Pages tagged "Minimum Wage"
As our senior policy analyst Sean O’Leary noted earlier this year, tuition at West Virginia’s public colleges and universities has skyrocketed over the last decade while state support for higher education has declined. The rise in tuition and fees at our public colleges has not only eclipsed the rate of inflation, but also the ability of students to work their way through college.Read more
Yesterday, I had the privilege to discuss efforts to raise the minimum wage with Hoppy Kercheval on his Talkline show. Today, Hoppy followed up with this commentary, arguing that raising the minimum wage is bad economics because it wouldn't actually help the working poor. But, the facts that Hoppy cites in his commentary don't really support that argument.
Hoppy points to research from economist David Neumark, who says that 29% of the benefits of raising the minimum wage to $10.10 would go to families with incomes at least three times the poverty level (if David Neumark sounds familiar, he's the economist whose work on the employment effects of the minimum wage isn't terribly objective).
Neumark's work largely agrees with the findings of the Congressional Budget Office, who said that raising the minimum wage would increase income by $5 billion for families below poverty, $12 billion for families between one and three times the poverty level, and $2 billion for families between three and six times the poverty level. So some of the benefits would go to families who aren't desperately poor. But rephrase Neumark's and the CBO's findings, and they don't sound all that bad: over 70% of the benefits would go to families below three times the poverty threshold. Not to mention that the CBO also found that raising the minimum wage to $10.10/hour would lift 900,000 people out of poverty, reducing poverty by 2 percent.
It's also worth mentioning that three times the poverty level still isn't exactly living the high life. In 2012, three times the poverty threshold for a family of four was $70,476. That's lower than the median four-person family income of $76,049. So, one could say that in addition to 70% of the benefits of raising the minimum wage flowing to poor families, most of the remainder is helping out the middle class, which I'm sure we all agree could use it. Doesn't sound like "bad economics" to me.
We already know the demographics of who benefits from the increase in West Virginia's minimum wage, and by-and-large it's low-income workers supporting their families. An increase to $10.10 doesn't change much. The average family income of a worker who earns less than $10.10/hour in West Virginia is less than $35,000. When you talk about raising the minimum wage, you're talking about helping low-income families.
Finally, Hoppy is right that the Earned Income Tax Credit (EITC) is a very effective tool for fighting poverty and helping low-income families. But for a commentary all about how the EITC is preferable to minimum wage because it targets low-income families better, he's been strangely silent on recent changes to the Child Tax Credit (CTC), which is closely related to the EITC. A bill passed by the U.S. House of Representatives and supported by Rep's Capito and McKinley increased the maximum earnings level of the credit, while letting the reduced earnings minimum expire. In effect, the House voted to reduce the CTC for low-wage workers and increase it for high-wage workers.
While a single parent earning the minimum wage, working full time would no longer be eligible for the credit, couples making between $150,000 and $205,000 with two children would become newly eligible. The disproportionate changes to the CTC are far more egregious than the fraction of low-wage workers working in high-income families who benefit from a minimum wage increase. But it didn't create much outcry from the likes of David Neumark and Hoppy Kercheval. Maybe because tax forms are dull and complicated and the minimum wage debate has a sexier ring to it.
On the last night of the 2014 Legislative Session, West Virginia's legislature passed HB 4283, raising the state's minimum wage. The bill now goes to Governor Tomblin for his signature, making it law.
While we wait for the governor's signature, let's take a look at what passage of the bill means to West Virginia's low-wage workers. The bill raises the minimum wage from $7.25 per hour to $8.75 per hour. That means, for full-time minimum wage workers, their annual pay will increase by $3,120, which for a family of two, is the difference between living in or out of poverty.
The bill passed by the legislature gives low-wage workers in West Virginia a raise in two steps. On January 1, 2015, the minimum wage increases to $8.00 per hour and on January 1, 2016, it increases to $8.75. We've looked before at who all would be getting a raise, so let's now break it down by year.
In the first year, raising the minimum wage to $8.00 per hour will have a direct impact (those who currently earn less than $8.00 per hour) on about 37,800 workers. The average hourly wage for these directly affected workers is $7.45 per hour, and they work an average of 30.4 hours per week. That means that these workers will see an average annual pay increase of about $868, for a total statewide wage increase of $32.8 million.
In the second year, raising the minimum wage to $8.75 per hour will give those workers an average annual pay increase of $1,184, assuming they still average 30.4 hours per week and still make the minimum wage of $8.00. So for those 37,800 workers, the total impact after the wage increase is fully enacted is an average annual increase of $2,052, for a statewide increase of $77.7 million.
In addition to those 37,800 workers, raising the minimum wage from $8.00 to $8.75 in the second year will affect an additional 45,900 workers. These are workers who were already earning more than $8.00 per hour, but less than $8.75. These workers earn an average of $8.20 per hour and work an average of 35.3 hours per week, meaning they will see an average annual pay increase of about $1,010, for a total statewide increase of $46.3 million.
So, all told, after two years, 83,700 workers will get a raise, averaging an annual pay increase of $1,480. But those 83,736 workers aren't the only ones getting a raise under the bill which also makes changes to the state's tipped minimum wage. To avoid the messy details, the bill would increase the tipped minimum wage from $2.13 per hour to $2.40 per hour in 2015 and $2.63 per hour in 2016. This would affect an estimated 8,745 tipped workers, who would see an average annual pay increase of $426 in 2015 and another increase of $363 in 2016, based on average weekly hours. That would equal a total average annual increase of $789 once the bill is fully in effect, for a statewide total of $6.9 million.
Aside from those directly affected by the wage increase, there will likely be spillover effects, as those who earn above $8.75 see a raise as the wage floor rises. We estimate that the spillover effects would impact about 34,600 workers. Assuming these workers see an average of a $0.50 per hour increase, they would see an annual average increase of $748, based on average wages and weekly hours, for a total statewide increase of $25.9 million.
So, to sum it all up, raising West Virginia's minimum wage to $8.75 will give a raise to about 127,000 West Virginia workers. About 83,700 regular hourly workers will see an average annual pay increase of $1,480, while about 8,745 tipped workers will get a average annual pay increase of $789. In additional, 34,600 more workers could see a raise due to the law's spillover effects, with a conservative estimate of an average annual increase of $748. Altogether, raising West Virginia's minimum wage from $7.25 to $8.75 will increase wages in the state by an estimated $156.8 million.
West Virginia's proposal to increase the state's minimum wage to $8.75 continues to work its way through the legislative process. We've looked before at the workers who would benefit from the increase, and we've also looked at how much it would cost the affected businesses. But now, let's take a closer look at businesses where are these low-paying jobs found.
In West Virginia, a little over 10 percent of all jobs pay less than $8.75 per hour. However, these jobs are concentrated in a small number of industries. Nearly 90% of the low-wage jobs ($8.75 per hour or lower) are found in four industries: retail trade, education and health services, food services, and administrative services.
What's more, the low-wage jobs are for the most part, concentrated in industries where low-wage workers make up a substantial share of the industry's workforce. For example, over 43% of the jobs in the food services industry pay below $8.75 per hour.
And while most low-wage jobs in West Virginia are concentrated in a few industries, those workers are largely employed by big businesses, rather than small businesses. Nearly three-fourths (73%) of all workers earning less than $8.75 per hour are employed by firms with at least 100 employees.
And the businesses that are employing these low-wage workers aren't teetering on the edge of collapse. Most are in a fairly strong position. For instance, of the four industries where almost all of West Virginia's low-wage workers are found, each one has had stronger employment growth over the past year than the state as a whole.
This report shows that, nationwide, of the top 50 largest low-wage employers, 92%were profitable in 2012, 75 % are earning higher revenue than before the recession, 63% are earning higher profits than before the recession, and 63% have grown larger profit margins since before the recession. But all of this growth has not resulted in higher wages for the industries' lowest-paid workers.
Simply put, the evidence is just not there to support the claim that employers can't afford to pay a higher minimum wage. Not only is the actual cost of the increase less than what some would lead you to believe, but the vast majority of low-wage workers in West Virginia are employed by large corporations. Theses businesses that employ low wage-workers are in strong financial positions, with record-setting profits, and whose executives and shareholders are keeping an ever growing share of the pie and can readily afford to pay a higher minimum wage.
Today's Charleston Daily Mail includes an editorial in response to the EARN report on income inequality and our recommendation to raise the minimum wage as a tool to combat inequality. The Daily Mail contends that raising the minimum wage is a bad idea for two reasons: one, income inequality isn't all that bad because rich people create jobs and pay taxes; and two, raising the minimum wage hurts more people than it helps. Both of these reasons are wrong.
The editorial cites the figure that the top 1% paid 22.9% of federal income taxes in 2009, and those taxes pay for anti-poverty programs. Now it really shouldn't come as a surprise that the top 1% pay a little over 20% of all federal income taxes, because that's about how much of the total amount of income they earn. In 2011, 19.8% of all the income earned nationwide went to the top 1%. So their share of taxes is roughly equivalent to their share of income. And of course, the Daily Mail's little factoid ignores that payroll taxes, which are paid by virtually everyone who receives a paycheck, make up a third of federal revenue, and pay for the country's major entitlement programs: Social Security, Medicare, and Medicaid.
The Daily Mail also defends the top 1% as "job creators," which is a fundamental misunderstanding of economics. Rich people just don't create jobs because they have money, and giving them more money won't lead to more jobs. Jobs are created when there is an increase in demand for goods and services, and that demand comes from consumers. Businesses will only create jobs when their customers demand it, not when rich people have more money.
But the demand that creates jobs is fueled by the 99% and the middle class, and when they have more money, they do create jobs. And this is where growing inequality hurts. Consider this, the average income of the 99% would be 12.3% higher if they still earned the same share of income they earned in 1979. That is equal to about $5,239 for each person. How much more demand, and therefore jobs, would an extra $5,000 in the pockets of 99% of the workforce create? The rich just can't generate that much demand for goods and services by themselves, but they are the ones getting that additional income.
Now onto the minimum wage. The Daily Mail cites the recent CBO report on the effects of raising the minimum wage as evidence that raising it does more harm than good. But the editorial gets several basic facts about the CBO report wrong. First the CBO report does say that raising the minimum wage to $10.10 will reduce employment by 500,000 (a reduction of only 0.3%), but that does not mean that it will cost 500,000 people their jobs, as the Daily Mail contends. There is an important distinction between costing jobs and lowering employment. As Dean Baker explains, the CBO projections imply that, instead of losing their jobs entirely, the negatively affected workers will instead work 2% less each year, because of the high levels of turnover among them. But when they do work, those at the bottom will earn 39% more, a beneficial trade-off.
It's also worth noting that the CBO's projections are outside the growing consensus of economists that there is no considerable employment effect from increasing the minimum wage. But ignoring that and taking the CBO report at face value, it shows that the benefits of raising the minimum wage far outweigh the negative. First, the report shows that raising the minimum wage gives a raise to over 16 million people. So, even if you assume that 500,000 people might lose their jobs, there are 33 people helped by every one person harmed.
The Daily Mail also misrepresents the CBO's findings about how raising the minimum wage affects poverty. The editorial states, "raising the minimum wage will cost more people jobs than it will move people out of poverty," and that raising the minimum wage to $10.10 an hour would only "boost the average family income of the officially poor by 1 percent." Both of these points are directly contradicted by the CBO report, with the relevant passage below:
Not only is the effect on poor families' incomes three times as high as what the Daily Mail claims it is, but the number of people lifted out of poverty is nearly twice the level of employment loss. There's really no question about it.
To sum up, income inequality is real, and is holding down middle-class incomes. And you can't create jobs without a strong middle class, no matter how much money the 1% has. Raising the minimum wage is one way to address income inequality and help reverse declining wages. And no matter which way you slice it, the positive impacts of raising the minimum wage far outweigh the costs.
The West Virginia House of Delegates passed legislation that would increase the state's minimum hourly wage from $7.25 to $8.75 by 2016. We've already looked at the demographics of who would be affected by the increase, now we'll look at how much it would cost.
Using the same method as when we looked the cost of raising the minimum wage to $8.25, we can show that raising the minimum wage to $8.75 would raise the weekly wages of the affected workers by $2.6 million.
With total weekly wages equaling about $480.7 million, the proposed increase to the minimum wage would increase total wage costs in the state by only 0.54%.
Even in the most heavily affected industry, service occupations (where 47% of the directly affected employees are found), raising the minimum wage to $8.75 would only increase wage costs by 2.5%, which over two years is less than inflation.
With its small cost, and plus its cost savings, it's no surprise that states at the federal minimum wage haven't seen any better job growth relative to states with a higher minimum.
Nor is it surprising that small business employment growth has been stronger in states with a higher minimum wage.
It also shouldn't be surprising that since 2010, Ohio's minimum wage increased from $7.40 to $7.85, and employment in the food service sector increased 16%, while in West Virginia, whose minimum wage has stayed at $7.25, employment grew only 12%.
As noted yesterday by the Daily Mail and Gazette, the House of Delegates overwhelming passed a bill (HB 4283) to increase the state's minimum hourly wage from $7.25 to $8.75 by 2016. As Dave Boucher carefully notes, the bill also increases the minimum wage for tipped workers from $2.13 to $2.63 by 2016. As I will discuss below, increasing the wage for tipped workers is long overdue and much needed!
Who are tipped workers?
While most of us typically think of tipped workers as waiters at restaurants - and for good reason since that is the case for about 61 percent of tipped workers nationally - they can also include parking lot attendants, hairdressers and hairstylists, barbers, manicurists, bellhops, and poker dealers, to name a few. Nationally, approximately 73 percent of tipped workers are women and 88 percent are at least 20 years old, while nearly half are at least 30.
As our state's economy has shifted from producing goods to providing services over the last several decades, job growth in industry sectors where most tipped workers are employed has also grown. Since 2001, employment in "food services and drinking places" has grown by over 20 percent - 45,000 compared to over 54,000 today - while total employment has only grown by 3.7 percent. This sector is also making up a larger share of total employment, growing from 6.6 percent in 2001 to 7.6 percent today.
How does the tipped minimum wage work?
West Virginia's current minimum wage is $7.25 per hour. West Virginia allows for a 20% credit against the minimum wage requirement for tipped employees. This means employers may pay tipped workers a reduced minimum wage of $5.80 per hour if their hourly rate plus tips equals $7.25 per hour (20% credit is a reduction of $1.45).
However, West Virginia's minimum wage law exempts virtually all employers from the West Virginia minimum wage provisions. This is because state minimum wage law only covers employers who are not engaged in interstate commerce, or if 80 percent of the employer's employees are not engaged in interstate commerce activities. In addition, a number of industries, including national restaurant chains, are not covered by the state law.
Instead, they are covered under the federal minimum wage. The federal tipped minimum wage is $2.13 per hour. Because of the state's definition of employer, almost all businesses can pay the tipped minimum wage of $2.13, rather than $5.80.
This means West Virginia is essentially one of only 15 states that set the tipped minimum at $2.13. Meanwhile, 20 states have a tipped minimum that is higher than $2.13, including neighboring Ohio. In seven states the tipped minimum is the same as the non-tipped minimum wage.
HB 4283 raises the state minimum wage to $8.75 and strips the interstate commerce definition of employer. It also changes the tipped credit from 20 percent to 70 percent. This, in effect, would raise the state's tipped minimum wage from $2.13 to $2.63. This increase would still put West Virginia near the bottom in tipped wages.
Meanwhile, the Senate's minimum wage bill (SB 411), which passed out of the Senate Labor Committee last week, raises the minimum wage to $8.25. It also strips the interstate commerce definition of employer, but keeps the 20% credit, which would increase the tipped wage to $6.60 by 2015.
An increase in the tipped minimum wage is long overdue
The federal tipped minimum wage was overlooked during the past two decades any time Congress raised the federal minimum wage. The federal tipped minimum wage of $2.13 hasn't been increased since 1991, when it was equal to about 50% of the regular minimum wage of $4.25. Since then, its value has fallen by 41.5% in real terms, and is now only equal to about 30% of the regular minimum wage.
Since the tipped minimum wage is so low, only $4,430 per year for a full-time worker, tipped workers are forced to rely almost entirely on tips. This means tipped workers see their paychecks fluctuate widely, creating economic insecurity and frequently leaving workers unable to meet their needs.
While the House minimum wage bill takes a step in the right direction by increasing the tipped minimum wage by 50 cents, adopting the Senate provision that includes a 20-percent credit would give tipped workers the boost they need to keep up with our changing economy and ensure that the original intent of our tipped waged law worked for all tipped workers.
Legislation to increase the state minimum to will be up for a vote today in the House of Delegates. The bill, which originally gradually raised the minimum wage to $8.50, will now raise it to $8.75. Previously, we showed that an increase to $8.50 would give a raise to approximately 113,000 West Virginian workers. Now, with the new proposal, we've re-run the numbers and here are the results:
Raising West Virginia's minimum wage to $8.75 would affect about 127,000 workers. 62% of the affected workers are women, and 68% are over the age of 25. The average age of the affected worker is 35. 54% of the affected workers are either married or a parent, and 60% work full time. 85% are at least a high school graduate and 39% have at least some college education. 34% have a family income of less than $25,000, and the average family income is between $30,000 and $35,000. 44,000 children have at least one parent who would be affected by the increase.
Beckley Register-Herald - A bill that would raise the minimum wage for some 100,000 West Virginians passed the House Committee on Finance Thursday, with delegates from the region voting on opposite sides of the issue. Read
The bill would take the current $7.25 an hour state minimum wage to $8 an hour by Jan. 1, 2015, and to $8.75 by 2016. That changes the original bill which would have increased workers' wages to $7.85 by July 1 and to $8.25 in 2015.
Charleston Gazette - As more and more states vote to increase the minimum wage, some say the time is right for West Virginia to do so, as well. Read
"Several other states have independently raised their minimum wage, not waiting for federal action anymore and taking the lead," said Linda Frame, communications manager for the West Virginia Center on Budget and Policy. "That appears to be what we are heading for in West Virginia, or we hope."
Bills in both the West Virginia State Senate and the House of Delegates would raise the state's minimum wage from $7.25 to $8.25 an hour in two steps. Last week the House Bill 4283 passed its first hurdle in the labor committee. Yesterday, the Senate version passed through the labor committee.