1991), even as the industry has seen strong growth and profitability. Women make up the majority in tipped occupations. According the National Women's Law Center, gender gaps and poverty rates for tipped workers are smaller in states where the tipped minimum wage is equal to the minimum wage. See a simplified table of minimum wage, tipped wage, and poverty rate of women in tipped occupations here. As the fight for an increased minimum wage continues, tipped workers cannot be forgotten.

6.    It's Not Just for Teens AnymoreContrary to common perception, fewer than 20% of workers earning the minimum wage or below are teens. Minimum wage workers are not just high-schoolers earning spending money; they are at least 20 years old and have greater family responsibilities. (Check out Table 1 here for a breakdown by age, gender, and race.)  In Indiana specifically, 88% of those who would be affected by an increase in the minimum wage to $15 are age 20 and older. According to a recent Economic Policy Institute fact sheet, “the typical worker who would benefit from a $15 minimum wage is a 36-year-old woman with some college-level coursework who works full time.” The minimum wage conversation cannot be pushed aside based on the perceived age of minimum wage workers. (Though there is no justification for paying teenagers poverty level wages either. Perhaps a conversation for another day…)

7.    Gender Gap: Based on 2011-2015 data, white and Asian Hoosier women holding full-time, year-round jobs earn $0.76 for every dollar paid to white, non-Hispanic men. Black and Latina Hoosier women earn even less, $0.66 and $0.54 respectively. This is unacceptable and raising the minimum wage can help. More than 301,000 households in Indiana are female-led. Thirty-two percent of those households – more than 97,000 – have incomes that fall below the poverty level. Increasing the minimum wage, especially in these female-dominated professions, could give these families more money for savings, child care, education, and housing.  Because 3/5th of minimum wage workers in Indiana are women, raising the wage is a good step toward equalizing pay.

8.    Wage Erosion: Adjusted for inflation, the minimum wage peaked in 1968! (That's 49 years ago. 49 years!) The last federal raise was in 2009 and since then minimum wage has lost 9.6% of its purchasing power. If the minimum wage had grown with productivity, it would have been $18.85 in 2016. If it had only grown with average wages, it would still have been $11.35 in 2016. Because the value of the minimum wage has been left to erode due to inflation, more workers are earning poverty wages. Reducing the erosion of wages would be a good step towards reducing income inequality. 

9.    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. Raising the minimum wage would likely increase these mid-range wages as well.

10.  Race to the Bottom: According to a 2016 report from the Bureau of Labor Statistics, 3.9% of hourly workers in Indiana make at or below minimum wage. 3.9% represents 32,000 workers at minimum wage and 37,000 workers below minimum wage. That's more than all neighbor states (Illinois 3.2%, Kentucky 3.5%, Michigan 3.7%, and Ohio 2.9%) and the U.S. average of 3.3%.

11.  Myth of a Spike in Unemployment: Critics of raising the minimum wage often argue that an increase will cause a spike in unemployment. However, seven decades of historical data find no correlation between minimum wage increases and employment levels. On the contrary, in the considerable majority of instances (68%), overall employment increased after a federal minimum wage increase. In the most substantially affected industries, the rates were even higher: in the leisure and hospitality sector, employment rose 82% of the time following a federal wage increase, and in the retail sector it rose 73% of the time. Moreover, the small minority of instances in which employment declined —either overall or in the indicator sectors—following a federal minimum wage increase occurred during periods of recession or near recession.

12.  Economic Growth: In a stagnant economy, increasing wages can lead to economic growth. Low-wage workers tend to spend any additional income they receive on their basic needs. If the minimum wage increases, these workers would pump money into the economy, boosting GDP, which would produce job growth in the broader economy. Economic Policy Institute supports this idea, saying that a “high pressure economy that eliminates the remaining demand shortfall in the U.S. economy and leads to low rates of unemployment and rapid wage growth would likely induce faster productivity growth.”

13.  Growing the Tax Base: Standard and Poor's cites rising income inequality as contributing to weaker tax revenue growth, making it more difficult for state and local governments to invest in education and infrastructure. This year, the Indiana General Assembly (IGA) discussed the expansion of Pre-K education, which not only prepares students for academic and social success, but allows parents to work or go back to school. However, funding was not increased as much as advocates suggested. Increasing the minimum wage could give the IGA more money to provide supports for low-income Hoosiers (which helps them reach self-sufficiency, which means more income for taxes, which can increase funding for education, which helps people reach self-sufficiency, and so on and so forth.)

14.  Reduce Need of and Spending on Public Assistance: According to a 2016 Economic Policy Institute report using Census data from 2012-2014, for those in the lowest wage category (those earning up to $9.91/hour), a $1 increase in hourly wages reduces the likelihood of needing public assistance by 3.8%. So if this entire group consisting of 15.5 million workers had an average $1 increase in hourly wages, there would be an approximate 3.8% decline in dependence on public aid, or 600,000 fewer workers receiving benefits. The study also found that for each $1 increase in minimum wage, benefit dollars for all public assistance programs decreased by $199. If those making $9.91/hour or less each had an average $1/hour raise, the expenditures on means-tested government benefit would go down $3.1 billion annually.

15.  Future Generations: Low wages not only affect adults, but children as well. Research has found that children being raised in poverty have worse physical, psychosocial, and academic outcomes than more affluent peers. A recent study of minimum wage increases showed that a $1 increase in minimum wage implies a 9.6% decrease in neglect reports.  Raising the wage will help ameliorate the deleterious effects of poverty on children, specifically reducing the risk of child welfare involvement for children 0-12 years old.

16.  Decreasing Teen Birth Rate: Teen parenthood costs the public more than $9 billion per year and can decrease the educational and employment outcomes of both the teen and the child. A recent study done by an Indiana University researcher found that a minimum wage increase of $1 would reduce the adolescent birth rate by 2%, leading to about 5000 fewer adolescent births per year. As the discussion on minimum wage continues, positive unintended consequences, like the effects on public health, can be strong debate points and influences in creating minimum wage policy.  

17.  Decreasing Infant Mortality Factors: A 2016 study looked at minimum wage, birth weight, and post-neonatal mortality by state from 1980-2011 to see what effect minimum wage had on infant mortality and birth weight. They found that a $1 increase above the federal minimum wage decreased low birth weight births by 1-2% and decreased post-neonatal mortality by 4%. In 2005, the social and health cost for low weight births was over $26 billion! Imagine how great the impact is a decade later. According to KIDS COUNT data from the Annie E. Casey foundation, Indiana does not compare well to neighboring states – 7.3 infant deaths per 1000 live births compared to 6.0 in Illinois, 6.7 in Kentucky, 6.6 in Michigan, and 7.2 in Ohio. (You can see interactive data on infant mortality here.) Raising the minimum wage can not only save money on public health outcomes, it can literally save lives.

Self-sufficient hourly wages are wages that allow an income that will meet the essential needs of an individual or family without public or private assistance. When looking at wages across the state, the lowest wages for a single adult to be self-sufficient are in Vermillion County at $7.96 and the highest wages are $11.39 in Hamilton County, with the median self-sufficiency wage across all Indiana counties for a single adult at $8.78. Families with children have significantly higher self-sufficiency needs. For an adult with a preschool child, the lowest self-sufficient wages are $13.58 in Cass County and rise all the way to $23.18 in Hamilton County. When looking at an appropriate minimum wage, these numbers should be taken into account. If we want to create public policy that ensures self-sufficiency for all Hoosiers – and I think we do – the minimum wage discussion needs to start at least at the highest self-sufficiency wage for a single adult.

Minimum wage discussions are happening all over the nation –  in local communities, in statehouses, in Congressional offices, and hopefully at the White House. This list goes through just a few of the many reasons that the minimum wage is no longer sufficient or acceptable. As long as it stays at the outdated level, it will continue to fail Hoosiers and Americans who are working towards a better future. 

You can also read our 16 Reasons, 15 Reasons, and 14 reasons on the blog.

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