Equal Pay/Fair Wage

Minimum Wage Doesn't Pay for Hard Work; Let's Hike

Tuesday, February 7, 2012

Minimum-wage jobs are mainly held by women struggling to support families on way too little. Let's guarantee these hard-working breadwinners a living wage. The first in a series of articles by Women Employed on the challenges facing low-wage workers.

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Lagging Behind Inflation

The minimum wage has not kept up with inflation. If it had kept up with the purchasing power it had in 1968, the Bureau of Labor Statistics estimates that today it would be $10.39 an hour, about $20,000 a year. A recent poll shows that 67 percent of Americans support gradually raising the minimum wage to that level.

Some argue against the minimum wage as a job killer to be avoided in the current prolonged period of high unemployment. But extensive research does not support that argument. Raising wages reduces costly turnover and increases productivity because workers who are paid more stay with their employer longer.

The first minimum wage was passed in 1938, during the Great Depression, as a way to help America's workers and increase consumer purchasing power to stimulate the economy.

It worked then, and it can work today. Raising the minimum wage should be a key strategy for our economic recovery, because more money in the pockets of low-income consumers means more spending on local businesses, which raises profits and revenues and leads to hiring.

Wages paid for hard, important work should at least allow a worker to feed and clothe their families, keep a roof over their heads and pay for transportation and child care.

We can make it happen. There are movements in states around the country to raise the minimum wage. In Illinois, for example, the Raise Illinois coalition is working to increase the minimum wage to $10.65 an hour; and you can take action on its website.

If you live in another state, look for a similar movement in your area and get involved. And call your federal senators and representatives today and urge them to support a higher minimum wage.

Let's make the minimum wage a living wage.

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Melissa Josephs, a longtime activist for fair workplaces, is director of equal opportunity policy at Women Employed, a 39-year-old organization that mobilizes people and organizations to expand educational and employment opportunities for America's working women. Women Employed is working to make the minimum wage a living wage in Illinois as part of the Raise Illinois coalition.

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Times Haven't Changed for 'The Help' of Today

Raising the minimum wage is not the panacea to ending poverty among women. Although increasing the minimum wage does increase consumer purchasing power in the short-term, it also has ramifications on purchasing power in the long term. Even with an elementary understanding of economics, we can understand that forcibly increasing incomes also increases the prices of goods and services because the employer must derive the higher wage from what it charges consumers.

In order for the minimum wage to work, we need to assume that consumers are not price sensitive. But that is not always the case. A couple examples of where demand is more elastic are in the retail and restaurant industries. We may also note that these are the industries that are more likely to pay a minimum wage. If we raise the minimum wage, then prices may increase on these goods. This effect drives consumers away and thus pressures the employer to mitigate costs through laying off employees. This doesn't help anyone.

Let's say San Francisco's government increases it's minimum wage, currently at $10.24, to $11.24. It implements this increase so Sally, a single mother who works at a grocery store, and Mary, a single mother who works in clothing retail, can have more purchasing power. However, the increase does not affect them equally. The owners may increase their prices to compensate for the wage increase. Customers at the grocery store are not price sensitive because they need food. Customers at the clothing store, on the other hand, may cut back on buying clothes. Sally can be confident that she will not be laid off or have her hours cut. Mary, on the other hand, will be at a much bigger risk of being unemployed or underemployed. Thus, by increasing the minimum wage, the government put one impoverished woman in jeopardy of losing her job and increased the living standards of another person by a small margin. Is that fair?

If we really wanted to raise the living-standards of impoverished women, we have to look at why they are in that condition in the first place. Yes, it may be because of sex discrimination or the responsibilities at home, but raising the minimum wage does not fix any of those problems. What can address those problems is increasing human capital – the skills that these minimum wage women may have. One obvious step is to push more women to pursue higher education, but that is not always possible when one is older, has a family to feed, or pays rent every month. An alternate route is to encourage women to raise their human capital in the workplace. Employers can benefit from having their employees take up more responsibilities. Businesses can become more productive and efficient. Employees may get a raise or may find better opportunities elsewhere. Increasing human capital is how we can raise the living standards of impoverished women, not by forcing businesses to raise their incomes.

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