Minimum Wage

President Obama said again is his State of the Union speech that we ought to raise the minimum wage. It’s long overdue. While the president endorses a proposal to raise it to $10.10 an hour even that isn’t enough for a single adult to live on let alone someone with children. The Massachusetts Institute of Technology has a living wage calculator developed by Dr. Amy K. Glasmeier which shows no one can scrape by anywhere in Chicago or it’s suburbs on less than $10.48 an hour. While it isn’t perfect I urge readers to go to the site and plug in their town or county and check out the monthly allotments low income people live on.

Despite conservative claims that minimum wage jobs are for teenagers an Economic Policy Institute study finds that 84.2 per cent of workers who would be impacted by this increase are at least 20 years old. Only 6.6 per cent are teenagers who work less than 20 hours a week and nearly two thirds have total family incomes of less than $45,000. More than one quarter (28.7 percent) of these workers are a parent supporting at least one child.

But even if a higher percentage of low income workers were teenagers there’s no good reason to deprive them of higher wages either. Today the amount of student loan debt in America is higher than credit card or car loan debt. According to the Federal Reserve Bank student loan debt in the US totals over $1 trillion dollars, twice what it was in 2007. The average college graduate leaves school with around $30,000 in student loan debt these days. Pay high school kids more for those after school and summer jobs and they’ll be more likely to go to college and graduate, and be able to do it without being buried under so much debt as they begin their working lives.

So who are minimum wage workers? According the the Bureau of Labor Statistics 1.57 million people in the United States make the minimum wage, and another 1.98 million make even less. These 3.6 million workers make up 4.7 percent of all hourly-wage workers. People who are paid mostly in tips ($2.13 an hour) and people under 20 ($4.25 an hour for the first 90 days) can be paid less than the minimum.

Of those who make minimum wage or less 44% are in food preparation and serving related occupations, 15% are in sales and related occupations, 9.7% in personal care and service occupations, 6.5% in building and grounds cleaning and maintenance occupations, 6.8% in transportation and material moving occupations and 6.4% in office and administrative support occupations. (Note that the largest sector that is below minimum wage is in food preparation and serving related occupations, with 16.5% of all workers who make minimum or less.)
The average age of fast-food workers is 29 and more than a fourth are raising children. 64% of those making the minimum wage are women.

So what happens when people work full time but still don’t make enough to put food on the table and a roof over their heads? The government must step in with aid programs such as food stamps (SNAP) and housing assistance. According to a study done by researchers at the University of California-Berkeley and the University of Illinois “data from the U.S. Census Bureau and public benefit programs show 52 percent of fast-food cooks, cashiers and other “front line” staff had relied on at least one form of public assistance, such as Medicaid, food stamps and the Earned Income Tax Credit program, between 2007 and 2011.”

Another report from the pro-labor National Employment Law Project found that the 10 largest fast-food companies in the United States cost taxpayers more than $3.8 billion each year in public assistance because the workers do not make enough to pay for basic necessities themselves.

In other types of service work, such as maintenance, laundry and personal services, the researchers found that one-third of employees are enrolled in public assistance programs, as were about 30 percent of workers in the retail and hospitality sectors.

Overall it costs taxpayers about $7 billion a year just to subsidize full time workers in the fast food industry alone who don’t make enough to live on. In reality what we are doing is propping up  the earnings of highly profitable companies like McDonalds ($6.5 billion in profits last year) and Walmart ($17 billion in profits last year).

Raising the minimum wage would not only decrease demand for taxpayer assistance, it makes economic sense. According to the Federal Reserve, boosting the minimum wage to $10 would generate an estimated $2,800 in new household spending annually. Minimum-wage workers will spend that new income locally, it will go right back into local businesses. McDonalds workers might even be able to take their kids to the Mickey D’s they work at occasionally to buy them hamburgers.

Like the MIT living wage calculator shows that $10 an hour isn’t enough to survive on. Fast food workers went on strike in 60 cities last summer asking for $15 an hour. For those small  business owners who say they can’t possibly afford to pay those kind of wages I say why keep subsidizing your competition like McDonalds and Walmart? The amount you would pay in increased wages would be offset many times by the increased spending power of your customers. It’s not only the right thing to do morally, it’s the right thing to do to shrink government spending and boost the economy for everybody.