June 13, 2006 – With the federal minimum wage stagnating for almost a decade, states from Maryland to Washington have recently raised their pay floors. But while advocates for the working poor hope voters and lawmakers will expand the raises to other states, they point out that the bare minimum still leaves families in poverty.
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Congress last raised the federal minimum wage in 1997, to $5.15 per hour. But since January, seven states have passed legislation to raise their minimum wages through legislation. Most recently, North Carolina raised its minimum pay by a dollar per hour, and the Massachusetts Senate passed a measure last month that would establish the highest minimum wage in the nation, $8.25 hourly.
This November, voters in six states, including Arizona, Colorado and Montana, will vote on ballot initiatives for state minimum-wage raises. Legislators have sponsored bills in other states, including Iowa and Pennsylvania, that would set the state wage floor in the $7 range.
Christine Sylvia-DeGennaro, a policy analyst with the labor federation AFL-CIO, which has campaigned around state minimum-wage issues, said that with elections approaching, hike proposals likely reflect political motives.
"People nowadays are so busy taking care of kids and going to work, and this might be an additional incentive to get people to vote," she said. But she said recent legislative battles over wage laws show that the initiatives are also "about states recognizing that something needs to be done."
"If you look at the poverty, the problem is not unemployment. The problem is full-time jobs just donâ€™t pay enough."
Sean Dobson is acting director of Progressive Maryland, an advocacy group for low-wage workers, which successfully pushed to raise Marylandâ€™s minimum wage to $6.15 in January. "Traditionally states have not acted on minimum-wage issues because itâ€™s a federal issue," he told The NewStandard, but added that "more and more states are not going to be around waiting for hell to freeze over."
Dobson said increasing inequalities in the US economy make raising the minimum wage now especially urgent. "If you look at the poverty, the problem is not unemployment," he said. "The problem is full-time jobs just donâ€™t pay enough."
The Economic Policy Institute, a think tank focused on lower- and middle-income households, estimated that a full-time worker supporting a family of three and receiving the national minimum wage would fall 5 percent below the federal poverty line in 2003, even after tax credits.
But even the state-level initiatives are not enough to pull minimum-wage workers out of poverty in many cases. California Assemblywoman Sally Lieber sponsored a bill that would incrementally raise the hourly state minimum wage to $7.75 and index it to inflation, preventing its value from eroding the way the federal minimum has in comparison to the real value of the dollar. The bill won Senate and Assembly approval and is awaiting a decision by the Governor.
"The concept of the living wage is you should not use tax dollars to create poverty jobs."
Lieber told TNS that while the new minimum wage would meet the federal poverty line for a family of three, it would not truly lift families out of poverty.
According to the Economic Policy Instituteâ€™s family-budget calculator, a full-time worker supporting two children in Yolo, California, for instance, would need an annual income of approximately $37,764 to cover food, childcare, housing and other basic expenses. But even with the proposed hike, the annual full-time minimum-wage income would yield just $16,120. The gap is greater still in some California cities, such as Oakland, where the EPI says that the same family would need nearly $48,624.
As minimum-wage raises are gaining momentum on the state level, the living-wage model, which mandates that employers pay enough for workers to actually make ends meet, has seen several successes at the city and county levels. But living-wage ordinances focus on companies receiving some form of taxpayer support, such as government contracts or subsidies, and the higher wages it requires has prevented its statewide application.
To determine the living wage, municipalities consider housing costs in the city or the stateâ€™s food-stamp eligibility threshold. The model also sometimes establishes a two-tiered wage system, with a higher living wage for companies that do not provide their employees with health benefits.
But Jen Kern, director of the Living Wage Resource Center of the community advocacy network ACORN, said the number of workers affected by the ordinances is minimal because legislation only covers the public sector and companies that do business with the local government.
Kern said the living-wage model excludes all the minimum-wage jobs at fast-food joints and gas stations, noting that most private-sector jobs are not with companies that have government-service contracts.
While local efforts to raise minimum wages and establish living wages have given raises to thousands of people across the nation, a host of measures is needed to reduce poverty.
Dobson of Progressive Maryland also advocated expanding the scope of the living wage to include more private-sector companies. "The concept of [the] living wage is you should not use tax dollars to create poverty jobs," he said. "So you can apply thatâ€¦ beyond government contractors."
He said that "any employee of the state should be paid [a living wage]" and that the living-wage model could encompass "quasi-government entities like universities and airports. So you can expand this outward to include potentially tens of thousand workers in a state like Maryland."
Living-wage ordinances vary in their reach. According to ACORNâ€™s Living Wage Resource Center, Bloomington, Indiana passed an ordinance last March that set the hourly living wage at $10 and included not only companies with government contracts but also companies receiving tax subsidies of at least $25,000.
Rebekah Jordan is a United Methodist deacon and director of the Mid-South Interfaith Network for Economic Justice, a group pushing for a living-wage ordinance in Memphis that would apply to all companies receiving tax breaks.
"Memphis has always given a lot of subsidies," she said. Such enterprises include a mall built as part of a downtown revitalization campaign, and International Paper, which announced its plan to move its global headquarters to Memphis last August after the city offered it millions in tax breaks.
Jordan said the campaign has petitioned door to door, organized town-hall meetings and met with councilors to pass the ordinance, which is backed by a coalition of area churches, unions and community organizations.
She added that living-wage ordinances in cities not only help working families, but increase pressure for a statewide minimum-wage raise. Tennessee currently defaults to the federal minimum wage.
"What youâ€™ve seen in a lot of states is that they [state minimum wage raises] grew out of living wage campaigns," she said.
Businesses tend to oppose wage floors.
Domonic Silva, a lobbyist for the New Mexico Retail Association, said local wage raises drive businesses away to areas with lower minimum- or living-wage rates.
"It can create urban sprawl by pushing businesses to be located outside of city limits," he said, referring to Santa Fe, which will have a living wage of $10.50 in 2008. "Is it really a living wage when businesses are forced to lay people off?" Silvia told TNS.
But a 2006 report released by the Fiscal Policy Institute, which studies tax and economic policy in New York State, evaluated the impact higher state minimum wages have on the employment rates of small businesses. It found that employment in businesses of less than 50 employees, as well as total job growth, grew faster in states with higher minimum wages than in states with the federal minimum wage.
According to the report, between 1998 and 2006, the employment rate in the retail industry rose 10.2 percent in states with higher minimum wages, while it rose 3.7 percent in federal minimum wage states.
Advocates say that while local efforts to raise minimum wages and establish living wages have given raises to thousands of people across the nation, a host of measures is needed to reduce poverty.
"In the absence of [a] single-payer healthcare system, employees have to step up and provide healthcare," Kern of ACORN pointed out. She added that activists with her group are also pushing for "low-income people to get decent loans so people can buy homes and have financial security."
To hold companies accountable to workers and pay their employees a living wage, Kern said workers should unionize. "No piece of legislation and benevolence can ever provide what a collective-bargaining unit can provide," she said, adding that unions are the "best way we know to provide [the] decent wages that American workers used to expect."