NPI: Washington has the highest minimum wage of any state in the nation, since it has risen with inflation (been "indexed") from the time it was enacted in 1995. Are you aware of any research tracking the rising minimum wage with joblessness or possibly population increases? That is, in your recent comment you provided the site for a study which showed actually a positive correlation between a minimum wage and employment growth. Has anything else been done along these lines?Thanks very much to Brock. This is the definitive short treatment. We will likely impose on him again as the economics section at NPI comes under rebuild over the next three or four months.
BH: A 2006 report from the New York-based Fiscal Policy Institute says it all: States with Minimum Wages above the Federal Level have had Faster Small Business and Retail Job Growth. One example of these statistics: Small businesses in high minimum wage states grew by 5.4% from 1998 to 2003, compared to 4.25% growth in the other states. The report is careful to say that the results don’t prove that a higher minimum wage brings about economic growth, only that the old argument that an increase leads to job loss and economic decline doesn’t square with the facts.
The Economic Policy Institute in Washington D. C. watches the relation between the state minimum wages and the state economies carefully. One of their studies, Jeff Chapman’s Employment and the Minimum Wage includes a discussion of Washington state’s loss of employment during the years of its rising minimum wages, a correlation that minimum wage opponents like to point out. Chapman counters that the state’s decline in jobs occurred in the manufacturing industries, especially aerospace, a high-wage sector unaffected by minimum wage changes; Washington’s restaurant industry grew solidly during the same period.
NPI: What is the argument against raising the minimum wage and who makes it?
BH: Conservatives oppose the minimum wage on the grounds that since wages follow the logic of economics--the more expensive something is, the fewer buyers there will be -- raising the minimum wage will lead to reduced employment or reduced hours of employment. They also argue that the minimum wage is so often paid to teenagers starting out in part-time jobs that it is an inefficient way to help poor families. The underlying theme is the perennial conservative one: tampering with the open market never helps anyone.
Who makes it? Check out the position of the National Restaurant Association on the minimum wage. Busloads of its members descend on Congress when minimum wage amendments seem headed for a vote.
NPI: If you were king, how would you structure minimum wage legislation?
BH: We hear the calls to raise the minimum wages and the fact that the federal minimum doesn’t even provide enough for a family of one adult and two children to rise above the poverty line. But what we don’t hear is a model, a definition, for what a minimum wage ought to be. As king, I would declare that the federal minimum wage should meet the basic needs of a single adult worker, with no children, in the states with low costs of living. The living wage for a single adult runs from $6 to $9 an hour in these, so the Kennedy bill for $7.25, while low, is appropriate. Families would need more than this, of course, but higher living wages, negotiated within communities, are better suited for meeting the needs of family budgets. Unlike the living wage, the minimum wage serves the purpose of being a rock-bottom wage floor, and it makes sense to base the amount on what the adult worker himself or herself would need to live adequately.
There is no easy answer to the question of providing a federal minimum that is appropriate for all parts of the country, so I would use the federal minimum wage to protect workers in the low-cost states and encourage states with higher costs of living to pass their own state minimums, as they have been.
NPI: Would you index the federal minimum wage to inflation so it rises each year?
BH: I think the federal minimum wage should be reviewed every year by an administrative board for an increase based not only on recent inflation but also on other factors such as employment figures and anticipated inflation. At the federal level, for a nation this size with our regional economic diversity, automatic indexing of the kind adopted in Washington, Oregon, and Florida might have complex unintended consequences, from what I read. A more flexible commission-based approach, such as that used in England, makes more sense to me.
NPI: How does the current minimum wage correspond to a livable wage?
BH: Living and livable wages are higher than minimum wages. Living wages are set usually in cities or counties as ordinances applying to workers hired by the local government. They are based on the federal poverty levels for a family or on local housing costs and usually run from $8 to $10 per hour or higher.
NPI: To wages in other industrial countries?
BH: This varies widely, since over a hundred nations use some form of the minimum wage. In U.S. dollars, the minimum wage in Canada varies by province from $5.19 to $7.03. In Mexico, from $4.11 to $4.36. In France, it’s $9.18. The United Kingdom http://www.lowpay.gov.uk/ uses a system I like: a minimum wage of $8.91 for those over 21, a lower minimum for 18 to 21-year-olds, and an even lower one for younger workers. Such an age-based minimum wage helps address concerns about minimum wage benefits being wasted on teenagers. See Wikipedia's list of minimum wages in other countries.
NPI: Senator Kennedy has a bill up to raise the minimum wage. How would you characterize it?
BH: The bill itself just specifies dollars and dates to amend the Fair Labor Standards Act: an increase from $5.15 to $5.85 within 60 days after passage, to $6.55 one year later, and to $7.25 one year after that. The tricky part will be the trade-offs that accompany its passage through Congress. Federal minimum wage increases have been and can be joined with reductions in the type and number of workers covered, for example, or special tax breaks for business owners.
Readers can sign on as citizen co-sponsors of the Kennedy bill.
NPI: How would you frame the debate?
BH: People debate the minimum wage along two lines, the economic one and the moral one, what seems economically necessary from each side’s point of view and what seems fair and just for the poor, for the employer, for the tax payer, and so on. I think that each side has its gut-level reaction that is seldom expressed directly, though. Supporters feel that damn it, in a country this rich, there is no excuse for paying poverty wages to working people, that exploiting low-wage labor has a long and ugly history and must be resisted. I think opponents feel that although they want to help the poor, they’re not, damn it, going to cut into their hard-earned profits to do it.
NPI: Why your personal interest in this?
BH: I’m a community college English professor nearing retirement. Trying to reduce poverty feels like what I want to work on for the rest of my life. A year ago there was no Web site that brought together all the sides of the minimum wage issue, and I think it’s important that there be one.
NPI: What does a typical minimum wage-earner look like?
BH: Because the federal minimum at $5.15 has become so low, only 479,000 workers in the nation earned exactly that wage in 2005. But the number who earn between $5.15 and $6.15 is in the millions. If a Washington resident stays at a motel in Idaho, where the minimum wage is the same as the federal one, the room might be cleaned by a young Latina who probably makes in this range. The young man or woman wrapping a hamburger at a fast-food restaurant makes at or near the minimum. So does the middle-aged African American man picking up the trash around a camp ground.
NPI: What does the typical supporter for a minimum wage hike look like?
BH: Public support for raising the minimum wage usually runs between 75% and 80% in the polls and is even higher at the moment. So supporters look like all of us.
NPI: What does the typical opponent of higher minimum wages look like?
BH: According to the polls, an opponent is mostly likely male, white, over 50, wealthy, and a conservative Republican.
A low volume, high quality source from the demand side perspective.The podcast is produced weekly. A transcript is posted on the day of.
Friday, May 5, 2006
Q&A: The Minimum Wage with Brock Haussamen
Brock Haussamen operates a web site Raising the National Minimum Wage: Information, Opinion, Research dedicated to information on the minimum wage. He commented on a post last month, and we inveigled him into responding to a few questions on the subject. Well, maybe more than a few. (This is good stuff.)
at 12:56 PM