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Our Path Forward: Paying Fair Wages

Wisconsin should raise its minimum wage to $15 per hour, indexed to the higher of inflation or non-farm business productivity. Where union collective bargaining is not keeping other work pay in line with productivity, it should establish tripartite (labor, business, state) regional wage boards to do that.  

What’s the Problem We Seek to Address?
Despite increased economic productivity, record corporate profits, and rising stock markets, Americans workers have seen little or no growth in hourly wages in the last four decades. In the last half of that period, over 2000-2017, hourly wages grew by 0.4% or less for more than half of all workers.1 Adjusted for inflation, the minimum wage has declined since 1968, and the Federal Government has not raised the national minimum wage since 2009. For a single breadwinner for a family of four, ever working full-time and even with tax credits, the current minimum wage of $7.25 doesn’t even reach poverty line.2   

Stagnant hourly wages have gone hand-in-hand with rising inequality and slow growth in the standard of living for Americans who work for a living. The failure of congress to adjust the national minimum wage to inflation explains roughly two-thirds of the growing wage gap between low- and middle-wage workers. Reduced employee bargaining power (aka, the collapse of unions) explains 20%- 33% of all wage inequality.3 

The pain of weak bargaining power and low mandatory wage floors is felt disproportionately by women and non-white workers. In 2016, 64.3% of workers earning minimum wage or below were women. African Americans, only y 13.3% of the US population, make up 27.5% of this low-wage population.4

Americans understand that keeping wages fixed while productivity increases isn’t fair.  A national survey by the Pew Research Center in 2014 found that 73% of people favor a federal minimum wage to $10.10 per hour.5 A YouGov survey in 2016 found that 66% of Americans support a $10.10 federal minimum wage, 59% support $12, and 48% support a minimum wage of $15 per hour.6

How OWR’s Proposal Addresses It
Raising minimum wages would raise the quality of life for people across Wisconsin – not just for workers at the bottom but also for those just above them. Although the business elite and their political agents have always argued that at raising wages will actually hurt workers by decreasing their employment, the weight of evidence is not with them. To the contrary, of the 22 increases in the Federal minimum wage since 1938, and found 68% of them were followed by a positive change in private employment the following year.7 The Center for Economic and Policy Research found little or no negative employment responses to increasing minimum wage,8 and a recent study on Seattle found that raising the minimum wage increased the wages of workers in food services, but did not decrease the number of jobs in the sector.9 Of course, judgment is needed to phase in substantial increases, giving time for their retention and resulting productivity effects to kick in. But it’s clear that this can be done.

An increase in the minimum wage, however, is not a cure for workers in the middle of the income distribution. For them, we need institutions that ensure workers at all levels get gains from their increased productivity. Nationally,  we need legally enforceable sectoral industry bargaining to register and share these gains. At the state level, we can do the equivalent with regional labor market boards – with representatives of business, labor, and government all present – to negotiate fair base wages for workers with different job tenures in different sectors of the economy. 

Who Else is Doing This?
On this issue, as so many others, Wisconsin was once a leader but is now lagging other states. Six states and 17 cities and counties have either approved a phase-in of a $15 minimum wage, or already reached this goal.10 In 2016, California passed legislation that will gradually raise the minimum wage to $15 per hour across the entire state,11  and Washington D.C. unanimously approved a law to raise the minimum wage in the District to $15 by July 2020.12  In 2014, Seattle became one of the first cities to adopt a $15-an-hour minimum wage. 

Wage boards have a long history in America. During World War II, the US government established wage boards where business and labor leaders worked together with government officials to set wage standards to control inflation and boost wartime productivity.13 These boards continued to set target wages for workers in different sectors of the US economy through the Carter Administration, until they were discontinued by President Reagan.14 Recently, cities and states have returned to wage boards to ensure that industries pay workers a living wage. New York State implemented to set wages for workers in the fast food sector after a study found that nearly 60% of fast food workers qualified for some kind of public assistance, and 75% of workers earned $9.25/hour or less.15

Why Not Wisconsin?
Getting a $15 minimum wage, plus wage boards to align wages with productivity gains on an industry regional basis, will certainly require a change in government. But public education and advocacy on it should start now. We certainly have an economy that can sustain such wage increases, and the community organization and business, labor, and local political leadership competent to do the work. They should be getting prepared for legislative action, and demand it of the new government. 

NOTES

  1.  Gould, Elise. (2018). First half 2017 data reveal broadly based wage growth, but inequality persists. Economic Policy Institute. Retrieved from http://www.epi.org/blog/first-half-2017-data-reveal-broadly-based-wage-growth-but-inequality-persists/ 
  2.  Executive Office of the President, October 2016.
  3.  Rosenfeld, J., Denice, P., & Laird, J. (2016). Union decline lowers wages of nonunion workers. Economic Policy Institute. Retrieved: http://www.epi.org/publication/union-decline-lowers-wages-of-nonunion-workers-the-overlooked-reason-why-wages-are-stuck-and-inequality-is-growing/ 
  4.  Bureau of Labor Statistics (April 2017). Characteristics of minimum wage workers, 2016. U.S. Department of Labor. Retrieved from: https://www.bls.gov/opub/reports/minimum-wage/2016/home.htm
  5.  Pew Research Center (January 21, 2014). Most See Inequality Growing, but Partisans Differ over Solutions. Retrieved from: http://www.people-press.org/2014/01/23/most-see-inequality-growing-but-partisans-differ-over-solutions/
  6.  Edwards-Levi, A. (April 13, 2016). Raising the Minimum Wage is a Really, Really Popular Idea. Huffington Post. Retrieved from: https://www.huffingtonpost.com/entry/minimum-wage-poll_us_570ead92e4b08a2d32b8e671
  7.  Sonn, P. K. & Lathropby, Y. (May 5, 2016). Raise Wages, Kill Jobs? Seven Decades of Historical Data Find No Correlation Between Minimum Wage Increases and Employment Levels. The National Employment Law Project. Retrieved from: http://www.nelp.org/publication/raise-wages-kill-jobs-no-correlation-minimum-wage-increases-employment-levels/
  8.  Schmitt, J. (2013). Why does the minimum wage have no discernible effect on employment?. Center for Economic and Policy Research, 22, 1-28. Retrieved from: http://www.doviak.net/courses/metrics/min-wage_cepr_2013-02.pdf
  9.  Reich, M., Allegretto, S., & Godoey, A. (June2017). Seattle’s Minimum Wage Experience 2015-16. Center on Wage and Employment Dynamics, UC Berkeley’s Institute for Research on Labor and Employment. Retrieved from: http://irle.berkeley.edu/files/2017/Seattles-Minimum-Wage-Experiences-2015-16.pdf
  10.  National Employment Law Project (December 2017). Raises from Coast to Coast in 2018: Workers in 18 States and 19 Cities and Counties Seeing Minimum Wage Increases on January 1. Retrieved from: http://www.nelp.org/content/uploads/Raises-coast-to-coast-2018-beginning-of-year-min-wage-raises.pdf
  11.  Johnson, D. (2016). See the Minimum Wage in All 50 States. Time. Retrieved from: http://time.com/4274938/minimum-wage-state-map/
  12.  Davis, A. C. (June 21, 2016). D.C. gives final approval to $15 minimum wage. The Washington Post. Retrieved from: https://www.washingtonpost.com/local/dc-politics/dc-gives-final-approval-to-15-minimum-wage/2016/06/21/920ae156-372f-11e6-8f7c-d4c723a2becb_story.html?utm_term=.0715dbdb5288
  13.  Western, B., & Rosenfeld, J. (2011). Unions, norms, and the rise in US wage inequality. American Sociological Review, 76(4), 513-537. 
  14.  Ruben, G. (1982). Organized labor in 1981: a shifting of priorities. Monthly Labor Review, 105(1), 21-28.
  15.  Musilino, M. (2015). Commissioner of Labor Opening Statement and Charge to the 2015 Fast Food Wage Board Retrieved from:: https://www.labor.ny.gov/workerprotection/laborstandards/pdfs/5-20-charge.pdf 
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