Tagged: living wage

Raising the Minimum Wage: Look No Further Than Your Own Backyard

May 8th, 2017 in Analysis, Federal Legislation, State Legislation

By: Brynn E. Felix

The United States has a minimum wage problem. In 2015, roughly 2.6 million workers earned at or below the federal minimum wage—a measly $7.25 per hour. The federal minimum has not budged since 2009 and continues to depreciate in value: by 2015 the $7.25 hourly wage had already lost approximately 8.1% of its purchasing power to inflation. With a looming Trump administration likely falling in lock-step with a Republican-controlled House and Senate, it seems safe to predict that the federal minimum isn’t going anywhere for the next four years.

Efforts by Democrats to raise the federal minimum wage to $10.10 largely stalled out, even after a letter signed by 600 economists supported the hike. Citing “close to 17 million workers” who would benefit from the raise, the economists pointed to

“important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front.”

Pros & Cons of Increasing the Minimum Wage

In addition to the economic arguments provided by the 600 economists who favor raising the minimum wage, proponents also point to the fact that the current minimum wage fails to provide a living wage for workers living in urban centers and places with higher costs of living. Indeed, the value of the minimum wage has significantly declined since the 1960s and 1970s. Moreover, low wage earners are more likely to spend the majority of their income locally, which benefits the local economy. In addition to the economic arguments, proponents have effectively framed the narrative as pursuit of economic justice. Too many working families are struggling to make ends meet, juggling multiple jobs with no relief in sight.

o-MINIMUM-WAGE-facebookCritics claim that forcing businesses to raise the minimum wage will inevitably cause them to reduce their employment ranks, rendering “many less skilled workers unemployable.” A wage hike would mean fewer jobs and an increase in unemployment. In response to Senator Bernie Sanders’ proposal to raise the federal minimum wage to $15, the Heritage Foundation claimed that approximately seven million full time jobs would be eliminated by 2021. Moreover, doubling the federal minimum wage would have a greater impact on states with lower costs of living. In a nutshell, opponents decry minimum wage increases as “’feel good, sound good’ policies that appease the masses, harm businesses, and displace workers.”

Fight for 15

The Republican-controlled 114th Congress needed no further convincing.

Seeing their prospects fade at the federal level, minimum wage advocates have reacted by strategically shifting their efforts to local reforms. Municipalities in particular have become the forefront of the movement for a living wage.

Seattle was the first major metropolitan city to enact a minimum wage hike amid the failed effort to increase the federal minimum wage. In early 2014, Seattle saw months of contentious debates and public demonstrations, bringing thousands of strikers and economic justice activists to the streets. The “Fight for 15” campaign had officially begun.

“It was the experience of a lifetime,” said former McDonald’s worker Martina Phelps. “After seeing my co-workers literally struggling and not having enough money to take care of their children, it was set in my mind that I can do something about this.”

Labor triumphed. By June of 2014, the Seattle City Council unanimously approved a city ordinance that raised the $9.50 an hour wage to $15 an hour. “No city or state has gone this far,” one councilmember noted, “We go into uncharted territory.” The ordinance contains different phase-in schedules that vary by business size: employers with 500 or more employees will pay $15/hour by 2017, while smaller businesses have until 2021 to gradually implement the raise. The first increases took place in April of 2015, while large employers currently pay $13/hour.

Building on Seattle’s success, the Fight for 15 spread like wildfire to other urban centers and state legislatures.

By December 2015 Chicago mayor Rahm Emanuel signed into law an ordinance to raise the city’s minimum wage to $13/hour by 2019. Three months later California legislators enacted a law that will elevate the state minimum wage to $15/hr by 2022. New York legislators followed suit with their own $15/hr measure, which will take effect in New York City by 2018.

In the meantime, the University of Washington’s Evans School of Public Policy and Governance published a study in July 2016, noting that Seattle’s wage increase had elevated the pay of minimum wage workers by nearly 12%, in contrast to a 5% increase seen by workers just outside the city limits. While the preliminary study concluded that low-wage workers’ employment levels and wages rose, the media continued to promote polemic interpretations of the study’s results. Supporters and opponents alike, eager to vindicate their own predictions, used the report to claim victory over their opponents. These two headlines are from the Seattle Times (July 25, 2016) and Forbes (July 26, 2016), respectively:

What actually happened? In reality, by July 2015, data demonstrated that the wage hike had a minor impact on employment and numbers of hours worked, along with significant increases in wages earned. Signs of misleading reporting were documented by the New Yorker: “Last February [2016], the Washington Policy Center and the American Enterprise Institute suggested that several Seattle restaurants were closing in anticipation of having to pay their staff more, though when a Seattle Times report went out to interview the owners she found more mundane causes: a bad location, a rebranding.“

Despite several media outlets prophesizing negative economic consequences of raising the minimum wage, voters in Arizona, Colorado, Maine, and Washington overwhelmingly approved November ballot measures to increase their respective state minimums. In total, 29 states now offer a higher minimum wage than the federal minimum.

Where do we go from here? Oregon may give us a clue.

With a few exceptions, the “Fight for 15” victories largely occurred on Democratic turf. In its article, The Bitter Lesson From Seattle’s Minimum Wage Hike, Investor’s Business Daily lamented:

“[S]uch foolishness seems to have infected the Democratic Party, with its now near-ubiquitous ‘Fight for $15’ campaign…forcing sharply higher wages on troubled local economies where the median wage is low and can have a devastating effect.”

Fears that increasing the minimum wage could harm states with lower costs of living are not unfounded; however, that alone should not be the reason for jurisdictions to reject minimum wage increases. Indeed, Oregon offers an innovative model that addresses concerns about significant economic disparities head on. In March of 2016 the Oregon State Legislature enacted a statewide law that raises the minimum wage, set at $9.25 at the time of passage, to $12.50, $13.50, or $14.75 by 2023—depending on the region. To accommodate both the high cost of living in Portland and the economic differential in nonurban counties, the legislature devised a system that divides the state into three regions: Standard, Portland Metro, and Nonurban Counties. By 2023, the Standard minimum wage will reach $13.50 and will be adjusted annually to compensate for any increases to the Consumer Price Index for All Urban Consumers. The Portland Metro area will hover at $1.25 above the Standard wage, while the minimum wage in Nonurban Counties will be fixed at $1 below the Standard minimum:

This multi-layered approach addresses many of the issues that may arise when different regional economies are subjected to uniform across-the-board wage hikes. By centrally managing wages by locality, Oregon was able to legislate for each sub-region’s unique economic situation. While such a plan might prove to be unconstitutional at the federal level due to the requirement that states be treated equally under the law, this approach may nevertheless provide a blueprint for other states that struggle with satisfying the needs of wildly different demographics.

The Takeaway

One of the greatest silver linings to emerge from the gridlock, obstructionism, and ever-intensifying polarization of Congress is the reminder that inaction at the federal level does not have to stall progress at the local level. Municipalities and local governments have proven to be successful incubators of policies that help the working poor. In Washington, a bold proposal in 2014 to raise the city’s minimum wage to $15 an hour catalyzed momentum for a statewide vote in 2016 to raise the state’s minimum wage to $13 an hour. Similarly, state legislatures like Oregon are adopting wage increases with creative and innovative implementation schemes. Only time will tell what effects these experiments will have—and how the media will attempts to shape the underlying narrative—but in the meantime, local advocates and policymakers should take full advantage of these beautiful laboratories.

Brynn Brynn E. Felix

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