Tuesday, June 17, 2014
The state House and Senate last week settled debate on the minimum wage in Massachusetts, agreeing to raise it to $11 an hour over two and a half years. But expect the wider argument to rage on nationally, for this overdue move is unfairly labeled a job-killer.
Even if raising the state’s minimum wage causes some employers not to fill openings, lawmakers had an obligation to their lowest-income constituents to move the needle on pay. The increase will make it a bit more possible for people working at minimum wage in Massachusetts to support themselves and their families.
And it pushes back against a sickening fact: The share of income in the U.S. going to workers, rather than to investors, is at its lowest level since the 1920s. One result of that is to put a drag on the economy. Working people spend what they earn, while holders of capital invest gains or sit on them. That’s one of the reasons the International Monetary Fund on Monday downgraded its forecast for the U.S. economy. Its director, Christine Lagarde, might have been cheered at Smith College last month if she’d come and said, as she did Monday, that increasing the U.S. minimum wage would be “helpful from a macroeconomic point of view.”
It was the first time the IMF has called the U.S. out for a minimum wage that lags historical and international standards. Because of inflation, the $7.25 an hour federal minimum wage is worth 20 percent less than it was 30 years ago.
That’s one of the reasons Massachusetts and 22 other states and the District of Columbia mandate higher minimums. Compared to Seattle’s move to set the minimum at $15 an hour, action in Massachusetts is conservative.
But that’s not how conservatives see it. Businesses in the Bay State lobbied against an increase, winning a delay in the first rise until Jan. 1, when the current $8 wage will go to $9. The state’s minimum kicks up one dollar at the start of each of the next two years. Employers also won a three-year freeze in unemployment insurance costs.
We think that concession and the phased-in change give employers the time and means to adjust to this new cost of doing business. The state’s minimum wage has not been increased since 2008.
As lawmakers in the two chambers pushed for agreement, the Senate’s sensible plan to link future increases to the U.S. Consumer Price Index failed to make the cut. That’s unfortunate. It means that, in time, the minimum wage will again lag, forcing low-wage workers to fall behind.
In Washington, this Main Street issue remains in limbo. In January 2013, President Obama used part of his State of the Union address to call for increasing the federal minimum to $9. Even that hike, which we do not expect to see, plays only feeble catch-up by bringing the pay level to what it was in the early 1980s, when adjusted for inflation.
Still, the increase is needed and would put more money in the paychecks of 15 million people, more than half of them women. According to the Bureau of Labor Statistics, 4.7 percent of hourly workers in the U.S. earn the minimum wage. More than half work full time for that pay. One-third are raising children and their average age is 35, according to the Department of Labor.
Labor Secretary Thomas E. Perez said last week that proposed increases in the U.S. minimum hold the potential to lift 2 million people out of poverty, though a Congressional Budget Office report in February put the number at 900,000.
Either way, those are big numbers. While Massachusetts and nearly two dozen states refuse to settle for the federal minimum, many others, mostly in the South, have not done the right thing.
Though the Obama administration stands little chance in a mid-term election year of getting a general increase through Congress, it is pursuing a rule change on its own to increase the minimum pay for federal contract workers to $10.10 an hour on Jan. 1.
While the IMF sees value in an increase, the Federal Reserve remains on the sidelines. Its chief, Janet Yellen, has cited the CBO report’s suggestion that up to 500,000 jobs could be lost if the higher of two proposed federal minimum wage increases is adopted. The report notes that the effect could range from a “very slight decrease” to the loss of as many as one million jobs.
Job losses are a concern, but that’s no reason to keep low-wage workers in a state of near penury. Back in 1938, the Fair Labor Standards Act set the federal minimum wage at 25 cents an hour. Congress has steadily, if inadequately, increased the rate to keep up with the times, backed by public support before that body fell into dysfunction.
The federal rate is no longer fair and should not be the standard.