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MN2020 - Minimum Wage is Way Too Low
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Minimum Wage is Way Too Low

August 27, 2013 By John Clay and Kevin Ristau, Guest Commentary

Minnesota 2020 joins a broad coalition of nonprofit, labor, and faith groups in a campaign to raise the state's minimum wage. It kicks off today at the State Fair and at satellite press events in Duluth and Mankato. We are happy to welcome one of our partners in that group, JOBS NOW Coalition, for the following analysis of why Minnesota needs a wage increase.

There is a growing consensus that the minimum wage is too low. And not just a little too low, but way too low.

In a national poll conducted in July for the National Employment Law Project, 80 percent of respondents supported raising the minimum wage to $10.10 an hour. The current federal minimum wage is $7.25 an hour, or $15,080 a year for a full-time worker.

Public opinion is simply reflecting the reality that today’s low wage workers are not getting by. When consumers can’t even buy basic needs, that’s not good for families or the state economy.

Cost of Living research by JOBS NOW Coalition shows that at $7.25 an hour, the effective minimum wage for virtually all Minnesota businesses, a couple with two children would have to work 155 hours a week to meet basic needs.

The minimum wage is intended to serve as a social norm for fair wages, according to economist Ann Markusen of the University of Minnesota. “Minimum wage is not simply a regulatory device,” Markusen says, “It’s a labor market institution.”

But the federal wage has lost value over the years. If the federal minimum wage had maintained its purchasing power since 1968, it would today be over $10.70 an hour, or $22,256 a year for a full-time worker, according to the US Bureau of Labor Statistics. If minimum wage had kept pace with average productivity gains, as it did in the decades leading up to the 1960s, it would today be about $22.00 an hour.

Many states have combated the problem by setting their own higher state minimum wage. The state of Washington has raised its minimum wage to $9.19 an hour and pegged it to rise with inflation in future years. Oregon’s wage of $8.95 an hour, also pegged to inflation, will easily surpass $9.00 an hour by 2015, and Connecticut’s wage will be $9.00 an hour in 2015.

The Minnesota House considered a bill last legislative session to raise the state minimum wage to $10.55 an hour and index it to inflation. The bill was later bargained down to the $9.50 an hour level at which it will be debated in the 2014 legislative session.

Raising minimum wage to $9.50 an hour would mean better wages for 360,000 Minnesotans and pump $472 million a year in consumer spending into the state economy, according to an analysis conducted by the Economic Policy Institute for JOBS NOW Coalition.

This booster effect might help explain why a nationwide study by economist Michael Reich published in the Review of Economics and Statistics shows no job loss resulting from minimum wage increases from 1990 to 2006, even where a county on one side of a state border has a higher wage than a county on the other side.

“The cost to employers of a minimum wage increase is generally small relative to their total wage and compensation costs,” says John Schmitt, senior economist at Center for Economic and Policy Research in Washington, D.C. “Employers often absorb the increase through channels such as reduced turnover and increased revenue from local consumer spending, rather than layoffs.”

A study by the National Employment Law Project (NELP) underscores another important point—most people earning minimum wage work for large, profitable corporations. Nationwide, about two-thirds of low-wage workers are employed by large businesses with over 100 employees.

The NELP study also found that the fifty largest employers of low-wage workers have nearly all recovered from the recession and are in strong financial positions: As of 2011, some 92 percent of these corporations had been profitable for the past year and 75 percent had higher revenues than before the recession.

The latest Minnesota Job Vacancy Survey shows that Minnesota’s low-wage employers have expanded dramatically over the past three years. In retail trade, job openings rose by 183 percent. In accommodation and food services, openings rose by 224 percent.

During the same three-year period, these gains were even more dramatic in Greater Minnesota. In Northeast Minnesota, for example, job openings in food preparation and serving went up 615 percent, giving this low-wage occupational group seven times more openings than it had three years ago.

The time is now to act on policies that raise workers’ wages, $9.50 by 2015 is a good start.

John Clay and Kevin Ristau are with JOBS NOW Coalition, a nonprofit based in Saint Paul that examines Minnesota’s economic and employment data.

Thanks for participating! Commenting on this conversation is now closed.

10 Comments:

  • Dan Conner says:

    September 4, 2013 at 8:12 am

    Raise the minimum wage to what it should be to be equal ($22.00) with the past.  It seems inappropriate to compromise equity and fairness.  Businesses will survive and prosper with it because they will all be required to use it.  Businesses in the State will be treated equal by all paying the same minimum.  We’ve had far too many years of economic fairness compromised away.  To compromise now means only to compromise fairness away.

  • Jen says:

    September 4, 2013 at 9:08 am

    Minimum wage is for entry level workers. Period. And you may be an entry level worker for a while when first entering the workforce while you learn. A person then should try and get a different job once they have acquired proficiency with the where they are at or gain skill where they are at and get a small raise. Raising the minimum wage is not the answer to a weak economy. Or the answer to a state government that over taxes and regulates business for their own glutenous need to increase spending every year. You are right. People can’t live on minimum wage. They are not supposed to. You can’t raise a family on minimum wage. It’s not intended for that. A minimum wage job is not that hard to do and takes little to no skill. If you have a family and have not taken the time to acquire a skill that will get you a higher wage then maybe you shouldn’t have had a family yet!! Life takes planning and accountability. I work my tail off as a small business owner. Some months I make way less than minimum wage when all the expenses are paid. Some months I am in the hole. Some I do well. It is my choice to do this and I would never think to get government help. I am always trying to improve and make more money and someday I hope I will feel secure.  I wish doing business in this state was easier but our Gov. Dayton with his tax-free trust fund squirreled away in South Dakota has no idea what is is to work hard and labor to put bread and milk on the the table for your kids. Taxing the middles class with increase sales taxes and fees to stifle business. Stop with the euphorian “let’s pay people enough to comfortably raise a family”. What is enough? When you get a free cell phone, free cable TV, free healthcare, free housing, EBT, subsidized transportation, a bunch of social service agencies babysitting you and leading you around to the next application for something “free”?...the list goes on and on. You never have “enough”. The idea in life is to EARN enough to raise a family and that takes hard work, sometimes extra education. If you can’t afford it for yourself working 40 hours a week you need more skills and maybe swap the big screen TV and the $200 Nikes for healthy food choices and a night class at a community college before you decide to have kids. There’s plenty of free abortion out there for all of you who say it’s so important. You all exhaust me perched on your high horses living in Edina, Eden Prairie & the likes, or the urban elites in your energy-efficient, restored home near the lakes or Grand Ave. where you likely hire help for the yard or cleaning and pay them minimum wage. You can’t have it both ways. The best way is to create a robust economy (cut taxes, cut regulation, stop so much social spending and then everyone has a chance to tap into “opportunity”. You can’t jump to the end game and circumvent hard work. It never works. Look at the sad cycle of poverty and low grad rates for the black community in our state and in the country. Welfare contributed to the destruction of the family unit for them and more money isn’t helping. It was a noble idea but unintended consequences have been enormous.  I suggest you look up Starr Parker or AlfonZo Rachel or one of the many black people who have been very vocal about the terrible situation black youth and families are in around the country and who have an answer. Skip the Jesse Jackson and Al Sharpton types who are in for themselves and continued divisiveness. We have a long way to go to get back to self-sufficiency. But raising the minimum wage is not a free ticket there.

    • TONY says:

      September 4, 2013 at 12:15 pm

      Wow, another rant by a unsuccessful business person complaining about all us takers. Free cell phones came from Bush. A family member of mine is handicapped(no legs) & is on Scial Security & pays $750/month for her section 8 apartment. Subsidized transportation? Roads are subsidized. Our taxes only cover 30% of the cost. Social service agnecies? Where do you want the old folks, blind, mentally handicapped to go? Let them eat cake? Yes, unemployed people get help too. I dont know many people making minimum wage, but its hard to pay for tv’s & Nike’s on that salary(oh by the way, the cleaners called, your Klan robes are ready). If you can afford to live in the neighborhoods you mentioned, they tend to vote Repub. and are mostly management & owner types that have held middleclass salaries flat for 30 years and yes, they probably hire yard guys to mow & pay them minimum wage or lower. So I agree with you there, these people are the problem. Not everyone can move up the corporate ladder & get pay raises but why if they stay on the same job & their productivity increases with experience, why dont they deserve more money. They cant if their boss says no. That’s why our fathers started unions or got the govt. to raise the minimum wage. The individual gains clout by organizing or electing legislators that push businesses to pay more. It’s called the American Dream.

    • Dan Conner says:

      September 4, 2013 at 1:20 pm

      I read this self=congratulatory post and I want to puke.  Let’s see…works her “tail off,” but has the time to post on this site during working hours and a weekday.  Something tells me you have a lot of “tail” left.  Then, you makethe case that someone is not meant to support themselves on the minimum wage,  Well, who said businesses are supposed to make a living?  Also, whille you claim to be a business person, you know little about the economy.  Elevating the minimum wage will accelerate growth in our economy.  Poorer people making a higher wage mean a lot more money purchasing goods and circulating in the economy.  The marginal propensity to consume greatly decreases as income increases.  Consumption is highest at the lowest earned incomes.  So, if we are looking for an economic boost and growth, you give more money to low-income people.

      If you are complaining about Governor Dayton because he raised taxes on the top 2% of income earners, then I don’t put any stock in your complaints, except as a selfish spoil-sport.  We must all do our part to make our economy prosper, and that comes only by offering a helping hand.  If you want an oligarchal society, then move to Mexico, look how well they do?  70% of all the wealth in our country is INHERITED.  I don’t doubt you received help when starting your business.  The vast majority do.  It doesn’t sound like you have ever experienced poverty.  I think it would be good for you.  You might learn something.

      I suggest you get over your judgmentalism and anecdotal BS about the poor.  It has been my experience the people who complain about the poor the most are the laziest.  People who truly work hard do so without complaint or self-congratulations.l They just do it.  It is the laziest and least successful that complain the most.  Most of all, I certainly hope that if your business is in anyway dependent on “poor” consumers, I hope you go bust.  I suggest you consult a successful businessman, Henry Ford, who was determined to pay his employees more money so they could afford to buy his cars.  You see, it’s a matter of economics.  I suggest yuo get over you your unhealthy case of hate, bigotry, racism, and insecurity.  Cherry-picking your racial examples, illustrating your selfish point of view does not sell anyone.If you don’t like the will of the people, you should do what you recommend for others and move out of here.  Then you might start being accountable.  It is people like you who are part of the problem, not part of a solution.  What you have recommended has been used before and failed everytime.  I suggest you endeavor to actually help others for a change.

      Now, if you fell strongly about your hateful position, I suggest you let people know what you “business is.”  Then others can start judging you.

      • Jen says:

        September 4, 2013 at 11:34 pm

        Dan Conner, I have had a long day, just got home from work. Thanks for all the suggestions you made for me. And all the names you called me.  Let’s see, according to you I am LAZY, BIGOTED, RACIST, SELFISH, a HATER, and you wish for my business to fail. Do you have any ill wishes for my kids or husband? They think like I do so that must mean you can call us names because we are of course bad people in your eyes since we aren’t like you.

        You have absolutely no idea what you are talking about buddy. We are at the edge of poverty. Have been since my husband lost his job 5 years ago. I am not talking in the hypothetical. I am a Minnesota working poor. I shop for groceries at Walmart and count every dollar. My children are kind, hard working people who value what they have.  And I might say, started at minimum wage at their first jobs and worked their way to raises pretty quickly. We have old cars that limp along. I grew up poor so maybe that is my lot in life. According to you I should fail no matter how I work and I should give more to others. How much more? I volunteer, I help neighbors in trouble, give what I can to charity…. I think I am a good person….But maybe you know better since you seem to know so much about me…....and economics : D LOL.

        M advice to you is to be careful in your glass house. I have inherited nothing. I started my business with $400. It’s still small but I am doing the best I can. I hope someday to be able to retire but with no savings left that will be along way off. A dream for someone else perhaps.

        • Dan Conner says:

          September 5, 2013 at 10:50 am

          Well, so interesting.  I thought I would recount a little of what you said, because it sounds rather hypocritical based on what you have now revealed:

          “People can’t live on minimum wage. They are not supposed to. You can’t raise a family on minimum wage. It’s not intended for that. A minimum wage job is not that hard to do and takes little to no skill. If you have a family and have not taken the time to acquire a skill that will get you a higher wage then maybe you shouldn’t have had a family yet!! Life takes planning and accountability.”

          Also,

          “A person then should try and get a different job once they have acquired proficiency with the where they are at or gain skill where they are at and get a small raise. Raising the minimum wage is not the answer to a weak economy. “

          You also said: “You never have “enough”. The idea in life is to EARN enough to raise a family and that takes hard work, sometimes extra education. If you can’t afford it for yourself working 40 hours a week you need more skills and maybe swap the big screen TV and the $200 Nikes for healthy food choices and a night class at a community college before you decide to have kids.”

          and

          “When you get a free cell phone, free cable TV, free healthcare, free housing, EBT, subsidized transportation, a bunch of social service agencies babysitting you and leading you around to the next application for something “free”?...the list goes on and on. You never have “enough”. “

          Based on the quotes from you above, it would seem you are not following your own advice.  Why did you start a family when you are having such a difficult time supporting them?  Why aren’t you looking for training so you can get a job with higher skills?  What about your husband?  While you become understandably miffed at “judgments made about you and your family, you had no quams about judging others.  You judged the Governor for his legal birthright, but I never heard one judgment about Donald Trump, the Koch Brothers and so many more rich that inherited hundreds of millions of dollars.  You might say they were born on third base and thought they hit a triple.

          Then, you said you’ve asked for nothing?  I beg your pardon.  While you even alleged not paying much in taxes, many millions of people have, so you could attend their public schools, drive on their snow-cleared and maintained roads, drink their clean municipal water, fly in their safe regulated and controlled airspace, live in an oderly society where laws govern and a system is operated to imperfectly offer justice and safety.  You camplain about taxes, which you admit you pay little of, and is the lowest it has been for corporations in decades.  Yes, decades.

          You seem to approach economics in an anecdotal quixotic way, gleaning only your predetermined response, which seems to be based on hate, bigotry and jealousy.  I suggest you start with a vlaue prised in religion and government, which is love your brother.  Find out what you can do to improve yourself and help others do the same.  Judgmentalism and hate has never done anything to fix anything.  It’s the crybaby approach to life.  It’s a violation of God’s Commandment about coveting what your neighbor has.  Maybe you need to follow your own maxims.

          • Jen says:

            September 5, 2013 at 11:14 am

            Dan, that is funny. I am not asking for more for myself, I’m asking that government let me keep more of what I earn and stop spending money on those who earn nothing while telling me I am greedy. I pay for all the things you say are “theirs” too. We are all in this together. Gov. Dayton’s taxing the rich hasn’t panned out. Do some research and see who is bearing the brunt before you condemn me.

            It’s funny you have been so judgmental and hate-filled specifically to me because I disagree with you. And a pretty good name-caller too. Where you get some of the names I will never know. Every liberal loves to call people RACIST who actually believe in content of character and equal opportunity. You seem to be the same kind of guy as William Penn the MSU Professor. Watch his video if you haven’t had a chance. I can only pray my kids in college aren’t exposed to anyone like that. Or bigoted people like you. Yes, I can say from all of your posted opinions and names you have called me that in fact you are a bigot.

            I’m surprised you are making God references. I think you should go back and read what you initially wrote to me and pray for forgiveness yourself. Talk about being a hypocrite.

          • Jen says:

            September 5, 2013 at 11:46 am

            Let’s stick to current facts and the minimum wage. The most likely minimum wage earners are young people.

            According to the Minnesota Dept of Education, under Democrat leadership and total district spending of $23,000 per pupil, per year, the 4-year graduation rate for students in Minneapolis is 50.1% and for black students is 36.8%. 

            Are these the kind of people who should start out earning $22 per hour? Our democratic state government just stripped all graduation requirement so teachers don’t look bad. The teacher’s union gave $1.8 million to Democrats in last election. You advocate for a system so broken that in our largest city in the state half the kids graduate and only about 1/3 of the black kids graduate. You think that this is an example of what is working?  You are nuts. These poor kids are getting short-changed by low expectations, no accountability and a society that financially rewards out of wedlock births (over 70% in the black community). And teachers and administrators keep getting paid more each year not to mention our own state house & sente who voted themselves raises this year. You have to get your news from places other than these liberal blogs and MSNBC.

        • Dan Conner says:

          September 5, 2013 at 11:41 am

          P.S.  raising the minimum wage is exactly what our economy needs to recover.  The rich don’t consume nearly as much as the poor.  Giving poor people more money allows them to spend more.  I would have thought a “business person” like yourself would know that.  The marginal propensity to consume greatly increasing as income declines. You should be aware of that as a business person.  Now, you might like to enrich Swiss Banks by giving more money to the rich, but I would really like to have goods and services purchased by giving more to the poor.  Your business might improve as a result.  As more businesses improve, your husband might get a job.

          • Jen says:

            September 5, 2013 at 12:01 pm

            Dan, Please cite your source for rich consuming less.

            Where do you think the money will come from to pay employees a minimum wage? More hits to the struggling small businesses and greater income disparity for those not working for the government in one way or another. All the money that has been given to education over the past decade and kids are learning less. Fewer are graduating. But teachers and Admin are earning a lot more. People need to have a stake in their own success and a path that allows for opportunity. Handing out more money isn’t working. It is having the opposite affect. Creating wider gaps in education & income. Why can’t you see that?

            I’m curious what you do for a living?