Category Archives: Minimum Wage

A Vision for a High-Wage America

Source: Michael McCormack and Jeff Madrick, The Century Foundation, October 16, 2017
From the summary:
America has deliberately chosen to be a low-wage society since the 1970s. This status was not thrust upon it inevitably by technological change or globalization, but instead was the result of deliberate policy choices made over the years. America likewise has the ability to reverse course, pursuing a policy agenda that would put it back on the path toward a high-wage economy. ….

…. This report provides an overview of the current state of the U.S. economy, characterized by a sluggish recovery, stagnant living standards, inequality, increasingly volatile and uncertain incomes, especially for low-income Americans, persistent poverty, and declining benefits. Our review below of the economic data and literature will demonstrate the persistence of reduced opportunity and a low-wage America for millions since the 1970s.

The report also explores the deliberate policy choices that led to the low-wage economy that developed in the late 1970s and was solidified by the 1980s and 1990s. There was only a brief reprieve during the full-employment economy of the late 1990s, when wage growth lifted wages for all income levels; even during this time, anti-inflationary monetary policy reduced the bargaining power of workers relative to capital.

After reviewing the political and academic influences that created a low-wage America, the report proposes alternative policy choices to build a high-wage America that extends prosperity to a broader range of workers. The three main pillars of a high-wage economy identified in this report—public investment and industrial policy, education and training, and labor standards and social supports—will guide the Rediscovering Government Initiative’s research and event agendas in the coming months, as it seeks to build an agenda that can return American workers to prosperity…..

What You Should Know

  • Between 1973 and 2015, productivity increased by 73.4 percent, but hourly compensation increased by only 11.1 percent. And that meager wage growth has happened mostly at the top of the income scale. Since the late 1970s, wage growth has stopped for the eightieth percentile of earners on down, and for much of the wage distribution, earnings have actually fallen.
  • Deliberate policy choices since the 1970s have contributed to this wage stagnation, including the attack on labor unions, cuts to social programs, tight monetary policy, tax cuts and free-market economic policies.
  • U.S. manufacturing work is particularly underpaid when compared to other nations. Manufacturing workers in the United States ranked eighteenth out of twenty-seven OECD nations with available data.
    The high-wage agenda requires new approaches to directly confront underemployment and unemployment that may include government acting as an employer of last resort and support for labor organizing, which is now actively thwarted.
  • Rebuilding the nation’s apprenticeship system that still only reaches less than half a million workers, and translating promising high school career academies into respected vocational and career education system that, among other things, can create inclusive access to well-paid skilled blue collar jobs.
  • White Lawmakers Are Using Alabama’s Racist State Constitution To Keep Black Wages Down

    Source: Bryce Covert, In These Times, November 2017

    Alabama wrote its 1901 constitution to “establish white supremacy.” Workers in a majority-black city say it’s Jim Crow all over again. ….

    Just two years ago, these Fight for $15 workers and their allies won a minimum wage increase to $10.10 in Birmingham. It was short-lived. State lawmakers intervened before the law took effect, passing a preemption bill that undid the work of the City Council and the will of its constituents. Since Alabama doesn’t even have its own minimum wage, minimum-wage workers still make the federal wage of just $7.25 an hour.

    “We want $10.10, we gonna do it again,” the crowd chanted.

    The workers are using protests to pressure corporate employers and state legislators to raise their pay. But they’re not counting on it happening voluntarily. On April 28, 2016, workers in Birmingham filed a lawsuit accusing the state of racial animus and violating the U.S. Constitution’s 14th Amendment guarantee of equal protection.

    The lawsuit offers a novel approach in a struggle taking place across the country as blue cities battle red states for self-determination. Republicans often extoll the virtue of local governmental control, but not, it seems, when it comes to progressive change…..

    Living wages: a US perspective

    Source: Stephanie Luce, Employee Relations, Vol. 39 Issue 6, 2017
    (subscription required)

    From the abstract:
    Purpose
    The purpose of this paper is to provide background on the US living wage movement, with particular attention to recent victories, and also the ways in which the US movement differs from living wage movements in other countries. It begins with some technical distinctions of terms, then analyzes the campaigns and movement for higher wages, and considers some of the challenges the campaigns have faced. It will conclude with some discussion about the future of the movement.

    Design/methodology/approach
    This is a general review of living wage campaigns in the USA. This is based on a review of existing literature and the author’s own prior research and participant observation.

    Findings
    The author argues that the initial living wage movement that began in the early 1990s was limited in scope but successful in building coalitions and political power to launch a much more expansive movement to raise wages in 2012.

    Originality/value
    This paper is a general summary of the last 20 years of living wage campaigns. It does not include new research.

    Newly available wage theft data shows nearly 130 Colorado employers with violations

    Source: Adrian D. Garcia, Denverite, August 24, 2017

    The state of Colorado is starting to name companies that steal wages from their employees, ending decades of businesses being able to shield their identities under claims of trade secret protections.

    Nearly 130 employers have been ordered to pay employees $547,780.90 in back pay and penalties since April 13. The companies were also ordered to pay the state another $170,750 in fines in connection with wage-law violations, according to the data shared Monday by the Colorado Department of Labor and Employment.

    Many People With Disabilities Are Being Paid Way Below the Minimum Wage, and It’s Perfectly Legal

    Source: Ashley Dejean, Mother Jones, August 8, 2017

    Chris Wilson is 33 years old and has Down syndrome. For the last three years, he’s worked at Kandu Industries, a packaging and assembly factory in Janesville, Wisconsin. He usually makes between $2 and $3 an hour, depending on whether he is packing brackets used in playground equipment or packaging food.  

    …. Kandu Industries can pay Chris and roughly 150 other workers substantially below the federal minimum wage of $7.25 an hour because of a 1938 provision in the Fair Labor Standards Act that permits employers, who apply to the Department of Labor for a waiver, to pay lower wages to people with disabilities. According to the department, about 20 percent of people with disabilities participate in the workforce, and of that group, about 3 percent, or approximately 195,000 workers, are being paid subminimum wages. These workers typically make well below the minimum wage, sometimes as low as “pennies per hour,” according to the Department of Justice…..

    Basic Income in a Small Town: Understanding the Elusive Effects on Work

    Source: David Calnitsky, Jonathan P. Latner, Social Problems, Vol. 64 no. 3, 2017
    (subscription required)

    From the abstract:
    This paper examines the impact of a guaranteed annual income experiment from the 1970s called the Manitoba Basic Annual Income Experiment (Mincome). We examine Mincome’s “saturation” site located in Dauphin, Manitoba, where all town residents were eligible for payments. Would people work less if their basic needs were guaranteed outside the market? Never before or since the Dauphin experiment has a rich country tested a guaranteed annual income at the level of an entire town. A community-level experiment accounts for the fact that people make decisions in a social context, not in isolation. Using hitherto unanalyzed data we find an 11.3 percentage point reduction in labor market participation, and nearly 30 percent of that fall can be attributed to “community context” effects. Additionally, we show that withdrawals were driven disproportionately by young and single-headed households. Participants who provide qualitative explanations for work withdrawals typically cite care work, disability and illness, uneven employment opportunities, or educational investment.

    Seattle’s Minimum Wage Experience 2015-16

    Source: Michael Reich, Sylvia Allegretto, and Anna Godoey, University of California – Berkeley, Institute for Research on Labor and Employment, Center on Wage and Employment Dynamics (CWED), June 2017

    From the abstract:
    This brief on Seattle’s minimum wage experience represents the first in a series that CWED will be issuing on the effects of the current wave of minimum wage policies—those that range from $12 to $15. Upcoming CWED reports will present similar studies of Chicago, Oakland, San Francisco, San Jose and New York City, among others. The timing of these reports will depend in part upon when quality data become available. We focus here on Seattle because it was one of the early movers. …. Our results show that wages in food services did increase—indicating the policy achieved its goal—and our estimates of the wage increases are in line with the lion’s share of results in previous credible minimum wage studies. Wages increased much less among full-service restaurants, indicating that employers made use of the tip credit component of the law. Employment in food service, however, was not affected, even among the limited-service restaurants, many of them franchisees, for whom the policy was most binding. These findings extend our knowledge of minimum wage effects to policies as high as $13. …

    Related:
    Press Release

    Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle
    Source: Ekaterina Jardim, Mark C. Long, Robert Plotnick, Emma van Inwegen, Jacob Vigdor, Hilary WethingNBER Working Paper No. 23532, June 2017
    (subscription required)

    From the abstract:
    This paper evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.

    Five Flaws in a New Analysis of Seattle’s Minimum Wage
    Source: Rachel West, Center for American Progress, June 28, 2017

    A team of faculty and students at the University of Washington was tasked with assessing how Seattle’s 2014 minimum wage ordinance, which is gradually raising the city’s minimum wage to $15 per hour, is affecting low-wage workers. This week, the group released a working paper—without peer review—that looks at the ordinance’s first two phases, under which the minimum wage for most workers increased from $9.47 to $11 per hour in 2015 and then to $13 per hour in 2016.

    Methodological flaws plague the group’s approach, causing them to draw conclusions wildly out of step with dozens of studies of similarly sized wage increases cited by both critics and proponents of higher minimum wages. The vast majority of rigorous, credible studies conclude that higher minimum wages have appreciably boosted workers’ earnings with little or no effects on employment. By contrast, the University of Washington researchers conclude that higher minimum wages not only reduced employment and hours worked in Seattle, but that the costs of the wage hike outweigh the benefits for the average low-wage worker—a finding at odds with the conclusions of even the most skeptical mainstream researchers. At the same time, the study’s results suggest—implausibly and largely inexplicably—that the wage hike to $13 per hour caused substantial growth in jobs paying more than $19 per hour in the restaurant industry. That’s just one of several questionable results that should give readers serious pause…..

    Seat­tle and the (Method­ol­ogy of the) Eco­nom­ics of Min­i­mum Wage
    Source: Ben­jamin Sachs, OnLabor blog, June 26, 2017

    ….Noam Scheiber also has a good story on the UW pa­per which lays out a cri­tique worth men­tion­ing here. In sum, the em­ploy­ment ef­fects iden­ti­fied by the UW study might be due, not to Seat­tle’s min­i­mum wage in­crease, but to a boom­ing job mar­ket in which high-wage jobs are re­plac­ing low-wage jobs. On this the­ory, the em­ploy­ment “losses” in the low-wage sec­tor that the UW study re­ports would ac­tu­ally just be peo­ple mov­ing from low- to high-wage em­ploy­ment. …

    How a Rising Minimum Wage Affects Jobs in Seattle
    Source: Norm Scheiber, New York Times, June 26, 2017

    Seat­tle and the Eco­nom­ics of Min­i­mum Wage
    Source: Ben­jamin Sachs, OnLabor blog, June 26, 2017

    ….There are, as al­ways, caveats. First, the Wash­ing­ton pa­per has yet to be sub­ject to peer re­view – it was re­leased on­line as an NBER work­ing pa­per. Sec­ond, an­other re­cent study – this one from Berke­ley – found that the Seat­tle or­di­nance “raises pay with­out cost­ing jobs.” As FiveThir­tyEight also re­ports, the Berke­ley study fo­cused ex­clu­sively on the fast food in­dus­try, and the Wash­ing­ton study it­self found no em­ploy­ment ef­fects of the min­i­mum wage hike on the restau­rant in­dus­try. One pos­si­bil­ity, then, is that the Wash­ing­ton study’s broader fo­cus is pick­ing up ef­fects that are missed by the (more tra­di­tional) fo­cus on the restau­rant in­dus­try. Many econ­o­mists, in­clud­ing Jared Bern­stein, how­ever, de­fend the method­olog­i­cal de­ci­sion to fo­cus a min­i­mum wage study on restau­rants. There are also, as al­ways, ad­di­tional method­olog­i­cal crit­i­cisms of the Wash­ing­ton study. (EPI has a press re­lease and pa­per that iden­ti­fies a num­ber of these con­cerns.)

    Then there is an im­por­tant caveat in the other di­rec­tion: Seat­tle might be a city in the best po­si­tion to ab­sorb min­i­mum wage in­creases, which means – if the Wash­ing­ton study is right – that the em­ploy­ment ef­fects could be even stronger else­where. ….

    The “high road” Seattle labor market and the effects of the minimum wage increase – Data limitations and methodological problems bias new analysis of Seattle’s minimum wage increase
    Source: Ben Zipperer and John Schmitt, Economic Policy Institute, June 26, 2017

    From the summary:
    A team of researchers at the University of Washington has released an analysis of the economic impacts of the 2015 and 2016 increases in the Seattle minimum wage. The study, Jardim et al. (2017), looks at the first two stages of a phased-in set of increases that will eventually take the minimum wage in the city to $15.00 per hour. The authors of the study argue that they find large job losses associated with these first two rounds of increases, in which the minimum wage for most workers rose from $9.47 per hour to $11.00 per hour in April 2015 and then to $13.00 per hour in January 2016.

    The authors’ analysis, however, suffers from a number of data and methodological problems that bias the study in the direction of finding job loss, even where there may have been no job loss at all. One initial indicator of these problems is that the estimated employment losses in the Seattle study lie far outside even those generally suggested by mainstream critics of the minimum wage (see, for example, Neumark and Wascher [2008])—as the authors themselves acknowledge.

    In this report, we describe the most important shortcomings in the new analysis and make suggestions for how the researchers can attempt to correct for these problems in future iterations of their long-term study of the Seattle minimum wage.
    See also: press release

    The Steal: The Urgent Need to Combat Wage Theft in Retail

    Source: Amy Traub, Dēmos, 2017

    From the summary:
    Retailers put a great deal of resources into dealing with theft. They install security cameras, affix anti-theft tags to merchandise, and hire guards to protect stores. Signs warn that shoplifters will be prosecuted to the fullest extent of the law. And yet another type of theft in the retail sector receives far less attention, even though it is equally, if not more pervasive in our economy: employers stealing pay they legally owe to their workforce.

    Key Facts
    – Just one form of wage theft is equivalent to the value of all merchandise lost to shoplifting nationwide.
    – By paying less than the legal minimum wage, employers steal an estimated $15 billion every year. This compares to an estimated $14.7 billion lost annually to shoplifting.

    – Despite the pervasiveness of wage theft, retailers spent 39 times more on security than the entire Department of Labor budget for enforcing minimum wage standards.
    – In 2015, retailers spent an estimated $8.9 billion on security. This compares to $227.5 million budgeted for the Department of Labor’s Wage and Hour Division to enforce wage standards.

    – Shoplifters can wind up in jail, but federal penalties for wage theft are not much of a deterrent—even when millions of dollars are stolen.
    – If a shoplifter steals more than $2,500 in merchandise, they can face felony charges in any state in the country. The greatest civil federal penalty for wage theft is repaying the amount in stolen wages and an equal amount in liquidated damages. Even for repeat or willful violations, the maximum penalty is $1,100.

    – Wage theft has disastrous consequences for workers, families, and the public.
    – Minimum wage violations cut into the paychecks of an estimated 4.5 million working people and their families, and drive more than 302,000 families below the poverty line.
    – In the retail industry alone, 358,000 workers are cheated by minimum wage violations.