By Matt Lawson and Fran Quigley
Miryah Lazaropolis is in a tough situation. When she fell behind on the rent on her Eastside home, she and her twin 3-year-old boys were evicted. Fortunately, Lazaropolis' parents are letting her and the kids stay with them for a while. But she owes money from the eviction and overdue utility bills, and the still-unpaid hospital fees for the twins' birth add up to nearly $20,000.
Lazaropolis tries to push the worry about the unpaid debts behind her. But some money problems are more immediate. On the day we spoke with her, Lazaropolis had no gas in her car and no way to buy some much-needed baby wipes — despite her job at Walmart stocking and straightening racks of clothes.
Lazaropolis is paid only $7.40 per hour, and her paycheck does not come close to meeting even the bare-bones needs of her family, even with full-time hours. "I am constantly worrying about how to make ends meet," she said. "It is a struggle, a terrible struggle."
Surveys show that an increase in the current federal minimum wage of $7.25 per hour is a popular idea across all demographic groups, save perhaps Walmart executives.
But there are a few folks who make arguments against raising the minimum wage. Not coincidentally, those arguments are usually put forth by the heads of corporations that pay low wages to Lazaropolis and workers like her. This is not a new phenomenon. The National Association of Manufacturers in 1938 opposed the proposal to create the first-ever federal minimum wage (25 cents an hour) because it "constitutes a step in the direction of communism, bolshevism, fascism, and Nazism."
Like the claims of the National Association of Manufacturers in 1938, the Chicken Little arguments against a 2013 minimum wage increase are just plain wrong. So here, as a public service — and a service to Miryah Lazaropolis — is a formal quashing of the top five myths about increasing the minimum wage:
1. Raising the Minimum Wage is a "Job Killer."
In his State of the Union speech in February, President Barack Obama proposed an increase in the minimum wage to $9 per hour. Obama had not even left the building before Fox News featured an interview with Nina Easton, a senior editor and columnist at Fortune magazine, who said that a minimum wage increase would be a "job killer." As a Congressman, Mike Pence took to the House floor in 2007 to argue against raising the minimum wage to $7.25 per hour, claiming it was "one of the most anti-minority and anti-poor laws that we could bring into this Congress."
There is a certain Econ 101 attractiveness to their argument: If we raise the price of something, in this case labor, employers will buy less of it.
Except the data show differently. Minimum wage increases are one of the most studied subjects in economics, and the evidence shows time and again that raising the minimum wage does not cause job loss. Studies comparing neighboring communities across state borders, where one state raised the minimum wage and one did not (including a comparison of Indiana and Illinois, where the minimum wage is $8.25 per hour), show no loss of jobs in the communities with the higher wage mandate.Even in times of high unemployment, the job loss argument has proven to be untrue.
That research has led hundreds of economists to call for minimum wage increases. A recent survey by the University of Chicago's Booth School of Businessshowed that only 16 percent of economists polled were opposed to Obama's proposed raise of the minimum wage. Both The Economist and Bloomberg News have recently endorsed a minimum wage hike. Public opinion polling shows a strong majority of voters support an increase — even among Republicans.
In fact, it seems most likely that a minimum wage increase would be a significant boost to the economy. Consumer spending accounts for 70 percent of U.S. economic activity, and low-wage workers like Lazaropolis take their raises and spend them in the community, creating higher demand and more jobs. The Economic Policy Institute estimates that the pending Fair Minimum Wage Act of 2013 — which calls for a minimum wage increase to $10.10 per hour by July 2015 — would deliver an estimated $51.5 billion to affected workers and generate as many as 140,000 new jobs.The jobs most affected by the minimum wage — retail, restaurant, and service sector positions — are also the jobs least likely to be moved overseas. Most analysts say that employers' adjustments to the new law would be minimal. Costco Chief Executive Craig Jelinek has suggested that reducing employee turnover and increasing loyalty helped his business more than minimizing wages.
2. Raising the Minimum Wage Hurts Small Businesses.
Two false premises underlie this myth. The first is that a minimum wage increase would have its biggest effect on small businesses. Not true. A study by the National Employment Law Project showed that two-thirds of low-wage workers are employed at large corporations, with Walmart, Yum Brands (Taco Bell, KFC, etc.) and McDonald's coming in as the top 3 low-wage employers.
The second false premise is that employers would be harmed by a minimum wage increase. Corporate profits are at their highest percentage of gross domestic product in history, leading to companies hoarding vast sums of cash — often overseas. Bolstered by a cheap workforce, most of the top low-wage employers also showed profits in recent years, and paid their chief executives, on average, nearly $10 million per year.
This trend is bad for small businesses, according to Holly Sklar, director of Business for a Fair Minimum Wage."The biggest problem for Main Street businesses is lack of customer demand," Sklarsaid in a news release advocating a minimum wage increase. "Corporate profits are at their highest since 1950, as a percentage of national income, while the share going to employees is near its low point. We can't build a strong economy on a falling wage floor."
3. Raising the Minimum Wage Will only Affect Teenagers with Part-time Jobs.
As an underpaid working mother, Lazaropolis is no outlier. An estimated 15 million workers would be set to receive a pay raise under Obama's proposal. U.S. job growth in recent years has been dominated by lower-paying jobs, as manufacturing jobs dry up and are replaced by jobs in retail or food service. Tipped employees, for example, have not had an increase in their minimum wage of $2.13 per hour in more than 20 years. Not surprisingly, waiters and waitresses are far more likely to be paid below the poverty line, even when tips are included.
The people filling these low-wage jobs are older and better-educated than the stereotype of a high school student working part-time for extra cash. Nearly 90 percent of the workers who would benefit from a minimum wage hike are age 20 or older, and the median age for those filling the roles in the fast-growing home health care field is nearly 40. Over 40 percent of the workers affected have some college education and most work full-time, and nearly a quarter of all U.S. children have a parent who would benefit from a minimum wage increase.Under current law, a full-time minimum wage worker only makes $15,000 per year. But the effects of a minimum wage increase to $9 per hour would pull a three-person family supported by a minimum wage worker above the federal poverty line.It would also help address the significant gender gap in wages, as women represent nearly two-thirds of minimum wage workers.
4. We Have Already Raised the Minimum Wage Enough.
Periodic minimum wage increases over the years have created the illusion of a climbing wage floor. But the real purchasing power of the current minimum wage of $7.25 per hour is lower than it has been in past decades. The minimum wage of $1.60 per hour in 1968, for example, would have a value of about $10.56 today.The smart way to remedy that problem, and to keep from revisiting the minimum wage debate every few years, is to index the wage to inflation, as is already done with Social Security benefits.
Judged by another measure, the current minimum wage is even further behind the times. The productivity of the U.S. workforce has increased substantially in recent decades, but wages have not kept up. The Center on Economic and Policy Research estimates that the minimum wage would be a whopping $21.72 per hour if it had been indexed to worker productivity.
Instead, the benefits of that productivity spike have gone to the richest Americans. In the years since 2008, while the incomes of 99 percent of Americans declined, the incomes of the richest 1 percent increased by more than 11 percent.
5. Raising the Minimum Wage is a Non-Starter in Indiana.
While over 140 living wage ordinances or laws have passed nationwide, Indiana remains a tough place to argue for workers' rights. In fact, the Indiana General Assembly in 2011 passed a law banning local communities from adopting minimum wage laws at amounts higher than the state level. In the 2013 legislative session, House Democrats failed to advance a proposal to raise the state minimum wage.
Still, former state Rep. John Day, D-Indianapolis, said he believes that, in the long-term, the effort to raise Hoosier wages will realize success. Historically, Indiana's minimum wage was set lower than the federal level (not all workers are subject to federal wage laws), so Day proposed an increase. Year after year, the Chamber of Commerce and other business interests opposed the idea, and Day's bill stalled. Finally, in 2007, Indiana law was amended to mirror the federal wage. "There was a good coalition in support of better wages," Day said. "I had a Republican co-sponsor and we pulled together church and labor and community groups to testify and advocate for the change."
A similar coalition is now in the works. Local advocates for workers aim to launch a campaign that mimics the efforts in states like Illinois, and local and national advocates are pressing Indiana's congressional delegation to take a stand for workers like Lazaropolis by signing the Fair Minimum Wage Act of 2013.
"It is terrible trying to live on less than $8 per hour," she said. "You just can't."
Matt Lawson is a student in the Health and Human Rights Clinic at Indiana University Robert H. McKinney School of Law. Fran Quigley teaches in the Clinic.
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