Anti-Poverty Advocates Cheer Minimum Wage Increase

July 31st, 2007

Caitlin G. Johnson – OneWorld US

NEW YORK, May 31 (OneWorld) – U.S. President George W. Bush signed into law Congress’ plan for continued war funding last Friday — and with it, an attached proposal to raise the federal minimum wage from its current level of $5.15 to $7.25 per hour in 2009.

“This is a huge event, decades in the making, that’s gotten lost in the coverage of the bill it was attached to,” says Kevin Whelan, communications director for the Association of Community Organizations for Reform Now (ACORN), a grassroots coalition of low- and moderate-income families across the United States. ACORN is a member of the Let Justice Roll coalition that pushed for the wage increase. “They sort of passed it at night and forgot to tell anyone,” Whelan adds.

About 13 million U.S. workers — 10 percent of the overall workforce — are expected to benefit, as will 6.4 million children whose parents earn minimum wage, according to the Economic Policy Institute (EPI), a nonpartisan research organization.

Of these workers, 5.6 million will see a direct increase in their paychecks; more than 7 million others who earn close to the new level are also likely to see a modest increase in pay — averaging about 40 cents per hour, according to EPI. There is also likely to be a slight spillover effect as businesses adjust other workers’ pay rates to maintain wage structures.

Some proponents of the increase are criticizing its link to the war funding bill, even as they praise its passage. “This victory is bittersweet because Congress chose to raise the minimum wage through a bill to fund war. Both the Iraq war and the minimum wage are moral issues, and should have been considered on their own merits,” says Roberta Spivek, coordinator of the national economic justice program at the American Friends Service Committee (AFSC), another member of the Let Justice Roll Campaign.

But the economic impact of the new law is not lost on Spivek. “One in eight women workers…will benefit from this increase,” she says, citing EPI data. “One third of the workers benefiting will be African American or Hispanic. A majority of the benefits will go to families with working adults in the bottom 40 percent of the income pyramid.”

Getting By on the Minimum

Julie Smith knows first-hand what it’s like to try to make a living earning the minimum. In 1983, she dropped out of college to give birth to her daughter, and took a job as a cashier at a discount department store.

Then, Smith says she earned $4.25 per hour and made ends meet with child care vouchers, food stamps, and help from her family.

“That’s twenty-four years ago and I was making 90 cents less than the minimum was until now. And everything’s gone up since then: gas, food, rent. I paid $165 for an apartment that would be $550 or $600 now,” she says. “If I were in the same position today, now, I wouldn’t be able to go to school because I’d have to work two jobs.”

Smith finished trade school, then college, and is now spokesperson for ACORN’s minimum wage campaign in Ohio. In November, the state raised its minimum wage to $6.85 per hour.

Smith says the federal increase is long overdue. “With $200 more a month, maybe you can drop that second job, or go to school. It’ll pay a bill or two, buy groceries. It’s not enough, but it’s a big help.”

Taking it to the States

With a federal victory under their belt, advocates continue to focus on grassroots efforts to boost state minimum wages and “living wage” campaigns that take into account the actual costs of living in an area.

To date, at least 32 states and the District of Columbia have set their state minimum wages above the federal level, according to the Economic Policy Institute.

Earlier this month, the Kansas Action Network kicked off its Raise the Wage campaign to tie the state’s minimum wage to the new federal level, up from its current rate of $2.65 per hour. Kansas is the only state with a minimum wage below the federal level; Kansas’ minimum wage applies to workers who are in certain categories exempted from the federal minimum by the Fair Labor Standards Act of 1938.

Five other states — Alabama, Louisiana, Mississippi, South Carolina, and Tennessee — set no minimum wage guarantee for these workers.

“People think that workers in these categories [not subject to the federal minimum wage] are kids or serving people who get tips, but in fact it’s people who work for small businesses of certain types, farm workers, some in the entertainment industry, and those who do companion or caregiver work for very young children or the elderly, for example,” says David Smith, a board member of the Kansas Action Network.

Using data from the U.S. Bureau of Labor Statistics, Smith estimates that 240,000 of Kansas’ 1.4 million workers will get a raise thanks to this new bill — but some 19,000 workers not eligible for the federal minimum will not see a change.

“The bottom line is that the federal minimum wage passage is good news for a large number of workers nationally and in Kansas, and we think it should be good news for the others as well,” says Smith.

A Chance at Common Ground?

Despite strong public support for a minimum wage hike — ranging from 80 to 83 percent in recent polls by the Associated Press-AOL News and the Pew Research Center — and expressions of support from President Bush, some conservative organizations like the Heritage Foundation oppose the increase.

“This is a well-intentioned piece of legislation that’s not going to do what its supporters want it to do,” says James Sherk, Bradley Fellow in Labor Policy at the Heritage Foundation’s Center for Data Analysis. “There’s little evidence to suggest that raising the minimum wage will reduce poverty.”

Instead, Sherk says, the bill may induce businesses to raise prices and eliminate entry-level or unskilled positions in the long run. “Some people will get a raise, and some will lose their jobs. While there may be more winners than losers, the losers will lose more than winners win.”

A better approach, according to Sherk, is to carefully increase the Earned Income Tax Credit that refunds some of the taxes that low-wage earners owe.

It is here that conservatives and progressives may find common ground. AFSC’s Roberta Spivek agrees that the Earned Income Tax Credit is an important tool in the fight to reduce poverty. “If we want to reduce U.S. poverty, we need both a higher minimum wage and an Earned Income and Child Tax Credits that cover more workers,” she argues.

A 2006 update from the Fiscal Policy Institute — a nonpartisan New York think thank — found no negative impact on small businesses in states that raised their minimum wages above the federal level. EPI’s economic models indicate that raising the minimum wage can bring payoffs through reduced recruiting and training costs and absenteeism, and increased worker morale.

“It eats into the fabric of our society that minimum wage workers aren’t valued,” says Julie Smith. “They provide the goods and services that the prices are going up on — they make, sell, market, and service them. It’s about time they had a raise.”

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