Randy Albelda Noah Berger: Lift the employment floor
BOSTON -- State economic policy should aim to make life better for regular people. That means that everyone who works for a living should be able to make a living -- not just scraping by, but a living with security and the ability to raise children and save for the future.
For the past several decades, our national economy and policy makers have not achieved these goals. Workers did their part. American productivity has doubled. But the resulting prosperity has not been broadly shared. Incomes have increased dramatically for the very wealthy, while wages for folks in the middle have barely budged -- and our lowest wage workers have seen the value of their wages decline.
For a hundred years Massachusetts has been setting minimum wage rates. Today, however, that wage, at $8 an hour, is worth 25 percent less than it was in 1968. Adjusting for inflation, a full-time minimum wage worker made $21,000 a year in 1968. Today that worker makes just $16,000. That decline has contributed to growing inequality and to a declining standard of living for lower wage working people -- even as our economy continues to grow.
Restoring the purchasing power of the minimum wage to its former levels would give a raise to over half a million low-wage working people, who, in turn would buy more goods and services, boosting the economy.
These wages matter. Eighty percent of those who would be affected by a minimum wage increase are adults. Half are the primary earners in their families. Many of one in five who are younger than 20 use their wages to help their families make ends meet or to pay for ever-increasing college costs.
A raise for tipped workers, likewise, is long overdue. Today the tipped wage is only 33 percent of the regular minimum wage: just $2.63 an hour. It has not been raised since 1997. True, all workers are supposed to make the full minimum wage after tips are included, but it does not always work out that way. National studies have shown that states with low-tipped minimum wages have higher rates of poverty among tipped workers and 73 percent of tipped workers are women.
Over the past two decades a number of careful economic studies have compared states or counties with higher and lower minimum wage rates. Minimum wage increases reduce poverty, and have small or no impacts on overall employment. Some studies have found small price increases, particularly in minimum wage intensive industries. Paying a fair wage to the person who cooks at a restaurant may mean paying a few cents more for a hamburger. It's worth it.
A minimum wage increase won't solve all of our economic problems, but it will improve the economic lives of hundreds of thousands of people in Massachusetts, who are among the hardest hit by an economy in which the rewards of growth have flowed overwhelmingly to those at the top.
It will also send a message: In Massachusetts we value hard work and want an economy that rewards everyone who works hard.
Randy Albelda is a professor of Economics at the University of Massachusetts Boston and Noah Berger is president of the Massachusetts Budget and Policy Center.
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