Clarence Fanto: Evidence from higher minimum wage should spur Congress to act

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LENOX — Although 29 states, including Massachusetts, have minimum wages above the federal mandate of $7.25 per hour, the rest don't, and too many of their residents live near or below the poverty line.

The solution seems obvious: Increase the federal minimum to $15 an hour, make it mandatory and allow states or cities in costly areas to go higher. A U.S. House bill awaiting action to lift the pay rate to $15 by 2025 would increase wages for at least 17 million workers, possibly as many as 25 million, according to projections from the nonpartisan Congressional Budget Office.

But when it comes to taking steps to reduce this country's outrageous pay inequality, nothing is easy. The same CBO forecast issued this past week predicted the proposal would lift 1.3 million people out of poverty, but would put a similar number of Americans out of work.

The federal minimum has been stuck at $7.25 for 10 years. The overall average wage for U.S. workers is $23.43 and is forecast to hit $26 next year or soon thereafter.

The CBO report cautions that the proposed increase in the House bill would have an impact on wages "unprecedented in recent history."

Critics are crying foul, calling the plan a redistribution of income from the highest paid to low-income workers. Business owners would face lower profits because of increased labor costs. Well-off Americans would see higher prices for restaurant meals as well as goods and services in general, they say.

But supporters say that's inevitable, since minimums have been absurdly low for a decade, long after the Great Recession eased and finally ended, creating a boon for investors and the upper middle class as well as the most prosperous among us.

They also argue that states and cities that have raised minimum pay on their own have seen far fewer job losses than expected.

"As a group, low-wage workers would be just unambiguously better off," according to Heidi Shierholz, policy director at the liberal Economic Policy Institute. "The bottom line is, the benefits exceed the costs."

The institute predicts that a $15 federal minimum wage within five years would generate $120 billion in higher wages. Since lower-paid workers spend much of their extra earnings, the wage boost would stimulate the economy and spur greater business activity and job growth.

Considering the ripple effects of a higher nationwide wage floor, an institute fact sheet foresees higher pay for 40 million employees, 26 percent of the workforce, "enough to make a tremendous difference in the life of a preschool teacher, bank teller or fast-food worker who today struggles to get by on around $20,000 a year."

The typical worker who would benefit from a $15 minimum wage is a 35-year-old woman with some college-level courses who is employed full time, the institute points out.

It also demolishes the notion that most minimum wage workers are youngsters on their first jobs. In fact, fewer than 10 percent are teenagers, and more than half are adults ages 25 to 54. Sixty percent work full time, and women represent 58 percent of the total.

Minority groups would benefit greatly, with nearly 2 out of 5 African Americans and 1 out of 3 Latinos seeing a raise if the federal minimum is increased to $15.

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Among others who would benefit:

- Nearly one-third of manufacturing workers;

- About one-fifth of construction workers;

- One-sixth of educators and one-fourth of health care staffers.

That's not surprising, given that the median pay for many jobs in those fields is well under $15 an hour: preschool teachers ($13.84), substitute teachers ($13.47), nursing assistants ($12.78) and home health aides ($10.87).

To their credit, some major employers have raised their starting pay to $15 an hour or more — Amazon, Whole Foods (owned by Amazon) and Target, to mention a few.

Here in Massachusetts, the current $12 hourly minimum goes up, in small steps of 75 cents a year, until it hits $15 on Jan. 1, 2023. That's agonizingly slow, of course, and partially explains why you see "hiring now" posters at so many Berkshire businesses.

The labor market is so tight, not only here, that employers have to consider raising their entry-level pay rates on their own and offering competitive benefits. Many resist, resulting in understaffed businesses, services, restaurants, you name it.

The Economic Policy Institute makes the case that low-wage workers earn less per hour today than their counterparts 50 years ago, adjusted for inflation, while workers are producing more from each hour of work, with productivity nearly doubling since the late 1960s. If the minimum wage had been raised at the same pace as productivity growth since the late 1960s, it would be over $20 an hour today, according to the institute.

Given that economics is a "dismal science," a phrase coined by 19th-century Scottish writer and philosopher Thomas Carlyle, there's bound to be pushback from conservative economists and think tanks.

But I'm impressed by research from Arindrajit Dube, an economist at the University of Massachusetts-Amherst, who cautioned the Congressional Budget Office, based on a preliminary version of its report, that its negative projections were off-base.

"The trade-offs for job losses assumed by the CBO are more pessimistic than warranted based on the weight of evidence," he stated, "especially from high-quality and comprehensive studies."

My bottom line is that cities and states that have raised their minimums on their own are not seeing significant negative impacts. That should be good enough evidence that Congress should put aside its dysfunction and approve a bill that would benefit the entire U.S. economy and population.

Information from The New York Times was included in this commentary.

Clarence Fanto can be reached at cfanto@yahoo.com. The opinions expressed by columnists do not necessarily reflect the views of The Berkshire Eagle.


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