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Perilli: Rhode Island Needs a Living Wage

Wednesday, January 01, 2014

 

Rhode Island's new $8 minimum wage is good, but not enough, believes John Perilli.

What's it take to get a good raise around here?

I have to give our General Assembly credit: they have, unlike Congress, taken pains to increase the state minimum wage by a small amount for the past two years. Today it rises to $8 an hour. Nearly ten thousand Rhode Islanders paid at the state's lowest legal rate are getting an important boost, one that for many families can be the difference between getting by and making painful cost-cutting decisions.

However the fact remains that as our workers have become more productive, the minimum wage has fallen behind. In real terms, both the Rhode Island and federal minimum wages are down from their high water marks in the 1960s. But our neighbors to the north are starting to buck this trend: A bill up for debate in the Massachusetts General Court would raise their statewide minimum wage to $11 by 2016.

How will Rhode Island respond? For all the talk of being competitive with our neighbors, minimum wage parity comes up surprisingly little. Let's have a New Year's resolution here in the Ocean State. No Rhode Islander––in fact, no one, period––should have to be a poor full-time worker. We need a double-digit minimum wage.

Living on the Edge

As of today, the day laws across the country change to mark the new year, Rhode Island's minimum wage has officially ticked up 25 cents to an even $8 an hour. The federal minimum wage, the bottom floor for the entire nation, remains $7.25 an hour, where it has stayed since 2009.

Today is also the first day of the bold new Medicaid expansion under the Affordable Care Act. The federal healthcare program for the poor now covers anyone at or below 133 percent of the poverty line. As we'll see, this is a crucial weight on the scale when we debate raising the minimum wage.

Now let's take a family of four, two parents and two children, where both parents make the federal minimum wage. According to the Census Bureau, the poverty line for a family of four is $23,550 a year. This means that if their income is below $31,322, they are automatically eligible for Medicaid. But can they reach this threshold? If both parents work 40 hours a week for 52 weeks a year, making $7.25 an hour, the family will earn $30,160 in a year, missing the mark by over a thousand dollars.

This is completely backwards.

And this is only if their state offers them the absolute minimum of Medicaid coverage. In Rhode Island, Medicaid for families is covered for up to 181 percent of the poverty line for parents and 250 percent for infants and children, meaning that families could earn even more but still not break away from being eligible for welfare.

Of course, this doesn't even account for what having two parents working full time on subsistence wages means for children. Delayed language acquisition and permanent academic disadvantages are but two of a long list of problems.

America––nay, the Earth itself––makes a basic promise to laborers. Work hard, and you will be able to reap the benefits of your toil and enjoy the fruits of self-sufficiency.

Unfortunately, this doesn't seem to apply anymore.

This odd post-industrial problem, the fact that families can work full time and still be poor, is the most compelling reason to raise the minimum wage. If we in Rhode Island want to pay more than just lip service to fighting poverty, we must give our lowest-earning workers a significant raise.

Tried and Untrue

At this point, opponents of the minimum wage will roll out all the old cannons. Raising the minimum wage will destroy jobs and hurt businesses. Teenagers looking for job experience will be forced out of work! If the minimum wage debate ever comes to a head in the General Assembly this year, I guarantee that we will hear these lines repeated ad nauseam.

The right-leaning Rhode Island Center for Freedom and Prosperity loves to put out studies showing just how many jobs the Ocean State will lose from raising the minimum wage. One of their latest screeds argues that raising Rhode Island's minimum wage to $10.10 an hour would cost the state over three thousand jobs.

This is interesting, considering that similar studies do not show this effect at all. The most widely cited one, conducted by economists Alan Krueger and David Card, observed fast food restaurants in New Jersey and Pennsylvania. New Jersey had just raised its minimum wage, while Pennsylvania had not. The study found no evidence that raising the minimum wage had destroyed jobs.

In truth, economists are still deeply divided over the minimum wage. There is no conclusive evidence that raising the minimum wage kills jobs, nor any proof that it doesn't.

However, far more convincing is the evidence that increasing the minimum wage raises the earnings of working and middle class households. The Economic Policy Institute found that if the federal minimum wage were raised to $10.10 an hour, more than half of income gains would be seen by families making less than $40,000 a year. My original point stands: If we want to help Rhode Island's middle class, raising the minimum wage is the sensible thing to do.

A Different Point of View

If you're a conservative and still unconvinced about the minimum wage, then stick around. There's another way to look at this issue.

Consider the aforementioned family of four, which had two parents working minimum wage jobs but still had to take Medicaid money to get by. The benefits they get from the government are, in effect, additional wages which allow them to escape poverty. This means that you––the taxpayer––are basically paying part of their salary without getting anything in return.

No matter if you're conservative, moderate or liberal, this fact should be infuriating. Businesses large and small are getting the public to pay their employees while taking all revenue from the labor for themselves!

Raising the minimum wage would privatize this problem. Companies will be forced to pay their workers a wage that puts them out of the reach of state and federal entitlement programs, meaning that the poorest workers get a raise, and taxpayers pay less to support them.

So this new year, let's make some commitments. Let's have no more of Walmart holding charity drives for its own employees. Let's have no more of McDonald's tellings its workers to get a second job.

We can do better than this. Let's give our workers a wage they can live on.

John Perilli is a native of Cumberland, RI and a junior at Brown University. He is the Communications Director for the Brown University Democrats. The opinions presented in this article do not necessarily represent those of the organizations of which John Perilli is a member.


Related Slideshow:
Pew Research: New England Employment Figures From FY2007 to FY2013

While unemployment figures receive more media attention, the employment rate is a preferred index for many economists because it provides a sharper picture of changes in the labor market. The unemployment rate, for example, fails to count workers who stopped looking for a job. By focusing on 25- to 54-year-olds, trends are less distorted by demographic effects such as older and younger workers’ choices regarding retirement or full-time education.

Below are the employment rates in FY2007 and FY2013 for New England states as referenced by the Pew Charitable Trust's "Fiscal 50: State Trends and Analysis" Report, ranked from best to worst.

Prev Next

#1 Vermont

CY2007 Employment-population ratio: 83.5%

FY2013 Employment-population ratio: 82.6%

Percentage point change, CY2007-FY2013: -0.9

Statistical significance of percentage point change, CY2007-FY2013: not significant

Prev Next

#2 New Hampshire

CY2007 Employment-population ratio: 85.1%

FY2013 Employment-population ratio: 82.4%

Percentage point change, CY2007-FY2013: -2.7

Statistical significance of percentage point change, CY2007-FY2013: not significant

Prev Next

#3 Massachusetts

CY2007 Employment-population ratio: 80.3%

FY2013 Employment-population ratio: 79.1%

Percentage point change, CY2007-FY2013: -1.3

Statistical significance of percentage point change, CY2007-FY2013: not significant

Prev Next

#4 Connecticut

CY2007 Employment-population ratio: 81.8%

FY2013 Employment-population ratio: 77.1%

Percentage point change, CY2007-FY2013: -4.8

Statistical significance of percentage point change, CY2007-FY2013: significant

Prev Next

#5 Rhode Island

CY2007 Employment-population ratio: 82.5%

FY2013 Employment-population ratio: 76.8%

Percentage point change, CY2007-FY2013: -5.7

Statistical significance of percentage point change, CY2007-FY2013: significant

Prev Next

#6 Maine

CY2007 Employment-population ratio: 81.3%

FY2013 Employment-population ratio: 76.6%

Percentage point change, CY2007-FY2013: -4.6

Statistical significance of percentage point change, CY2007-FY2013: significant

Prev Next

United States Average

CY2007 Employment-population ratio: 79.9%

FY2013 Employment-population ratio: 75.9%

Percentage point change, CY2007-FY2013: -4.1

Statistical significance of percentage point change, CY2007-FY2013: significant

 
 

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Comments:

Art West

John,

Here's what I want you to do:

Open a restaurant (using your savings, borrowing from banks... maybe risking it all). Pay your workers really well, and since you're a very generous man, I want you to pay them double the minimum wage. Maybe add in healthcare benefits while you're at it.

The business you're in has razor thin margins and is highly competitive. Are you going to raise your meal prices to pay for the higher labor costs? (Not to mention the myriad additional costs of doing business from insurance to taxes to regulatory requirements.) Will your customers walk away if you charge higher prices? Does the high labor cost force you to fire workers and get by with fewer people? Are you able to stay in business?

Try some real-world experience that requires real decisions and then come back and report on your findings.

Sammy Arizona

70+ years ago, FDR signed the minimum wage law, since then the Right-Wingnut-rubes have strongly opposed every increase (even of just pennies per hour) with false predictions of economic doom, In those 70+ years, the American economy has grown to be the largest economy in the world.
Folks like the draft-dodging coward Rush Limbaugh, and many others on the Reight, have called for the abolition of the minimum wage.

They want the USA to be more like the conservative paradise Bangladesh were folks earn 17 cents and hour. and Children are paid 7 cents an hour, or less
Happy New Year...Sammy

Kendall Svengalis

This article is what you would expect from a wet-behind the ears Brown student devoid of real world experience and suffering from “higher ed” indoctrination syndrome. This is simply more of the same Obama income redistribution tripe that the left feeds on and which drove the terminally clueless "Occupy Wall Street" movement. The demagogues on the left need a scapegoat on which to pin the woes of the underclass. This is of the same ilk. What many naïve college students fail to comprehend is that the rise in income disparities has done nothing to impede economic mobility in the United States, which remains strong.

This kind of static economic “analysis” ignores the fact that those in the bottom quintile experience a significant rise in incomes over time. For example, according to the Treasury Department report from 2007 ("Income Mobility in the United States from 1996 to 2005"), taxpayers whose incomes were in the bottom 20 percent in 1996 had a 91 percent increase in incomes by 2005. Yet, the income inequality outrage and gum bumping is based on the false premise that people at the bottom rung of the income scale, many of them first-time job holders, are stuck there indefinitely.

The University of Michigan Panel Survey on Income Dynamics showed that, among people who were in the bottom 20 percent income bracket in 1975, only 5 percent were still in that category in 1991. Nearly six times as many of them were now in the top 20 percent in 1991. Furthermore, the success of those in the top 1% has almost no bearing on whether those in the bottom quintile can move up. The Occupy Wall Street narrative is, quite simply, food for the simple-minded, the kind of voters who would support a Barack Obama or political hacks like Sheldon Whitehouse. And in the current political environment, it is a pathetic attempt by Obama and his minions to change the subject from the disaster of Obamacare. And not just the roll-out, but the implosion of the entire program because young people, justifiably, refuse to sign up.

The same is true with the minimum wage or “living wage” debates. A year after being hired, two-thirds of minimum wage workers are making more than the minimum wage. Raising the minimum wage simply makes it more difficult for young people to gain the work experience necessary to begin climbing the economic ladder. The chief tragedy of our moribund economy are the millions of young people, many of them minorities, who can’t even gain that initial job experience because the cities in which they live are already suffering from a economic climate hostile to business growth and job creation.

The minimum wage and “living wage” rhetoric is also a staple of organized labor, which is more concerned about raising the wage floor as an argument for their own subsequent wage demands than it is about helping the unemployed who need a chance to hop on the first rung of the economic ladder. Naturally, organized labor is in a n unholy alliance with the Democrat Party because it depends on Democrat politicians to maintain the forced unionization structure that keeps their dues coffers filled, pays the six figure salaries of union operatives and finances Democrat political campaigns. Without the forced dues of organized labor, where would Sheldon “To the Manor Born” Whitehouse and Jack Reed be. They might actually have to raise campaign funds through voluntary donations. Horrors!

The left and the Democrat Party feed on political demagoguery designed to ensnare naïve voters, even when their prescriptions harm the very people them claim to be helping. It's why RI is in the economic sewer and will probably stay there.

G Godot

What we would appreciate from YOU, Sammy Arizona, is a lot less name calling and some reference to fact. I'm not holding MY breath.

G Godot

Do they teach Economics at Camp Bruno or haw the discipline been replaced with a seminar in "How to shout down invited guests whose ideas we don't want to think about" ?

Jimmy LaRouche

"What's it take to get a good raise around here?"

Short answer: Have skills an employer wants or have the cojones to stop whining and open your own business. Not holding my breath...

Jimmy LaRouche

By the way, great response Art....

Art West

Jimmy,

Ditto. Let's keep fighting the good fight... in comment sections, and more importantly, via hands-on actions in our communities.

Michael Byrnes

John,

You start with a good question “What's it take to get a good raise around here?” It might be more useful to look for ways to help those working at minimum wage to develop the skills and work ethic to move ahead. It would be most enlightening to know how many of the nearly ten thousand Rhode Islanders paid at the state's lowest legal rate are heads of households. It would also be interesting to know how long people have been working at minimum wage – one year, three years, five or ten years. Furthermore some age brackets and education levels would tell us much about how serious a problem this is and what might be done to make it better.
I was not sure if you were serious when saying that raising the RI minimum wage from $7.75 to $8 an hour that these ten thousands would getting an important boost. You do go on to say “No Rhode Islander––in fact, no one, period––should have to be a poor full-time worker. We need a double-digit minimum wage”. Of course you realize the term ‘poor’ is a relative condition, unless everyone earns exactly the same wage. As someone once said “For you always have the poor with you”. As Mr. Svengalis so rightly pointed out the poor as a category will always be there but as long as real people in that abstract category have the ability to move up the situation is not a dire as you maintain.




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