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Living wage: How about $9 an hour?



Donna Riley never liked taking handouts. The 49-year-old parking lot attendant had for years subsisted on disability payments for her injured back and $6-an-hour part-time work, eventually filing for bankruptcy in 2003 because of her mounting medical debts.

In 2004, when the city of Buffalo, N.Y., passed its last living-wage ordinance, raising city contractors' minimum pay to $9.03 plus benefits, she saw the opportunity to finally get off disability and work full time.

Now, Riley and her husband, who also works for a city parking company, make $6 more an hour combined -- enough to pay all of their bills and buy their first new car.

"Driving out of the car lot at the dealer with a brand new car was a total blow-away," Riley said. "Now we are working on buying a house."

With federal minimum wage stuck at $5.15 since 1997, many cities and states are taking matters in their own hands. They are enacting minimum wages for city contractors and, increasingly, mandatory minimums for all area businesses in an attempt to lift the fortunes of workers on the lowest rungs of the economic ladder.

The floor has sunk
As it stands now, a worker making the federal minimum wage would make $10,712 a year, or less than $1,000 above the 2006 poverty line of $9,800 for an individual.

"If the minimum wage had kept pace with inflation, it would be more like $9 right now. We've let the floor sink so low, it's historically less than we were paying back in the 1960s," said Jen Kern, director of the Association of Community Organizations for Reform Now (ACORN), an advocacy group that has led the "living-wage" movement.

Changes in the federal minimum wage Year Wage Year Wage
1938
$0.25

1975
$2.10

1939
$0.30

1976
$2.30

1945
$0.40

1978
$2.65

1950
$0.75

1979
$2.90

1956
$1.00

1989
$3.10

1961
$1.15

1981
$3.35

1963
$1.25

1990
$3.80

1967
$1.40

1991
$4.25

1968
$1.60

1996
$4.75

1974
$2.00

1997
$5.15



Source: U.S. Dept. of Labor

Twenty states, the District of Columbia and 140 cities and counties have now voted in new living-wage laws. Washington state's minimum wage is $7.63 an hour, highest of any state. And several cities have set their own rates much, much higher: Santa Cruz, Calif., for example, requires that city contractors pay more than $12 an hour, plus health benefits. Lawrence, Kan., sets minimum pay for all workers in the city at 130% of the federal poverty threshold.

And dozens more are now being debated this year, including at least a dozen state minimum-wage initiatives, according to ACORN.

Opponents of the living-wage movement believe market forces, not regulation, should set wages. Laws like these only hurt the people they are trying to help, said John Doyle, managing director of the Employment Policies Institute, a think tank supported by retail, hotel and restaurant businesses.

In many areas, these wages are not enough to lift workers' fortunes substantially, Doyle said, and often the added labor costs force employers to shed jobs and hours.

"More often than not, low or unskilled workers are displaced from the job they hold," oftentimes being replaced by a high-school student lured by the higher pay, Doyle said. He points to the 540 workers who lost their jobs in Santa Fe, N.M., the year following its first citywide minimum-wage increase to $8.50 in 2004. Those that lost their jobs had 12 years of schooling or less.

However, economist Robert Pollin, co-director of the Political Economy Research Institute at the University of Massachusetts at Amherst, notes that while these people did lose their jobs, employment in the city actually grew 2%. And in those industries with the lowest starting pay -- restaurants, hotels and retail -- it actually grew 3.2%.

"More people got jobs, but more people are also looking for jobs," he said. In other words, as wages have gone up, more people entered the market looking for work, making it harder for the least skilled to get work inside the city.

But, he said, that doesn't necessarily mean that people are getting laid off as a result of the ordinance, which was later boosted again to a starting wage of $9.50.

"There are more jobs in Santa Fe that are higher quality," he said. "Overall the benefit is positive."

The cost of a pricey town
Sam Gerberding, general manager of Santa Fe's chic Inn of the Governors hotel, said the ordinance has cost the 100-room hotel, especially during slow months, when extra pay from its profit-sharing plan didn't bring housekeepers up to the new $9.50 wage.

These costs have been manageable, he said, and the hotel hasn't furloughed any workers. But, Gerberding said, the pay raises, including a planned bump to $10.50 in 2008, do make him think twice about replacing people. When a houseman left his job this past year, the hotel tried to do without his position for several months.

Some Santa Fe employers say they feel they have to pay workers a higher minimum wage so that employees can afford a place to live in this pricey but beautiful city.

"This is an expensive place to live," said David Salazar, owner of El Farol, the city's oldest restaurant and cantina, housed in an 1835 adobe. "Not like San Francisco or Manhattan, but we still have some very expensive real estate."

Santa Fe's ordinance counts waiters' tips as part of the hourly minimum, so most sit-down restaurants don't wind up on the hook for much more money. Salazar says he pays an extra $8 for each of his two new dishwashers per day, not enough to make him raise prices or consider any layoffs.

"It never crossed my mind," he said.

The living-wage movement
The living-wage movement, started just over a decade ago in Baltimore, when labor and religious leaders campaigned successfully for a local law requiring city service contractors to pay a higher, "living" wage, a term that didn't really exist before. A string of other cities followed suit, with minimum wage requirements for city contractors in areas such as St. Louis, Los Angeles, Boston, Tucson, Ariz., San Jose, Calif., Portland, Ore., Minneapolis and Milwaukee.

The movement gained new momentum several years ago when cities and states began pushing for minimum wages for all companies located there of a certain size. So far, Santa Fe, San Francisco and Albuquerque have all enacted citywide minimum wages. States have acted, too. Florida, for example, set a statewide minimum wage of $6.15 -- not a huge increase, but it covers more than 350,000 workers.

Battling tooth-and-nail over these higher minimum wages are large retailers and fast-food chains that would see their costs rise dramatically. They argue that these lower wages help keep more of the workforce employed, a point Pollin takes issue with.

While there has been some job loss, he said, it has not been "significant." "Businesses that have workers they like tend to keep them."

Moreover, he says, these wage hikes, at least in small part, reduce workers' dependence on government subsidies.

"The living-wage movement is important because it is an initiative to address to the growing gap … between rich and poor. It may not be the best and most-efficient policy to do it." But, he said, it's a start.

Moreover, he said, these measures don't just address the very lowest incomes, he said. They also tend to increase the wages of jobs above them, something large service-sector employers are well aware of.

"This is about where the American economy is going. It's a line-in-the-sand issue," Kern said.

Business repellent?
In Chicago, the city council is trying to draw that line in the sand with the largest retailers, who pay some of the lowest wages. Lawmakers there are trying to pass a resolution that would make big-box stores subject to a minimum wage of $10 per hour, plus $3 in benefits.

Wal-Mart officials say they oppose the ordinance because it only applies to a "narrow band" of retailers, not every establishment in the city.

"We think all boats should rise with the tide," said John Bisio, Wal-Mart spokesman. The ordinance "sets a lousy precedent and is probably unconstitutional."

Starting pay at Wal-Mart's other stores surrounding Chicago is several dollars less per hour than the $10 proposed. Moreover, new clerks at Wal-Mart must wait six months before receiving health insurance, Bisio said.

If the proposed ordinance is enacted, Bisio said, Wal-Mart, which is opening its first store in a low-income Chicago neighborhood this summer, will have to think about opening stores in outlying suburban neighborhoods instead. Employment Policies Institute spokesman Doyle said these higher minimum wages are already keeping some restaurant and retail chains out of San Francisco and other areas.

"Any mandate that will make labor more expensive is going to have an economic consequence," Doyle said.

Doyle and other pro-business groups support earned income tax credits to prop up the personal incomes of low-wage workers, rather than wage hikes.

Businesses, he said, "don't have a moral obligation to take care of unskilled adults when society won't."

A modest beginning
But increasingly, Americans see the living wage as a moral issue, and are voting in living-wage ordinances to address the widening gap between rich and poor.

"You can't tell people who are watching the value of wages in their cities and states fall to wait for Congress" to raise the federal minim wage, Kern said.

However, it's fair to say that many of the battles won in minimum wage have been largely symbolic, and hardly enough to support a better, more comfortable life. A $6.15 minimum wage in Florida and Nevada, for instance, probably won't allow most individuals to pay down debt or to buy a house or a car.

Kern, however, sees it as a start, and a wage that is "winnable."

"It's modest," she acknowledges. "We are trying to promote things that are a step in the right direction. These are moving towards the actual cost of a living wage."

ACORN hopes these wins will set a precedent for future wage hikes and perhaps put pressure on the federal government to raise the $5.15 minimum wage, which has lingered even as Congress has raised its own pay.

For Riley, who received a more-sizable bump in minimum wage, the extra pay will likely mean a new home. After watching one of her co-workers and her family move out of the projects in Buffalo and into her own home, she believes she and her husband can, too. But most importantly, she says, getting a full-time paycheck of more than $360 in gross pay has meant a new sense of pride.

"I don't feel like I'm a nobody. I feel like I have something to offer," she said, including taxes, when she and her husband buy their house. "I have become someone who is contributing to the city," she said.

http://articles.moneycentral.msn.com/CollegeAndFamily/LoveAndMoney/LivingWageHowAbout9AnHour.aspx?GT1=8178
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