Here's What a Higher Minimum Wage Will Buy

[Bob Geiger]

I thought these were some interesting numbers given by the office of Senator Ted Kennedy (D-MA) when discussing the real difference that the expected increase in the minimum wage under a Democratic Congress will mean for low-income Americans. Raising the minimum wage to $7.25 an hour will mean an additional $4,400 a year to minimum wage earners and their families.

According to Senator Kennedy's office, this would be enough money for a low-income family of three to buy:

• 15 months of groceries

• 19 months of utilities

• 8 months of rent

• Over two years of health care

• 20 months of child care

• 30 months of college tuition at a public, 2 year college

It's amazing that the Republican party, which has fought tooth and nail for more tax cuts for the wealthiest Americans, would consistently stand in the way of such a meager wage increase for working families.

You can read more from Bob at BobGeiger.com.

[jpwhite]

1. great post

That was a great post Bob. I think I am more than willing to pay a little extra for my hamburger because the minimum wage went up. It's better that people can work and take care of their family instead of relying on government assistance. Wait, I thought the GOP was for getting people off of gov't assistance? Why would they oppose raising the minimum wage. Oh yeah, they have too many corporate doners telling them what to do. Sorry, I forgot.

James
[e-mail]

[robinlynne]

And that is why we are democrats!

[4_TN_TITANS]

17. What? I thought we were Democrats

because of all the hot liberal ladies?
:P

[robinlynne]

19. Why thank-you.

[sandnsea]

2. Maybe a single mom

Otherwise those numbers seem a bit of fantasy to me. $7.25 wouldn't provide that much, which shows how badly it's needed.

[ileus]

21. Every hourly workers pay should be bumped up to match it

[Arkansas Granny]

3. These points really bring it home. A person who has never

worked for minimum wage often does not realize how hard it is to live on minimum wage. It is a crying shame that in the richest country in the world that minimum wage does not mean a living wage.

[Warpy]

4. Here's what else it will buy:

Fuller grocery baskets: increased staff at the market, more truckers to transport food across the country and from warehouses to the stores, more people working at growing, harvesting and processing food, more people working to produce agricultural machinery and fertilizers...

Utilities: more people to develop energy sources and more people to work on transmission systems...

Rent: landlords who aren't afraid to rent to marginal workers, construction of safer apartments and/or trailers...

Health care (although I think Kennedy's been on Congressional socialized medicine too long. This will pay for routine prescriptions and OTC meds but hardly 30 months of routine health care): Vaccines and children's care on a month to month basis, routine medicines for adults like inhalers, a rare trip to a doctor for a child or adult with a serious infection. This employs health care workers, pharmacists, more truckers, more retail help...

Child care: construction of new facilities, licensing of those facilities, better background checks and training of child care workers, higher pay for those workers so the turnover isn't so great...

Community college tuition: fewer hours to be worked while in school, better grades, lower debt load, more educated population, employment of more instructors, employment of textbook company workers...

Every additional dime to the working poor is going to be SPENT, in other words, and every dime that is spent is going to circulate through the consumer economy (2/3 of the US economy) increasing employment, possibly opening the door to education, improving nutrition and housing, and generally doing some WORK on its way up to the rich.

Don't bother quoting supply side economics to me. The shitty economy we have now is because nobody has considered DEMAND side economics. Remember, no rich man ever handed out a job unless he had a poor man with money in his pocket ready to buy the goods or services that job produces.

[nashville_brook]

8. DEMAND-SIDE economics! what a great turnabout.

[savemefromdumbya]

5. States with minum wage ABOVE federal level = faster sm business and job growth

There are some advantages to raising min wage

http://www.fiscalpolicy.org/FPISmallBusinessMinWage.pdf
http://www.dollarsandsense.org/archives/2006/0506wicks-lim.html
http://www.marylandpolicy.org/blog/2005/04/debunking-myths-about-minimum-wage.html

Executive Summary Some observers contend that because many small businesses are labor intensive and largely employ low-wage workers, they will experience sharp cost increases when the minimum wage is increased, leading them to reduce employment levels. However, this report examined recent state-by-state trends for small businesses employing fewer than 50 workers and found that employment and payrolls in small businesses grew faster in the states with minimumwages above the federal level than in the remaining states where the $5.15 an hour federal minimum wage prevailed. This report also found that total job growth was faster in the higher minimum wage states. Faster job growth also occurred in the retail trade sector, the sector of the economy employing the most workers at low wages, in the higher minimum wage states. The simplistic introductory economics prediction that an increase in the minimum wage will result in job loss clearly is not supported by the actual job growth record. Rather, faced with an increase in the minimum wage, small businesses may have benefited from somecombination of higher productivity through improved worker retention and savings on recruitment and training. There may also be a “Henry Ford” effect at work: if you pay workers more, they can buy more, boosting the overall economy, especially among small retail businesses. The last time the federal minimum wage was increased was in September of 1997. Since then, a growing number of states have raised their own minimum wage levels above the federal $5.15 level. By 1999, 10 states and Washington, D.C. had minimum wages above the federal level. The next big wave of increases came in 2005 when five states set their minimums above the federal level. There are currently 18 states, plus the District of Columbia, that have a higher minimum wage. In addition, Michigan recently acted to raise its minimum wage effective October 1, 2006. These 19 higher minimum wage states comprise a diverse set of states and include seven northeastern states (Connecticut, Massachusetts, Maine, New Jersey, New York, Vermont, and Rhode Island), four Midwestern states (Illinois, Michigan, Minnesota, and Wisconsin), the five West Coast states (California, Oregon, Washington, Alaska, and Hawaii), and Delaware, Maryland, Florida, and the District of Columbia. Altogether, the states that have raised their minimum wages account for almost half of the nation’s total employment. In examining state-level small business job growth, the best government data available permits a comparison of 1998 and 2003; the latter is the most recent year for which the data are available. For the 10 states and the District of Columbia that had set their minimum wages above the federal level for most of this period, indicators of economic performance were consistently better than for the other 40 states where the federal minimum wage of $5.15 an hour prevailed: • The number of small businesses across the economy with fewer than 50 employees grew by 5.4% from 1998 to 2003 in the higher minimum wage states, compared to a 4.2% increase for the balance of the states; and
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Higher Minimum Wages and Faster Small Business Job Growth 4 • In the higher minimum wage states as a group, small businesses had faster job growth (6.7% vs. 5.3% for the other 40 states combined); total annual payroll grew more (24.5% vs. 21.2%); and average payroll per worker increased by 16.7%, a greater increase than the 15.1% increase for the 40 states observing the federal minimumwage. Within the retail trade industry, the sector of the economy most likely to employ low-wage workers, the smallest retailers also consistently fared better in the higher minimum wage states than their counterparts in the other 40 states where the lower federal minimum wage prevailed. • The number of small retail businesses grew by 0.6% in the higher minimum wage states (compared to a 0.3% decline for all other states), the number of employees increased by 4.1% (versus 2.6%), total annual payroll increased by 19.7% in the higher minimum wage states, and average payroll per worker increased by 15.0% (versus 16.9% and 13.9%, respectively, for the other states). The superior performance of the higher minimum wage states was also demonstrated for totaljob growth and total retail job growth (that is, job growth among businesses of all sizes). • Total employment in the higher minimum wage states increased by 9.7% from January 1998 to January 2006, 30% greater than the combined job growth of 7.5% for the other states where the federal minimum wage prevailed; and • Retail employment grew by 10.2% in the minimum wage states over this 8-year period, nearly triple the 3.7% retail job growth in the other states. A detailed look at retail employment during the first year after New York increased its minimum wage in January of 2005 also showed no adverse effects: • Retail employment in New York increased faster from 2004 to 2005 than overall employment, while retail’s growth was slower than total employment growth in neighboring states and in the U.S. as a whole; and • The positive effects of the increased minimum wage on low-wage workers’ incomewere not negated by reduced hours of work. This analysis does not prove that increasing the minimum wage will boost employmentgrowth over what it otherwise would have been. But it is clear that the prediction that an increase in the minimum wage will result in adverse employment outcomes has not been validated. In fact, this analysis suggests that small employers may benefit from a higher minimum wage because of positive effects on worker retention and productivity and savings on recruitment and training costs. It is clear that higher minimum wages have helped workers get a fairer wage while small businesses have continued to grow.
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Fiscal Policy Institute 5 Introduction The question often arises when increases in the minimum wage are considered about the effect on small businesses. Some observers contend that small businesses that are labor intensive and that largely employ low-wage workers will experience sharp cost increases with the result that they will be forced to reduce their employment levels. This claim is consistentwith the traditional, simplistic textbook supply and demand theoretical model that holds that an increase in the price of low-wage labor will reduce the demand for labor, i.e., the number of jobs or hours worked. However, there is now a growing consensus among economists that the traditional theoretical textbook model is incomplete and does not accurately reflect the workings of the low-wage labor market.1More sophisticated models of how the economy operates suggest that employers are likely to respond to a wage increase by improving the skills of their workers and becoming more efficient, and that slightly higher wages would be offset by savings fromreduced turnover and higher productivity. Recent historical evidence supports this richer understanding of how labor markets operate. The most revealing commentary on the current state of research regarding the minimum wage is presented in the 1999 Economic Report of the President. This report, which is submitted to Congress annually together with the report of the President's Council of Economic Advisers, stated: Many studies have examined this issue , and the weight of the evidence suggests that modest increases in the minimum wage have had very little or no effect on employment. In fact, a recent study of the 1996 and 1997 increases, using several different methods, found that the employment effects were statistically insignificant.2The federal minimum wage was last raised in September of 1997 when it was increased from$4.75 to $5.15 an hour. At the time of the last federal increase in 1997, only four states (Alaska, Hawaii, Massachusetts, and Oregon) and the District of Columbia had minimumwages above the federal $5.15 level. Since that time, 14 other states (California, Connecticut, Delaware, Florida, Illinois, Maine, Maryland, Minnesota, New Jersey, New York, Rhode Island, Vermont, Washington, and Wisconsin) have also raised their state minimum wages, and Michigan is scheduled to join these in October, 2006. With several states having minimum wage levels above the federal level in recent years, it is now possible to examine employment trends between states having a higher minimum wage and those where the federal minimum wage prevails. This report makes several such comparisons in order to provide an empirical basis for assessing the effects of minimum 1 For a discussion of the economic research literature on this issue, see the Appendix in Raising the Minimum Wage in New York: Helping Working Families and Improving the State’s Economy, January2004, Fiscal Policy Institute. This report is available at: http://www.fiscalpolicy.org/minmumwagereportrevised20jan2004.pdf2 Economic Report of the President, 1999, p. 112.
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Higher Minimum Wages and Faster Small Business Job Growth 6 wages on employment, particularly for small businesses. Thus, this report provides comparisons between these two groups of states in terms of: • total nonfarm employment, • total retail employment, • employment and average payroll per worker for all small businesses (defined as thoseemploying less than 50 workers), and • employment and average payroll per worker for small retail businesses. State Minimum Wages Table 1 on the next page shows federal and state minimum wage changes since 1996. Eighteen states and the District of Columbia now have minimum wages above the $5.15 federal level, and Michigan will become the nineteenth in October, 2006. For purposes of employment comparisons, we exclude those states which increased their minimums above the federal level for the first time since the beginning of 2004 (Florida, Illinois, Maryland, Minnesota, New Jersey, New York, and Wisconsin). Thus, for the comparisons of total nonfarm employment and total retail employment, 11 states plus the District of Columbia are considered the "higher minimum wage states". The analysis of employment and payroll trends for small businesses (defined here as establishments with fewer than 50 employees) compares data for 1998 and 2003. The source for the small business analysis is the U.S. Commerce Department's County Business Patterns(CBP) series; 2003 is the latest year the CBP data are available. Since Maine first increased its minimum wage above the federal level in 2002, Maine is also excluded from the group of minimum wage states for purposes of the small business analysis. Thus, for this analysis, 10 states plus the District of Columbia are considered the "Higher minimum wage states". As states began increasing their state minimum wages since the last federal increase in 1997, the number of states with higher minimum wages increased from five (plus D.C.) in 1998 to 10 in 1999. The addition of several larger-population states over the past couple of years has brought the share of national employment covered by minimums over $5.15 to nearly three times what it was in 1998, and double what it was as recently as 2003. And since several states continued to increase their state minimums, the average minimum wage in states with higher minimums increased each year from 1998 to 2003.3For those states (plus D.C.) with higher minimums than the federal government between 1998 and 2003, the average minimum wage increased from $5.66 in 1998 to $6.74 in 2003 (see Table 2). None of the wage figures cited here have been adjusted for inflation. 3 The weighted average decreased in 2004 and 2005 when large states enacted minimums lower than the then-current average.
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Fiscal Policy Institute 7 $4.75 $5.15 10/19/1$5.25 $5.65 $7.15 10/19/11/1$5.00 $5.75 $6.25 $6.753/13/11/11/1$5.65 $6.15 $6.40 $6.70$6.90 $7.10 $7.401/11/11/11/11/11/11/1$5.00 $5.65 $6.15 1/15/110/1$6.60$7.001/11/1$7.00FL*$6.15$6.405/21/1$6.40$5.25 $5.75$6.25 $6.75 1/11/11/1$6.75$5.50 $6.50 1/11/1$5.75$6.25 $6.35$6.501/11/110/110/1$6.15 2/16$5.25 $6.00 $6.75 1/11/11/1MI$6.95 10/1$5.15MN$6.158/1$6.15NJ**$6.15$7.1510/110/1$6.15NY$6.00$6.751/11/1$6.75$4.75 $5.50 $6.00 $6.50 $6.90 $7.05 $7.25$7.501/11/11/11/11/11/11/1$7.50$5.65 $6.15 $6.757/19/1$5.00 $5.75 $6.25 $6.75 $7.00 $7.25 1/110/11/11/11/11/1$7.25$5.70 $6.50 $6.72 $6.90$7.01 $7.16 $7.35$7.631/11/11/11/11/11/11/11/1$7.63WI$5.70$6.506/16/1$5.70* Oregon, Washington, and (as of 2006) Florida are adjusted automatically by cost of living each January 1st.** A "Minimum Wage Advisory Committee" will review the New Jersey value annually.Source: Economic Policy Institute; U.S. Dept. of Labor(see: http://www.dol.gov/esa/minwage/america.htm )$6.15MDVTOR*2006WA*MARIMEILHI$6.15 D.C.$5.25 $5.25 DECTCAAK20042005U.S.19961997199819992000200120022003Minimumas ofMar.1 '06$5.15$6.75$7.15$6.75Table 1: Federal and state minimum wage changes since 1996(month and date of increase listed below the new minimum wage amount)$6.75$7.40$6.50$6.50$6.15
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Higher Minimum Wages and Faster Small Business Job Growth 8 Percent of national non-farm workersAverage** minimumcovered by higher than federal minimum*for those covered (nominal$)19961.2%$5.2519974.9%$5.33199815.7%$5.66199919.9%$5.72200020.1%$5.94200120.2%$6.35200220.6%$6.65200320.6%$6.74200425.0%$6.56200544.4%$6.46*Employment counts from Current Employment Survey, BLS**Weighted by total employmentCoverage percents and weighted minimums assume all workers in affected states are covered.Table 2: Mean effective minimum wage and coverage for those states having higher than $5.15 minimumComparisons between Higher Minimum Wage States and Other States based on Total Employment Total nonfarm employment in a state can be affected by many factors, particularly the condition of the national economy overall (whether the economy is expanding or contracting), and by the forces affecting the largest and most prominent industries in each state. It is also clear from an examination of total employment trends over the years since the last increase in the federal minimum wage that state minimum wages do not appear to have an adverse effect on total employment. Figure 1 on the next page shows the year-over-year change in total employment for the 11 states (plus the District of Columbia) with higher minimum wages at some point between the last federal increase in 1997 and 2003, compared to the total employment growth for the other 39 states (the states where the $5.15 an hour minimum wage prevailed). This figure shows that from the time of the last federal increase in September 1997 through the end of the national expansion (early 2001), employment growth in the higher minimum wage states generally exceeded that of all other states combined. And since the onset of the national recession in March 2001, and the period of weak national job growth from the official end of the national recession in November 2001 through December 2005, job growth in the higher minimum wage states has generally tracked that of the balance of states. (Between 1991 and 1997, most of the “higher minimum wage states” did not have a minimum wage higher than the federal level.) Over the entire period from January 1998 to January 2006, aggregate employment in the higher minimum wage states (plus D.C.) increased by 9.7 percent. This is 30 percent higher than the combined job growth of 7.5% for the other 39 states.45 Among the other 39 states, IL increased its minimum for the first time in 2004, and five more (FL, MN ,NJ, NY, & WI) increased their minimum wage above $5.15 during 2005.
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Fiscal Policy Institute 9 Figure 1: Total nonfarm employment growth for 11 higherminimum-wage states (plus D.C.) compared to 39 non-minimum-wage states, Jan. 1991-Dec. 2005-3.0%-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%Jan-91Jan-92Jan-93Jan-94Jan-95Jan-96Jan-97Jan-98Jan-99Jan-00Jan-01Jan-02Jan-03Jan-04Jan-05% change all nonfarm employmentyear ago11 Higher Min.Wage states and D.C.39 non-Min.Wage statesSource: Bureau of Labor Statistics Current Employment Survey, 2005 benchmark series. Analysis by FPI.Of the 39 states, IL increased its minimum wage for the first time during 2004, and, in 2005, five additional states increased theirminimum wage above $5.15.Comparisons between Higher Minimum Wage States and Other States based on Retail Trade Employment Retail trade jobs tend to pay the lowest wages among all industries in the economy, and thus are more likely to be affected by the minimum wage than other industries. This section makes the same comparisons as the previous section, except that employment growth is considered just for the retail trade industry. Figure 2 shows the year-over-year change in retail employment for the 11 states (plus the District of Columbia) with higher minimum wages, compared to the total employment for the other 39 states. The results are similar to those in Figure 1: the higher minimum wage states had weaker retail job growth in the early and mid-1990s (when most states in this group were still at the federal minimum wage), then job growth that surpassed other states during the period from 1998 through early 2001. While retail job growth fell sharply for both sets of states during the 2001 recession, since then the higher minimum wage states have had consistently stronger retail job growth than the other states. Over the entire January 1998 to January 2006 period, retail employment grew by 10.2 percent in the 11 higher minimum wage states (plus D.C.), nearly triple the 3.7 percent retail job growth in the other 39 states.
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Higher Minimum Wages and Faster Small Business Job Growth 10 Figure 2: Since 1999, when several states raised their minimum wages above the $5.15 federal level, retail jobgrowth in these states has out-performed retail job growth inall other states-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%Jan-91Jan-92Jan-93Jan-94Jan-95Jan-96Jan-97Jan-98Jan-99Jan-00Jan-01Jan-02Jan-03Jan-04Jan-05% change retail employmentyear ago11 Higher Min.Wage states and D.C.39 non-Min.Wage statesSource: Bureau of Labor Statistics Current Employment Survey, 2005 benchmark series. Analysis by FPI.Of the 39 states, IL increased its minimum wage for the first time during 2004, and, in 2005, five additional states increased their minimum wage above $5.15.Comparisons for Small Businesses between Higher Minimum Wage States and Other States As mentioned in the introduction, concern for the effect on small businesses often arises when minimum wage increases are proposed. Most businesses are relatively small employers, and these small employers account for a large share of total employment. This report uses an employment threshold of 50 to define “small businesses”. The most comprehensive official government data source for employment and payroll information by employment size of business is the U.S. Commerce Department’s County Business Patterns (CBP) series. The latest year the CBP data are available for is 2003. The CBP series made a switch to the new North American Industry Classification System (NAICS) from the Standard Industrial Classification (SIC) system with the publication of the 1998 data. 1998 was also the first year after the most recent increase in the federal minimum wage, to $5.15. Because of this, our analysis compares the years 1998 and 2003. In 1998, establishments across all industries with fewer than 50 employees accounted for 94.8 percent of all establishments and 41.5 percent of all employment. The average payroll5per 5 Payroll includes all forms of compensation, such as salaries, wages, reported tips, commissions, bonuses, vacation allowance, sick-leave pay, employee contributions to qualified pension plans, and the value of taxable fringe benefits.
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Fiscal Policy Institute 11 worker for small establishments was $26,939. This amount was 88 percent of the $30,609 average per worker payroll across all establishments. We compared changes in the number of establishments, employment, total payroll, and average payroll between the 10 higher minimum wage states6(plus D.C.) and the 40 other states. Table 3 summarizes these comparisons. Each of these measures grew faster for the states with minimum wages above the $5.15 an hour federal minimum than for the 40 states where the $5.15 federal minimum wage prevailed. The number of small employer establishments grew by 5.4 percent in the higher minimum wage states, well above the 4.2 percent rate for the other 40 states. The number of employees in small establishments grew by 6.7 percent between 1998 and 2003, more than 25 percent faster than the 5.3 percent growth pace in the other states. Total annual payroll and average payroll also grew slightly faster in the 10 higher minimum wage states than in the other states. 10 Higher Minimum Wage States* (plus D.C.)40 States with $5.15 Federal Minimum WageNumber of establishments5.4%4.2%Number of employees6.7%5.3%Annual payroll24.5%21.2%Average payroll per worker16.7%15.1%*AK, CA, CT, DE, HI, MA, OR, RI, VT, and WA.Payroll in nominal dollarsFigures do not include most government workers, railroad workers, or self-employed.Source: U.S. Commerce Department, County Business Patterns.percent change from 1998 to 2003Table 3: Growth among small businesses, 1998 to 2003,10 higher-minimum wage states (plus D.C.)vs. 40 states with federal $5.15 minimum wageAll establishments with less than 50 employees,6 Whereas 11 higher minimum wage states were used earlier, for this analysis, ten higher minimum wage states were used, since the time period under consideration ends with 2003 and Maine did not increase its minimum wage above the federal level until 2002.
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Higher Minimum Wages and Faster Small Business Job Growth 12 Comparisons for Small Retail Trade Businesses between Higher Minimum Wage States and Other States Table 4 provides a similar comparison between the 10 higher minimum wage states and the other 40 states, but looking specifically at small retail employers—those who would presumably be most affected by increases in the minimum wage. Again, the results are consistently more favorable for the 10 higher minimum wage states over the 1998 to 2003 period. The number of small establishments increased slightly in the higher minimum wage states, but actually decreased in the other 40 states, and the number of employees working for small retail employers increased by 4.1 percent, more than half again as fast as the 2.6 percent increase for small retail employers in the other states. 10 Higher Minimum Wage States* (plusD.C.)40 States with $5.15 Federal Minimum WageNumber of establishments0.6%-0.3%Number of employees4.1%2.6%Annual payroll19.7%16.9%Average payroll per worker15.0%13.9%*AK, CA, CT, DE, HI, MA, OR, RI, VT, and WA.Payroll in nominal dollarsFigures do not include most government workers, railroad workers, or self-employed.Source: U.S. Commerce Department, County Business Patterns.All establishments with less than 50 employees,percent change from 1998 to 2003Table 4: Growth among small retail businesses, 1998 to 2003,10 higher-minimum wage states (plus D.C.)vs. 40 states with federal $5.15 minimum wage
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Fiscal Policy Institute 13 Detailed analysis of trends in New York since the minimum wage increaseAfter the New York legislature overrode a veto by Governor Pataki, the first phase of a three-stage minimum wage increase went into effect on January 1, 2005, increasing the state minimum wage from $5.15 an hour to $6.00 an hour.7We examined the employment effects of this change. Employment effects can be part of national or regional trends, so we compared employment changes in New York with national changes, and with changes in four abutting states (Vermont, which has a very small population, was not included). We looked at total employment, but we also separated out retail trade employment, which is noted for having substantial numbers of low-wage employees. These comparisons (see table 5) show that retail employment and total employment both grewin all three cases (New York alone, the four neighboring states, and the whole nation), between 2004 and 2005. But low-wage growth relative to total employment growth was highest in New York, nearly twice as high as the nation as a whole and more than triple that of the surrounding states. This analysis further weakens the argument that increases in minimum wage will adversely affect low-wage employment.20042005ChangeNew York StateAll non-farm8,461.98,528.30.8%Retail trade868.0879.11.3%1.63Four neighboring states (NJ, PA, MA, CT)*All non-farm14,474.214,605.20.9%Retail trade1,677.01,683.80.4%0.44United StatesAll non-farm131,435.3133,462.91.5%Retail trade15,058.215,254.91.3%0.85*Massachusetts and Connecticut had higher minimums, but did not change them in 2005;Pennsylvania had none; and New Jersey's new minimum did not take effect until October, 2005.Source: Bureau of Labor Statistics Current Employment Survey, 2005 benchmark seriesTable 5: Relative to New York's total job growth, job growth in retail trade hasfared well since the January 2005 minimum wage increase.Ratio of change in retail tooverall changeAverage employment (000s)While low-wage employment, as represented by retail trade, was not adversely affected, employers might have lowered costs and diminished the effectiveness of the increased minimum wage by reducing the hours worked by low-wage workers. For workers with the 8 The minimum wage in NY went to $6.75 on January 1, 2006, and will go to $7.15 on January 1, 2007.
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Higher Minimum Wages and Faster Small Business Job Growth 14 lowest wages, however, we found that both mean and median hours of work per week went up from 2004 to 2005 (Table 6). Thus, it does not appear that low-wage employees lost the benefit of their wage increase through decreased hours of work.Second tenth by wage2004200520042005Mean hours worked per week30.731.333.934.7Median hours worked per week32.033.540.040.0Decile cutoff$7.00$7.00$8.50$8.75Annual average hours worked per week computed for those with positive wages and hours.Source: Current Population Survey ORG files, analysis by FPI.Lowest tenth by wageTable 6: Hours worked by low-wage workers, before and afterJanuary 1, 2005, minimum wage increase in New York
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Fiscal Policy Institute 15 Conclusions A growing body of both empirical and theoretical work has called into question the long-held prediction that a higher minimum wage will reduce the number of jobs. A more nuanced model of how the economy operates has superceded the simplistic supply and demand theoretical model that is the basis for this prediction. This more sophisticated labor market model suggests that employers are likely to respond to a wage increase by improving the skills of their workers and becoming more efficient, and that slightly higher wages would be offset by savings from reduced turnover and higher productivity. Recent empirical evidence supports this new theoretical understanding. As the 1999 Economic Report of the President indicated, studies of the 1996 and 1997 federal minimum wage increases found that there were no adverse employment effects. In the eight and a half years since the federal minimum wage was last increased, several states have enacted and maintained state minimum wage levels above the federal $5.15 hourly minimum. It is now possible to make job growth comparisons over several years between a set of states that have had higher minimum wages than the federal level for a number of years and the remaining states where the $5.15 federal minimum wage has prevailed for most of the period since 1997. This report makes such comparisons, for employment in all industries together and for the retail trade industry, the lowest-wage industry and thus the industry most likely to be affected by the minimum wage. The results clearly point toward no adverse employment effects in the higher minimum wage states between January 1998 and January 2006. In fact, the findings show that job growth in the higher minimum wage states surpassed that in the remaining states. A detailed comparison in New York showed that retail employment grew faster than employment as a whole after that state’s minimum wage increase in 2005. It is sometimes suggested that small businesses are the most vulnerable to minimum wage increases. Some observers contend that small businesses that are labor intensive and that largely employ low-wage workers will experience sharp cost increases, leading them to reduce employment levels. This report also examined the trends in employment and total payroll for small businesses employing fewer than 50 workers in the higher minimum wage states compared to the remaining states. For the 1998 to 2003 period for which analysis is possible using the latest Commerce Department data, employment and payroll growth in the higher minimum wage states consistently performed better than in the remaining states. This analysis should further call into question notions that an increase in the minimum wage will hurt small businesses overall or employment in small businesses in the aggregate.

[Jack Rabbit]

6. The tax cuts are supposed to trickle down to the low paid workers

. . . so that they aren't so low paid anymore.

Of course, it doesn't work that way, but why let facts get in the way of an elitist ideology?

[Recursion]

13. "trickle-up" is the only model that's been shown to work

You pay workers more, and they go out and buy more. We raised the minimum wage in the early '90s, which brought other wages up a little with it, which made people buy more, which stimulated the economy, etc.

Why people refuse to make this basic historical connection is beyond me.

[Jack Rabbit]

15. Who was it who said that if you want to live like a Rupublican . . .

. . . you have to vote like a Democrat?

[Jed Dilligan]

7. Cut those times in half for California

No way a family of three is paying 500/mo unless they're stacked up like chickens in a coop.

[Cleita]

9. Well, it still won't give them enough money to do all those things.

However, if our country does go down the road of national health care, free college education and childcare, then this might keep a family sheltered and with the basic necessities.

[Lydia Leftcoast]

10. One thing I learned during my 3 years as a semi-employed part-time

teaching slave is that if you don't have the cash on hand, the stores can cut prices all they want, and you still won't buy. You think, "Wow, great price on those jeans," but then you think, "I'm not sure if I have enough grocery money to last till the end of the month."

I confess that when I finally got a real job, I went on a bit of a buying spree.

[Cleita]

11. This is why the economy was so good under Clinton.

A lot of people with money in their pockets were spending it, raising the profits of the businesses they patronized, which in turn raised the value of the stockmarket breaking records in the nineties. Everyone benefitted, including the rich.

Let's face it 100 moderate income workers buying Toyotas is going to put more money into the marketplace than one rich guy buying a Mercedes.

[Mythsaje]

16. That's what giving the people at the bottom will achieve

Greater buying power for the average worker means they'll spend more money. More money spent means more economic activity in general. More economic activity means more need for jobs. More jobs means more people working and further stimulating the economy.

The Republican/Conservative economic policies are just so much nonsense and it's about time we had someone on the national stage saying as much. Thom Hartmann on the radio does it all the time, but we need more TELEVISION air-time to spread this information.

Somehow. Someone needs to have the balls to explain this to the average American. We need to completely disassemble the Republican meme of "trickle down" economics. It is, as Bush Sr. called it, "Voodoo economics."

[Straight Shooter]

12. Put it in a manner such that Repubs can relate to it.

How many tanks of gas, how many made-in-China widgets sold through corporations such as Wal-Mart, how many home improvement projects, how much less dependence on food banks, how much less dependence on state-funded medical and dental care, et cetera, et cetera.

You can't tell Repubs how it will improve the lives of the impoverished. You have to frame it in such a way that it tells Repubs how it will improve their own lives.

Hey, maybe women (and couples) who make more money will now reject abortion, because they won't fear having a child who has to live in poverty. How about that. Is that a viable argument? I don't know. I'm asking.

[inthebrain]

14. $7.25 an hour is not going to buy Ted Kennedy shit in his own state

No one on this board should settle for that rate. We are entitled to a living wage and a fair share of the wealth we create. Ted Kennedy should no better and tossing low wage workers table scraps is fucking insulting.

[rman]

18. Right, like Ted Kennedy is the only one

to determine what the minimum wage will be. It's not like the chance of a minimum wage raise depends on how much the raise is... right?
But coming from you, this far-fetched critisism of many a DU-er's favorite Dem is not much of a surprise.

[primative1]

20. Your Right In A Way ...

In Mass. the state minimum wage has long been above that so you are right in asserting it wont mean much here. But it is still a move in the right direction and while Kennedy is unlikely to be thrown a parade when this passes, noone will fault his sincerity in getting even this little measure through.
I will however be watching to see what "OTHER" measures are stapled onto it in order to get El Presidentes signature.
That will tell us what the deal is realy about.