Action Alert

The Fight for 15 and the Numbers in Between: Raising the Minimum Wage

The Fight for 15 and the Numbers in Between: Raising the Minimum Wage
United Methodist Women and local community activists march for racial and economic justice during the 2014 United Methodist Women Assembly.

Imagine you work a job that pays by the hour, the same type of job as about 59 percent of the U.S. workforce. If you are paid the federal minimum wage like 3 million other Americans, you could very well be living below the poverty line.

The federal minimum wage has been $7.25 an hour for the last eight years. Now Congress is deciding whether or not to raise it again as cities and states start to adopt minimum wages closer to a living wage.

Minimum wages across the country leave families in poverty, including when they are paid the federal minimum wage of $7.25 per hour. A family of two or more living on a minimum wage income makes only $15,080 a year; for a family of three, this means they make $5,000 below the poverty guideline.

Despite increases in worker productivity and education in the United States, the minimum wage has not adjusted to reflect the smarter, more efficient American workforce. Minimum wage workers in 1968 made more than they would today working the same jobs, if wages are adjusted for inflation. Workers have less money in their pockets despite worker productivity doubling and education increasing since 1968. About half of minimum wage earners have a college degree or some college experience today, nearly tripling the number of low-wage workers who could say the same in 1968.

Better educated and more productive, the United States’ minimum wage earners have less purchasing power. Purchasing power simply refers to a person’s ability to buy products or services, and it differs depending on their cost. As costs rise due to inflation, among other reasons, your ability to buy the same products or services declines.

If wages grew with the prices of goods and services, minimum wage would have been $9.54 per hour in 2014. If both increased prices and productivity were factored in, the federal minimum wage would be $25.50 an hour today.

The federal minimum wage was raised to $7.25 from $5.15 in 2007, but it seems that it isn’t enough to cover the 30 percent increase in costs of living.  

Childcare, higher education, healthcare, housing and retirement in 2012 cost $10,600 more than they did in 2000. During that same time period, income rose less than 1 percent.

According to a report by Americans for Tax Fairness, even a $9.00 an hour wage might not be enough for workers to live without public assistance.

"Most people think those abusing the system are the poor, and often the undeserving poor, but this report reveals that workers who are actually working full-time and hard, but just can't cut it on these wages, and the rest of us are helping them along," ATF executive director Frank Clemente said to CBS news. "Ideally, you'd want the companies employing these people to pay the full freight."

A person in a family of three would have to earn at least $10 per hour just to make it barely over the poverty line. This doesn’t even account for taxes or the varying differences in living costs across the United States; yet, about 3.75 million American workers make less than $10.10 per hour.

Who Gets Paid the Minimum Wage?

Employees are guaranteed at least the federal minimum wage if they fall under the protections of the Fair Labor Standards Act, or FLSA. The FLSA, which establishes minimum wage, overtime pay and youth labor standards, covers most public and private employees. However, there are a few exceptions: domestic service workers providing companionship services in private homes, certain employees with computer-related jobs and tipped workers. Employers have to pay tipped workers, such as waiters and waitresses, at least $2.13 an hour. This assumes that the tips will make up the rest of their wages, equaling at least $7.25 per hour.

About 62 percent of the 3 million workers paid the federal minimum wage or less are women, despite the fact that men make up a larger share of the workforce.

Women’s overrepresentation in low paying jobs is one of the reasons that American women face a pay gap. Women are overrepresented in tipping jobs and domestic service work, where the full federal minimum wage is not guaranteed under the FLSA. Women make up about two-thirds of tipped workers and about 92 percent of workers in private households.

Women are still earning 77 percent of their male counterparts’ income. Women of color face even worse pay gaps; African-American women make 64 cents and Latina women make 56 cents for every dollar a white man makes.

This pay gap worsens for the younger generation too. Among 20- to 24-year-old hourly workers, women were twice as likely as men to be paid minimum wage or less. Therefore, women are the most affected when the minimum wage doesn’t increase with rising costs.

This is especially true for childcare costs, which averages out to $11,666 annually. That’s more than public college tuition in over half the states. For single parents, the cost of childcare could mean never breaking even, meaning they lose money when they go to work. However, there are few alternatives for a single parent responsible for the entire household.

The cost of childcare can take the form of work schedule cuts too. Work schedules for working families are usually erratic, making it impossible to plan for childcare. If a person has no choice but to arrange their work schedule around childcare, they could lose hours. Less hours means less income for the very childcare for which they sacrificed hours. A bill in Congress, The Schedules That Work Act (H.R. 3071 & S.1172), would stop employers from punishing employees who need to change their schedule by cutting hours. If passed, the working family wouldn’t have to choose between their hours and care for their children.

States Move to Raise Minimum Wage

To meet costs and keep families out of poverty, some states and cities have been raising their own minimum wages. The question, however, becomes: how much?

Twenty-nine states and the District of Columbia have set higher minimum wages than the federal wage of $7.25, and they may set them higher.

The Fight for 15 movement, in particular, has gained momentum in several cities. Supporters of this movement propose raising the minimum wage to $15.00 per hour—a raise that fast-food workers started to demand two years ago in strikes and boycotts across the United States. Seattle, Los Angeles, San Francisco and New York have started to raise their minimum wage to $15.00. In New York’s case, the $15.00 per hour wage is for fast-food workers only. Those for the raise say that $15 per hour is necessary due to the costs of living in an urban setting. By giving more money to lower income families, they argue that domestic spending will increase due to the fact that lower income individuals are more likely than high income individuals to spend their money rather than save it.

Others worry that employers will cut jobs or workers’ hours if the minimum wage is $15 per hour. Small businesses, especially, could be affected by a large hike in the minimum wage. If more people are out of work or have their hours cut, they will actually have less money to spend, critics of the movement argue.

However, no one is sure how many jobs could be lost, since this particular minimum wage is untested. Extensive research has been done on minimum wages between $6.00 and $10.00, which found little to no impact on employment. However, research is limited on wage increases above that. Fifteen dollars is the highest minimum wage to be attempted, and its effect will depend on the local economy.

In Seattle, the first city to try the $15 per hour wage, critics worried that restaurants were closing in response to the raise. However, these claims were found to be false; after all, the raise is set to occur incrementally over the next seven years. There will be changes, The Seattle Times reported, but it’s likely to come in the form of paying an extra nickel per dollar on your restaurant bill.

For Los Angeles, the Institute for Research on Labor and Employment at Berkeley projected that the raise could result in a loss of 3,472 jobs by 2019, or 0.2 percent of all employment in the city. In San Francisco, the government projected they would lose 15,000 jobs, or 2 percent of the city’s workforce. The effects of a higher minimum wage become complicated in New York because unlike other cities, it only raised the minimum wage for fast-food workers of chains with at least 30 locations. Critics of its narrow scope argue that workers in other industries could use a raise too and that it imposes higher costs on one type of business. Critics also argue that it encourages fast food restaurants simply to alter their business model to avoid the hike by changing to independent stores, ordering prepared food instead of hiring cooks or upgrading technology to take orders without the help of a worker. However, supporters of the New York minimum wage raise say the economic cost will be minor.

“Even if you have some gaming, and suppose that the big companies lose market share, this doesn’t mean fewer jobs,” Center for Economic and Policy Research economist Dean Baker said to The New York Times. “The people who might have eaten at McDonald’s will instead go to a smaller fast-food chain (or non-chain) or eat at a regular sit-down place. If this is the price of getting a big pay increase for lots of people working at McDonald’s, it may well be worth it.”

Wage Goes Further

A $15 minimum wage has different meaning for workers in New York, however, than for workers in Macon, Georgia.

Depending on the cost of living, a $15 wage goes further in some areas, in terms of purchasing power, according to the Pew Research Center.

In its study, the Pew Research Center found that in Honolulu, the most expensive metropolitan area in the United States, $15 has a real purchasing power of $12.24. In the least expensive metropolitan area, $15 is worth $19.23. That means a person in Honolulu would be worth $489.60 a week in purchasing power. If that person moved to Beckley, West Virginia, for a job with the same pay, he or she would end up with $279.60 a week extra to spend. Because cost of living can differ so dramatically, other states and cities may not go as high as $15 per hour.

Minnesota, for example, raised its minimum wage to $9.00 an hour from $ 6.15 in August, giving it the highest minimum wage in the Midwest. Even with a lower minimum wage, Minnesota still will have trade-offs. Businesses in Minnesota are saying the raise, though frustrating, is not having dire consequences.

“[It’s] allowing people to earn a better living through their work. We’re not talking about handouts here,” Minnesota Gov. Mark Dayton said. “We’re talking about rewarding people who work with a better income, which makes them better citizens.”

Why the Federal Minimum Needs a Boost

Since states and cities are pushing for higher minimum wages, some have begun to question the necessity of raising the federal minimum wage.

Opponents of raising the federal minimum wage state the same reasons for avoiding raising state minimum wages: loss of jobs, increased prices and that a raise won’t actually help those in poverty. However, some opponents say that raising minimum wage should be left up to employers, like Walmart.

Walmart raised the starting wage for about 500,000 workers to $9.00 per hour and is raising the wages of 100,000 specialized workers and managers this summer.

“We need to leave it to the private sector. I think state minimum wages are fine,” Former Florida Gov. Jeb Bush said. “But the federal government doing this will make it harder and harder for the first rung of the ladder to be reached, particularly for young people, particularly for people that have less education.”

Though Walmart isn’t the only corporation to raise wages, U.S. income in general has remained stagnant. It’s for this reason that cities and states have joined the movement to raise minimum wage in the last two years.

However, not all states choose to raise their minimum wage and instead rely on the federal minimum wage. Sixteen states use the federal number as their state minimum wage. Five of these states don’t have state minimum wage laws at all, and two have state minimum wages below the federal wage. Two states also use the federal minimum wage as a standard to decide at least some part of their minimum wage laws.

So even though several states are pushing for living wages, a higher federal wage would be needed to affect these states that rely on this standard to set their own minimum wages.

Again, the question is: how much?

Several Suggestions

In Congress, there are several suggestions. The most recent suggestion, the Pay Workers a Living Wage Act (S.1832 & H.R. 3164), took the momentum from the Fight for 15 movement and suggests raising the federal minimum wage incrementally to $15 per hour in four years.

Supporters say it will help citizen who work but still can’t afford their bills. “In the richest country on the face of the Earth, no one who works 40 hours a week should be living in poverty,” said Sen. Bernie Sanders, who introduced the bill. “The people who serve our food and clean our offices should not be forced to work two or three jobs just to pay the bills.”

Some are not convinced that $15 per hour would work across the nation, pointing to the fact that each state has different expenses. Back to the Pew Research Center’s study on purchasing power, that wage would carry more weight in rural, less expensive areas than in expensive, metropolitan areas. In other words, while it may help urban workers, it could end up hurting rural economies.

“Raise minimum wages too high, and you’ll eventually choke off employment, harming the very people that the policy is intended to help,” finance professor Noah Smith said in the Bloomberg View. Others say that it’s too soon to push for a federal $15 minimum wage because we haven’t seen the full effects of it in the cities that already passed it.

Other bills in Congress raise the federal minimum wage at different levels. The Original Living Wage Act (H.R.122), for example, would put the Secretary of Labor in charge of raising the minimum wage every four years. The wage would have to be at least 15 percent higher than the federal poverty threshold for a family of four, therefore raising minimum wage to $13.41.

Some economists, however, are saying $12.00 per hour is the magic number. The Raise the Wage Act (S.1150 & H.R. 2150) would raise the minimum wage to $12.00 per hour over the next four years and leave the Secretary of Labor in charge of determining the amount from then on.

The Economic Policy Institute conducted a study and found that raising the minimum wage to $12.00 by 2020 would return the wage distribution back to its 1968 levels. There’s been a compression of median wages, according to the EPI, over the last five decades. In 1968, the minimum wage was its highest, unemployment was 3.6 percent and the wage distribution was better across classes. Overall, the EPI found that the United States could afford this minimum wage, especially since productivity and education have increased since 1968.

The $12 minimum wage could affect more than a quarter of the U.S. workforce, according to supporters of the bill, including 30 percent of wage-earning women. The increase also falls in line with average federal minimum wage increases in the past, so supporters argue it won’t be too much, too fast.

This act would also gradually get rid of the FLSA’s separate wage for tipped workers. Most tipped workers are women, so by phasing this out and guaranteeing they will get the same federal minimum wage as other workers, more women will be earning something closer to a living wage.

With one of these bills, both men and women will get even closer to receiving living wages in the United States. As Franklin Roosevelt once said, “It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country.”

Posted or updated: 11/23/2015 12:00:00 AM

Suggested Pages:

*Economic Justice

*Action Alerts


Take Action

Meet your Congressional representatives in your district or contact them through the Congressional switchboard (202-224-3121). Urge them to support the following bills.

Wages and Work:

  • Raise the Wage Act (S.1150 & H.R. 2150) proposes raising the minimum wage to $12 per hour over the next four years, before leaving the Secretary of Labor in charge of determining the amount each year.
  • Original Living Wage Act of 2015 (H.R. 122) suggests that the Secretary of Labor adjust the wage every four years to at least 15 percent higher than the federal poverty threshold for a family of four. If done this year, it would increase the wage to $13.41.
  • The Schedules That Work Act (H.R. 3071 & S.1172) requires employers to provide more predictable, stable schedules and allows employees to request changes to their work schedules without fear of retaliation.

Fair Pay:

  • Fair Pay Act of 2015 (H.R.1787) proposes prohibiting discrimination in the payment of wages on account of sex, race, or national origin.

Childcare:

  • Helping Working Families Afford Child Care Act (H.R.1780 & S.661) and the Child and Dependent Care Tax Credit Enhancement Act of 2015 (S.820) would increase the childcare expense tax credit amount and expand who is eligible.

Learn

  • Visit the U.S. Department of Labor website to examine the myths and questions concerning minimum wage.
  • Take action in your state to increase minimum wage. You can visit the minimum wage website to learn more about minimum wage in your state and around the country.
  • Read more in The Economist about the wage crisis in America.
  • See what the $15 per hour wage would be worth in your area:
  • Read Resolution 4052, “Economic Justice for a New Millennium” (pages 545-568), in The Book of Resolutions of the United Methodist Church (2012).
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