If Congress, state won’t raise minimum wage, Lexington should

March 29, 2015

The minimum wage has a big impact on low-wage workers, many of whom must rely on public assistance to make ends meet, as well as the overall economy, which is driven largely by consumer spending.

The $7.25 federal minimum wage hasn’t been raised since 2009. Its value adjusted for inflation has lost more than 25 percent since its peak in 1968.

Congressional Republicans have refused to raise the federal minimum wage. But many states and cities have raised theirs, realizing its importance to both low-wage workers and local economies.

The Democrat-led Kentucky House recently approved a state minimum-wage increase that was rejected by the Republican-led Senate. Louisville’s Metro Council in December approved a gradual minimum-wage increase to $9 over three years, which is being challenged in court.

Urban County Council member Jennifer Mossotti has proposed gradually raising Lexington’s minimum wage to $10.10 an hour by July 2017 and tying future increases to the consumer price index. The proposal also would gradually raise the $2.13 minimum wage for tipped workers, who haven’t seen an increase since 1991, to $3.09 over three years.

Council members are unlikely to consider the issue before June. But when they do, Jason Bailey, director of the Kentucky Center for Economic Policy, has put together a good report about the low-wage Lexington workers who would be affected.

Among the highlights: An increase would directly lift wages for about 20 percent of Lexington workers, 90 percent of whom are older than 20 and 30 percent of whom are 35 and older. Fifty-seven percent are women, 54 percent work full-time and 26 percent have children at home. Read the full report at: Kypolicy.org.

Businesses usually oppose minimum-wage increases — if not the very idea of a minimum wage — saying that increasing labor costs forces them to put people out of work and raise prices. Studies have generally shown those effects to be negligible, and the economic impact to be positive.

A minimum-wage increase is long overdue. If federal and state officials won’t do it, Lexington should join other cities and states that are.


Want to improve the economy? Narrow the growing wealth gap

December 21, 2014

Many politicians and business executives like to complain about the slowness and fragility of the economic recovery. Then they push policies to keep it that way — or make it worse.

What they don’t seem to understand is that the best way to improve the economy is to put more money in the pockets of average people who will spend it.

Instead, these politicians and executives oppose raising the minimum wage, which has been $7.25 an hour since 2009 and losing ground to inflation for decades. A low minimum wage keeps wages just above it depressed, too.

Then there are the perversely misnamed “right to work” laws. Their real purpose is to weaken what is left of labor unions so that big business, which already seems to have bought control of government with campaign contributions, has nobody to challenge its power.

Add to that efforts to repeal Kentucky’s “prevailing wage” law, which would cut the pay of working men and women who build public construction projects.

The biggest drag on the economy — and perhaps the biggest threat to America’s long-term prosperity — is the widening wealth gap between the haves and have-nots. Narrowing the gap is in everyone’s best interest, whether they realize it or not.

The prevailing-wage law became a flashpoint last week at a state legislative meeting. The law is designed so that public construction projects pay wages that reflect those in the local community. But as so much of the construction industry has become non-union, critics argue that the law puts too much emphasis on higher union wages.

The Legislative Research Commission compiled a report showing that construction workers on state projects earned $8 an hour more than those on private projects. Workers on 12 school district projects earned $11.37 an hour more.

But critics objected to the analysis, saying it looked only at labor costs, not total project costs. Might more skilled, better-paid workers complete projects faster and better? Besides, higher wages help strengthen local communities.

The irony is that most of the legislators who think construction workers are overpaid have little to say about the sometimes obscene compensation policies at state government’s highest levels.

Kentucky’s public pension systems are among the most under-funded and least transparent in the nation, yet they provide rich benefits for part-time legislators and other high-ranking officials smart enough to game the system.

And then there is the case of the Kentucky Community and Technical College System president, long the nation’s highest-paid community college leader. He recently retired with a $300,000 handshake.

Warren County’s Fiscal Court last week approved Kentucky’s first county “right to work” ordinance, although it is unclear if it is legal under state law.

Republican legislators and chambers of commerce would like to make Kentucky a “right to work” state. That would make Kentucky more “friendly” to companies that want to come here and pay low wages. Studies show right-to-work states often do have faster job growth — as well as lower overall wages and higher poverty rates.

Since Congressional Democrats failed to overcome Republican opposition to raising the federal minimum wage, a statewide minimum-wage increase has been proposed by Democrats in the Kentucky General Assembly. Last Thursday, Louisville’s City Council raised the local minimum wage to $9 by 2017 on a 16-9 party-line vote.

Predictably, business groups and right-wing activists argue that would cause huge job losses — even though it has never happened with previous minimum-wage increases.

Since Ronald Reagan was elected president in 1980, economic policies and trends have largely been based on “trickle-down” economic theory — the notion that if the rich get richer, everyone else will prosper, too. Trouble is, it hasn’t worked that way.

Wealth inequality in the United States is now higher than at any point since the 1920s. The vast majority of all income growth is going to the rich. Corporate profits and the stock market are at record highs. But average workers are losing ground, and the overall economy remains sluggish.

This is a global problem, too, prompting Pope Francis to take up the issue last year in a papal statement worthy of a few amens.

“Some people continue to defend trickle-down theories, which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world,” the Roman Catholic Church’s leader wrote. “This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power.”


Higher minimum wage would be a step toward economic justice

January 20, 2014

On this national holiday honoring the legacy of the Rev. Martin Luther King Jr., it is worth remembering that he focused on more than racial justice. The next big issue on his agenda was economic justice.

King was murdered in 1968 while in Memphis to help striking sanitation workers get better pay and treatment. At the 1963 March on Washington for Jobs and Freedom, where King delivered his “I have a Dream” speech, one of the key issues was raising the minimum wage enough to lift many workers out of poverty.

While America has made great strides in racial equality and opportunity, it finds itself in a similar economic situation to what those marchers faced 50 years ago. The income of the wealthiest Americans has soared over the past three decades, while middle-class wages have stagnated and many low-wage workers have fallen into poverty.

The gap between the rich and everyone else is wider than it has been for a century. There are many reasons for this, from manufacturers moving overseas for cheap labor to the decline of unions and tax code changes that favor non-wage income, most of which goes to wealthier people.

The minimum wage hasn’t risen in five years, and low-wage workers’ earnings have continually fallen behind inflation. The Economic Policy Institute estimates that 28 million workers — the bottom 20 percent by income — earn less than $10 an hour.

The minimum wage of $1 to $1.25 an hour that marchers in 1963 said was too little would now, with inflation, be worth more than today’s minimum wage of $7.25. The $2 minimum wage the marchers were seeking would now be worth more than $15.

President Obama favors a plan by Congressional Democrats to raise the minimum wage to $10.10 over three years, with future increases automatically tied to the rate of inflation.

At least seven Nobel Prize-winning economists and eight former presidents of the American Economic Association have endorsed the move. But the idea has met opposition from Congressional Republicans, whose economic agenda can best be described as Robin Hood in reverse.

Assuming political gridlock keeps Congress from acting, the General Assembly should adopt a similar proposal by House Speaker Greg Stumbo, D-Prestonsburg, to gradually raise Kentucky’s minimum wage to $10.10.

Opponents of raising the minimum wage argue that it causes many companies to hire fewer workers, but there is little evidence to prove that. A number of studies by respected economists show little job loss from minimum-wage increases.

Another argument is that higher minimum wages lead to higher consumer prices. But studies show price increases, when they occur at all, amount to only a fraction of the wage increase.

Another argument is that few people actually earn the minimum wage, and many of them are teenagers. After years of high unemployment, many workers at or slightly above the minimum wage are adults supporting families.

Increasing the minimum wage tends to have a ripple effect on slightly higher wage rates at the bottom of pay scales, and that also would be a good thing.

What I find most galling is that many low-wage workers at some of the nation’s biggest and most profitable corporations earn so little that they qualify for public assistance.

Bloomberg News estimated last month that Walmart employees get $2.66 billion in government assistance each year because of their low wages. University researchers in Illinois and California reported last year that Kentucky’s 32,000 frontline fast-food workers make such low wages that 46 percent qualify for public assistance that costs taxpayers $115 million.

Why should taxpayers be subsidizing profitable companies? Shifting some of the burden back onto employers in the form of a higher minimum wage only seems fair.

In addition to being good for low-wage workers, a higher minimum wage would help the whole economy. Low-income people spend a much greater share of what they earn than do wealthier people. So, when they have more money to spend, it helps the whole economy and generates more tax revenues.

The minimum wage is long overdue for an increase. If Congress won’t do it, Kentucky lawmakers should.

As King once said: “The time is always right to do what’s right.”

 


Laborers’ wages are nothing to celebrate this Labor Day

September 2, 2013

Labor Day this year falls five days after the 50th anniversary of the March on Washington for Jobs and Freedom, which is remembered as a civil rights demonstration that included the Rev. Martin Luther King’s “I Have a Dream” speech.

But march organizers had another issue, as well. They wanted federal minimum wage rates, which in 1963 were $1 and $1.25 an hour, raised to $2. Anything less, they argued, would not provide a “decent standard of living.”

What kind of buying power would those minimum wages have today?

According to the U.S. Bureau of Labor Statistics’ inflation calculator, a 1963 dollar would now be worth $7.63. That is 38 cents more than the current minimum wage of $7.25, which was last increased in 2009.

An hourly wage of $1.25 in 1963 would now be worth $9.54. That is 54 cents more than the minimum-wage increase President Barack Obama is now seeking.

The $2 minimum wage sought by marchers a half-century ago would now be worth $15.27. That is 27 cents more than what fast-food and other low-wage workers have demanded recently in wildcat strikes across the country.

What’s the chance for any significant increase in the minimum wage? Slim to none, thanks to opposition from Republicans in Congress.

A national public opinion survey by the Pew Research Center and USA Today found that 71 percent of Americans support raising the minimum wage to $9, as the president has proposed. Only 26 percent oppose it.

But it doesn’t seem to be an important issue for Congress. Perhaps that is because the average senator is worth about $11 million, while the average House member’s wealth is about $7 million, according to the nonpartisan Center for Responsive Politics.

Many opponents of raising the minimum wage argue that few people actually earn that little. That is somewhat true. But minimum wage workers make up a large share of the 10 million Americans the BLS classifies as the “working poor.” About 4 percent of all full-time workers are officially classified as poor.

Minimum wage increases also tend to push up other workers’ wages, something that is sorely needed. Wage stagnation among all but the wealthiest Americans may be the biggest obstacle to real economic recovery.

Consumer spending accounts for between 40 percent and 70 percent of the economy, depending on how you calculate it. Most people have less to spend than they used to because the value of middle-class wages has been falling for more than three decades, despite huge gains in worker productivity. Meanwhile, corporate profits and shareholder returns have soared, compensation for top executives has risen into the stratosphere and corporate cash reserves are at historic highs.

Opponents of raising the minimum wage argue, as they always have, that higher pay means fewer jobs. But a recent report by the nonpartisan Economic Policy Institute cites research by prominent economists that disputes that argument.

Robert Reich, who was Labor secretary under former President Bill Clinton, wrote recently that many large employers of low-wage workers could well afford to give them raises. He cited two big examples.

Wal-Mart, the nation’s largest employer, has seen net income (profit) rise steadily in recent years while the company has maintained a gross profit margin of more than 24 percent. Wal-Mart’s net profit last year: $15.766 billion.

Reich noted that Wal-Mart CEO Michael Duke is paid $20.7 million a year — more than 1,000 times the earnings of a typical Wal-Mart worker.

McDonald’s Corp. net income last year was $5.465 billion, more than double its profit five years earlier. Reich said McDonald’s CEO Don Thompson’s compensation totals $13.8 million — about 800 times the earnings of a typical worker at one of its fast-food restaurants.

A major trend in American business for the past three decades has been to keep labor costs — the wages of average workers — as low as possible to boost profits, executive compensation and shareholder return.

The trend has been supported by the “business friendly” laws and policies of federal and state governments. You hear a lot of talk about the importance of job-creation. But, far too often, the jobs now being created pay much less than what is needed to support a middle-class family.

As Americans celebrate another Labor Day, many average laborers might conclude that the system is stacked against them. And they would be right.