The Oregonian newspaper stirred up quite a controversy the past couple of days concerning a study by the state's Legislative Revenue division of the effects of increases in the minimum wage on low-wage families. The study dealt only with single parents with two children. There is a bill pending in the legislature that would raise the state's current minimum wage of $9.25 to $15.00 per hour.
The Oregonian's headline to its story was, "How much would a single parent gain under $15 minimum wage? Less than $50 a month." The newspaper published the study's chart showing a decline in tax benefits such as the Earned Income Tax Credit (EITC) and various other benefits, including food stamps, welfare and state-funded child care subsides, as the minimum wage increased. By $16.10 per hour all government benefits are gone except a small amount of the EITC. At $12.10 and $13.10 that single parent actually takes home a little less each month.
The implication of the story and of a follow-up story was that a raise in the minimum wage really would not be all that beneficial. The problem is, the group the study focused on is a very small percentage of the people who would benefit from an increase in the minimum wage in Oregon.
Today, the Executive Director of the Oregon Center for Public Policy, Chuck Sheketoff, published on blueoregon.com and on the Center's website, a scathing critique of the newspaper story. He points out that more than 500,000 employees in Oregon would be affected by an increase in the minimum wage to $15.00, and only about 9,000 people might experience a small decrease in income - and then only if the minimum wage is only $12-$13.00. He wrote:
"The vast majority of the more than 500,000 or so workers who would benefit directly from the legislature raising the minimum wage to $15 an hour don’t have child care expenses. And even among workers those with children, many don’t benefit from state-subsidized child care. That program helps only about 10 percent of all kids in child care."
He went on to point out that small changes in the limited state child care program could eliminate the reduction in income for the small number of people who might experience it.
Republicans are fighting increases in the minimum wage at the state level, as well as at the federal level. Once again, Republicans are showing their loyalty to special interests, rather than to their constituents. In November, referendums to increase the minimum wage passed in all states where they were on the ballot, including four very Republican states, Alaska, Arkansas, Nebraska and South Dakota.
Across the country, many state and local governments have increased their minimum wages, some much higher than the current federal rate of $7.25. Twenty-nine states now have minimum wages higher than the federal rate.
The major problem with the federal minimum wage, other than it is far too low, is that it is not indexed to inflation. If the minimum wage in 1968 had been indexed to inflation, the minimum wage today would be above $10.00. If it were reflective of increased productivity, it would be somewhere between $18 and $23 an hour, depending on which date is used as the starting date for comparison.
The reason why $15.00 has been selected as the principal target for the minimum wage is that is the point where most people would be out of poverty. That is an annual wage of a little over $30,000, assuming the employee is working a 40-hour week. If the employee has children, there still would be some EITC, but that employee no longer would qualify for welfare or food stamps.
Raising the minimum wage to $15.00 would eliminate the scandalous situation we have today where the government is subsidizing some of the largest and wealthiest corporations, like most of the big retail chains, because their wages are so low. Employees at Walmart have been averaging less than $9.00 an hour (although the company recently announced plans to increase wages, but details have not been released). At that level fulltime employees qualify for food stamps and for EITC. Billions of taxpayer dollars are going to Walmart employees because the company has not paid a living wage. The same is true for most of the major chains. It just is a bigger scandal with Walmart because they are so profitable - one of the most profitable companies in the world.
By raising the minimum wage to $15.00, tens of billions of dollars in food stamps, EITC and welfare payments would be saved. Social Security and Medicare revenues would be increased.
Those savings then could be used to make college education free for everyone, probably without having to raise any taxes or do any deficit spending.
So not only would we experience an economic boom from the buying power of those whose income increased to $15.00 an hour, student loans no longer would be needed for college. Without student loans hanging over them, college graduates probably would buy more houses, also driving up the GDP.
And these are just some of the positives of increasing the minimum wage to $15.00.
And, before the Republicans say raising the minimum will cost jobs and increase prices, as they will, there is no substantial evidence from previous increases in the minimum wage, or from states and cities that have increased the minimum wage above the federal level - and also from countries that have much higher minimum wages - that increasing the minimum wage causes job losses or inflation.
And for fun, check the The Big Mac Index of The Economist, http://www.economist.com/content/big-mac-index. The average price for a Big Mac in January, 2015, in the United States, with a federal minimum wage of $7.25, was $4.79. In Australia, which has a $16.00 minimum wage, the average price was $4.32, taking into account the exchange rate.