How Could DC Make Work Pay Better? Another Answer

As the title suggests, I’m taking off here from the DC Fiscal Policy Institute’s recent income inequality report.

As I earlier wrote, it proposes a handful of policy changes that would produce higher wages for workers and potential workers at the low end of the income scale.

One group would help low-income residents qualify for some of the living wage jobs in our local market.

The other consists of two related initiatives that would make work pay better. Both of these focus exclusively on the District’s living wage law.

Properly enforced — and as DCFPI suggests — expanded, the law would ensure that some workers get paid more than the regular minimum wage.

These are only workers employed by for-profit companies and large nonprofits that reap significant financial benefits from contracts with our local government and/or various types of assistance, i.e., grants, loans, tax increment financing.

I’ve been thinking about what else might be done to make work pay better for some of those in the bottom fifth. What about those in low-paying, high-demand service occupations, for example — food servers, janitors, cashiers, so-called sales associates, etc.?

An answer: The District could boost their incomes by reforming its minimum wage law.

At this point, the law links the local minimum wage to the federal minimum. It’s always $1 higher, no matter how long Congress defers a further increase.

Year after year, the minimum wage loses value due to inflation — at the District level, as well as the federal. By July 2011, two years after the latest federal minimum wage increase fully kicked in, its real value had already lost 5%.

Just in case you didn’t notice, inflation didn’t stop dead then.

A nifty calculator on the Bureau of Labor Statistics’ website shows that the District’s minimum wage has now lost an additional 1% of its purchasing power.

If it had just kept pace with inflation, it would be 50 cents higher now than when it was last increased. Full-time minimum wage workers would be earning over $1,000 a year more.

Eight states have already addressed this problem. And Connecticut may soon become the ninth, if New York or New Jersey doesn’t get there first.

The eight raised their minimum wages to partially make up for lost value over time and provided for further automatic increases based on some version of the Consumer Price Index — a commonly-used measure of inflation.

The District could do the same — just “fix it and forget it,” as the Economic Policy Institute says Congress should do.

This would, of course, make work pay better for minimum wage employees.

It would also benefit workers paid somewhat more since employers would increase their wages to retain a differential between them and the lowest paid.

This “spillover” effect, as EPI calls, it boosted the number of workers affected by the eight states’ last increases by about 27%.

Yes, I know the DC Chamber of Commerce and the Metro area Restaurant Association would scream bloody murder.

But raising and indexing the minimum wage is nonetheless a policy change that would make work pay better for some of those people in the bottom fifth who are living in poverty.

And small businesses would survive. Washington state indexed its minimum wage back in 1998. And there are still plenty of small businesses there — restaurants included.

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