After more than four years without an increase in the federal minimum wage, following decades of neglect of this core income standard, many low-paid workers stand poised to get raises — if not through overdue congressional action, then from states and cities moving ahead on their own to address the wage crisis.
Legislatures in Massachusetts, Delaware, Maryland, Illinois, Minnesota and Hawaii have signaled plans to pursue minimum wage increases this year, and efforts to place minimum wage increases on the November ballot are under way in Arkansas, Idaho, South Dakota, Alaska and New Mexico.
At the local level, voters’ passage of a $15 minimum wage for airport workers in SeaTac, Washington, spurred interest in establishing similar wage rates in major cities such as Seattle, Chicago and New York.
But there’s one group not likely to welcome the effects of state and local wage increases over the next year: the corporate-backed interests that remain dedicated to fighting any increase in the minimum wage, which will have to contend with a flood of new evidence further undermining their paper-thin case against raising pay for low-wage workers.
It’s an article of faith among many lobbyists and spokespersons for low-wage companies like Wal-mart or McDonald’s that any minimum wage increase automatically imposes unmanageable new costs on businesses — a position that flies in the face of the most rigorous economic research over the past two decades, and that overlooks the substantial savings from minimum wage increases in the form of reduced turnover, greater productivity and increased consumer spending.
Consider the impact of minimum wage increases that took effect on New Year’s Day in 13 states. Four of these states — New York, New Jersey, Connecticut and Rhode Island — passed measures in 2013 to raise their minimum wage rates, while the remaining nine states implemented automatic adjustments to their rates to keep pace with rising living costs.
More than 2.5 million low-paid workers will receive a pay raise this year thanks to these wage increases. And as these workers begin to spend their increased earnings on food, gasoline and other basic necessities, state and local economies will benefit from increased consumer spending and greater economic growth.
According to an analysis of Census data by the nonpartisan Economic Policy Institute, these pay increases in 13 states will generate more than $619 million in new economic growth in 2014, helping support the creation of 4,600 new full-time jobs as businesses expand to meet increased consumer demand. A report last year profiling a Washington state McDonald’s franchise owner shows how this works on the ground: The franchisee chose to rebuild and expand his restaurant in Newport, Wash., instead of moving just across the street to Idaho, where the minimum wage is roughly $2 lower. The strong consumer demand his business was enjoying enabled him to continue to expand and employ more workers, even at higher wages.
The decades-long erosion of the minimum wage is one reason for the explosive growth in income inequality. Low-wage jobs now threaten to define the core of the U.S. economy — and over the next decade, low-wage industries such as retail, restaurants and home care are projected to continue supplying the bulk of new job growth. The promise of state and local minimum wage action this year is welcome progress for many low-paid workers across the country. But the crises of low pay and rising income inequality are national in scope and demand national solutions. There’s no better way to start answering both than from the bottom-up, with an increase in the federal minimum wage. And for millions of low-paid Americans, that is the only avenue to higher wages.
The evidence is clear that raising the minimum wage is good for workers and for our economy overall. It’s great that states and localities aren’t waiting to act. Now it’s time for Congress to follow their lead with an urgently-needed increase in the federal minimum wage.
Christine Owens is executive director of the National Employment Law Project.
Terri Henderson, 6, center, whose mother is El Salvador, attends a rally with members of Congress at Union Station's Columbus Circle to announce the Restore Opportunity, Strengthen, and Improve the Economy (ROSIE) Act on July 29, 2014. The legislation provides incentives for government contractors to pay a living wage and other benefits that would help low-income workers.