Public Employee Press

THE WORLD OF WORK
Minimum wage hike will help all

By GREGORY N. HEIRES

As the debate over President Barack Obama's proposal to raise the minimum wage unfolds, conservatives argue that an increase will hurt small businesses and kill jobs but help only high school kids.

Their argument is full of holes. In fact, a higher minimum wage will help millions of low-wage workers, higher-paid workers, too, and the entire U.S. economy.

Obama's proposal is sound public policy, reflecting the government's appropriate role of stimulating the economy and correcting the injustices of freemarket capitalism.

"Everyone benefits," said Ron Deutsch, executive director of New Yorkers for Fiscal Fairness, which recently worked with the Hunger Action Network, New York State AFL-CIO, the Labor-Religion Coalition of New York and Occupy Albany to push for a hike in the state's minimum wage. Under the March budget deal between Gov. Andrew Cuomo and state legislators, the rate will rise from $7.25 an hour today to $9 in 2015.

"Pushing up the minimum wage will add $1 billion to economic activity in the state," said Deutsch, citing a study by the Albany-based Fiscal Policy Institute. "It will put money in people's pockets, which will increase demand and drive up wages for everyone. A rising tide lifts all boats."

A benchmark for all workers

The last increase in the federal minimum wage occurred in 2009. Economists cite the drop in the value of the federal minimum wage as a contributing factor to the declining and stagnating incomes that have crushed the poor and middle class over the past 30 years.

Not only would a minimum-wage increase directly affect 15 million workers, but because the minimum wage is used as a benchmark for setting the pay of other low-wage workers, millions more would also benefit. Lawrence Mishel, head of the Economic Policy Institute, estimates that an increase to $9 an hour would benefit 21 million workers and add $20 billion to wages overall each year.

"It's a step forward, since we have fallen so far behind," said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, noting that Obama's $9 proposal would fall short of restoring the rate to its 1968 peak. A 2012 CEPR study found that the minimum wage would have to be $10.52 an hour to keep up with inflation since 1968. Obama's proposal would have the long-term advantage of linking future increases to the rate of inflation.

After Obama called for hiking the minimum wage in his State of the Union Address, Republicans said the increase would cause job losses - a charge they fire indiscriminately at almost every action the president takes.

While research about the impact of the minimum wage on employment isn't conclusive, by and large it shows that modest increases in the minimum wage do not lead to significant job losses. A wellknown study of New Jersey fast-food restaurants found that employment actually increased slightly after a minimum-wage hike. One reason increases might not significantly impact employment is because two-thirds of low-wage earners work for big companies, which are better able than small businesses to absorb modest pay increases.

Though teenagers are commonly identified as minimum-wage workers, a recent Economic Policy Institute report found that nearly 90 percent of workers paid the minimum wage are 20 or older, more than a third are married and over 25 percent are parents.

A moral case

Apart from the technical arguments in favor of raising the minimum wage, there is a powerful moral case for the government to boost it from $7.25 to $9 an hour. Simply put, it's the right thing to do when you consider how hard America's 50 million working poor struggle to put food on their tables.

A higher minimum wage would lift many families out of poverty and offset the estimated 10 to 20 percent increase in economic inequality since 1980 caused by the decline in the value of the minimum wage.

"A lot of people today depend on government programs - such as food stamps and Medicaid - who would no longer have to," said Baker, pointing out that raising the minimum wage could lead to government savings.

"A full-time worker making the minimum wage earns $14,500 a year," Obama said in his State of the Union Address in January. "A family with two kids that earns the minimum wage still lives below the poverty line. That's wrong."