Outten & Golden: Empowering Employees in the Workplace

Minimum Wage: Taking it to the States

June 7th, 2005 | Paula Brantner

Since 1997, workers have waited in vain for Congress to pass an increase to the federal minimum wage. But some workers, tired of waiting for federal advances that do not seem likely any time soon, have taken matters into their own hands on the state level. In several states, activists have successfully nudged state legislatures into significantly increasing state minimum wage rates, which trump the federal minimum wage when they are higher. Perhaps their efforts will ultimately shame Congress into doing something positive for the American worker, but until then, state campaigns may be the only ray of hope in our otherwise bleak wage picture.

For nearly eight years, the federal government has failed to increase the minimum wage by even a penny. While prices continue to rise, the minimum wage has remained stagnant, at $5.15 an hour. The federal minimum wage totals just $10,700 a year for a full-time, full-year minimum wage worker—$5,000 below the poverty line for a family of three. Today’s minimum wage has significantly eroded in value as well: in the 1970s, the minimum wage amounted to about half of what the typical American worker was earning. Today, it has fallen to only 38 percent. (See Senate HELP Committee Staff Report.)

However, states are free to pass higher minimum wage laws, and an increasing number of them are starting to do so. As one New Jersey state senator points out, “The federal government is not living up to its responsibility, so the states are acting.” Eleven states have raised their rates since January 2004, and Wisconsin will this week become the 12th. In all, 17 states and the District of Columbia — covering 45% of the U.S. population — have set minimums above the federal rate of $5.15. That has helped reduce the number of workers earning the minimum or less (for those earning tips) from 4.8 million in 1997 to 2 million last year, or 2.7% of hourly earners, the Bureau of Labor Statistics says. (See USA Today article.) The Department of Labor’s map of the United States is increasingly becoming more green (signifying a state with an increased minimum wage), but is not yet green enough for those 2 million workers to receive a survival wage.

Those opposing minimum wage increases say that an increase will lead to fewer jobs, and will hurt the very people its designed to help. They trot out studies funded by retail and restaurant organizations, those most likely to pay minimum wages, to “prove” that jobs will be lost. Just yesterday, a study released in Massachusetts, where a minimum wage hike from the state’s current higher minimum, $6.75, to $8.25 is now under consideration, claims that 27,000 jobs will be lost. (See Boston Globe article.)

However, this directly counters the experience in Los Angeles, which passed a living wage ordinance significantly higher than the minimum increases under consideration. In Los Angeles, city contractors and firms doing business on city property must either pay their workers $10 per hour, or $8.75 if health benefits are offered. Unlike the dire claims made during debate on the bill, when opponents predicted a loss of 3,000 jobs and said employers would leave the city, the study found an overall loss of only 112 jobs, or about 1%, attributable to the law. Employers made up the wage hikes by cutting overtime and fringe benefits, hiring more skilled, productive workers or passing on costs to the city. What’s even more significant: lower employee turnover and absenteeism also helped offset the higher wage costs, making up 16% of the pay difference, the study said. (See Los Angeles Times article.)

Opponents also claim that only teenagers and part-time workers receive the minimum wage, and reject the notion that families are trying to survive on the minimum wage. However, research shows that 72% of workers whose wages would be raised by a minimum wage increase to $7.25 by June 2007 are adults (age 20 or older). Close to half (43.9%) of workers who would benefit from a minimum wage increase work full time and another third (34.5%) work between 20 and 34 hours per week. (See EPI Minimum Wage Issue Guide.) Even if it were true that few working families were earning the minimum wage, this argument completely neglects the “spillover effect,” — the effect that a low minimum wage has on depressing other wages. Raising the minimum wage will help raise wages for many other low-wage workers, including those making more than the minimum wage but still under the poverty line.

While many of the state campaigns are designed to take advantage of progressive campaigns and infrastructure built around last November’s election, and to put Republicans on the defensive, the campaigns have been successful even in some “red” states, including most recently, Florida. As one strategist predicts, “This is going to take off like wildfire. It will pull progressive voters to the polls. The way the gay marriage amendment lured conservative voters to the polls (in November) was a wake-up call for us.” (See USA Today article.)

Regardless of the reason why state minimum wage campaigns are now becoming a priority, it is clear that workers need higher wages to be a priority. Until and unless Congress takes action, activists expending their energy on state campaigns are likely to see their efforts pay off, as the American worker is starting to comprehend just how impossible it is to survive on anything that’s even close to the minimum wage.

More Information:

Workplace Fairness:
Profits Before People: The Income Gap
Your Rights: minimum wage

Economic Policy Institute:
EPI Issue Guide: Minimum Wage

ACORN:
Living Wage Resource Center

AFL-CIO:
Working Families Deserve a Real Minimum Wage

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