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.

How to Narrow the DC Income Gap: Some First Steps

As I recently wrote, the DC Fiscal Policy Institute has issued an eye-opening report on income inequality in the District of Columbia.

It’s got some recommendations for narrowing the income gap between the richest and the poorest. No revolutionary attack on “the system” that’s enriching the top 1% at the expense of the rest of us.

Instead some modest, politically-feasible our steps our local government could take right now to lift the incomes of some portion of the bottom 20% — now, on average, well below the poverty line.

With two limited exceptions, the recommendations address policies and programs already in place. As so often in the District, it’s the funding that’s wanting — and for the most part, will be wanting if the DC Council approves what Mayor Gray has proposed.

Bigger budgets for the initiatives would help achieve three objectives.

Help Residents Prepare for Living Wage Jobs

One initiative DCFPI cites is the recently-established workforce intermediary pilot. When/if implemented, the intermediary would get training programs better tailored to local workforce needs and then refer qualified candidates to employers.

Mayor Gray’s Fiscal Year 2013 proposes $1.6 million to “fully fund the creation of the pilot.” Unclear, at least to me, whether this means we’d have an ongoing, fully functional intermediary.

The second initiative is the unfolding redesign of the Temporary Assistance for Needy Families program. Participants are to get in-depth assessments of their strengths and needs, then be linked to appropriate services and a broader range of work-preparation opportunities than was previously available.

The problem here, as I (and others) have mentioned before, is that the current law calls for a phase-out of cash benefits for long-term participants who’ve had no opportunity to benefit from the improvements. It also fails to carve out needed exemptions, as federal rules allow.

Unfair and very unwise, given all we know about the lifelong disadvantages children suffer when they grow up in poverty.

Address Housing Concerns

The “concerns” here are budget cuts to the District’s main affordable housing programs.

One — the Housing Production Trust Fund — was all but gutted last year, stalling numerous projects to develop and preserve housing that low and moderate-income residents could afford.

The other — the Local Rent Supplement Program — provides housing vouchers residents can use to rent apartments on the open market.

It would need regular budget increases just to keep pace with rising rents. It hasn’t gotten them and now reportedly has a shortfall that could leave more than 500 households with no more rental assistance.

The Mayor’s proposed budget addresses the shortfall — by once again raiding the Trust Fund. Says he’ll put the money back if revenues come in substantially higher than projected. Well, he agreed to something similar last year. And the Trust Fund got zip.

Make Work Pay Better

DCFPI focuses on the District’s living wage law, which establishes a higher minimum wage requirement for employers that benefit from District government contracts and/or various types of financial assistance worth $100,000 or more.

The law, DCFPI says, needs to be more strictly enforced, suggesting that the District has finally gotten around to enforcing it at all. DCFPI also recommends expanding the law. No details here.

Other Work-Related Needs

The DCFPI recommendations are, as I said, very modest. And with the exception of affordable housing funding, they’d help only those in the bottom fifth who work or potentially could work if properly trained.

Even for this group, the District could — and should — do more. But the Mayor doesn’t see it that way.

For example, as the Fair Budget Coalition notes, child care programs have been cut by more than $20 million in the last five years. The Mayor’s proposed budget cuts an additional $5.7 million from child care subsidies.

Without funding to increase provider reimbursement rates, low-income parents with little kids may have no choice but to stay home.

Funding for basic adult education has also been cut. Two years ago, programs funded in part by local taxpayer dollars served only 8% of need — this when more than one in three  D.C. adults is functionally illiterate.

How many aren’t working because they can’t read even well enough to fill out a job application? How many are stuck in part-time, minimum wage jobs because they can’t pass the GED exams?

How many more will be stuck if the Council approves the Mayor’s proposed $950,000 cut for adults and family education?

DC Councilmember Aims To Put Some Teeth Into Living Wage Law

Seems that some health care workers aren’t getting the wages they’re due under the District’s living wage law. DC Councilmember David Catania aims to do something about this, with a bill that would put real teeth into the applicable requirement.

A bit of background here.

As I recently wrote, the District’s minimum wage law covers home care workers, though federal minimum wage rules don’t.

But home care workers employed by agencies with Medicaid contracts are supposed to get more — specifically, the higher hourly wage required under the Living Wage Act.

The same is true for employees of Medicaid contractors that operate community residential facilities and group homes for people with intellectual disabilities.

The Living Wage Act was passed in 2006, but these Medicaid contractors were exempt until the District issued implementing regulations. A mere five years later, it finally has.

Councilmember Catania asserts that he and staff “have been inundated by evidence that frontline workers continue to receive wages that are well below the $12.50 per hour” that the latest annual adjustment in the living wage requires.

Evidence here may include a paycheck review conducted by the SIEU local that represents home care workers at one of the contractor agencies. An organizer told me that all 150 were paid less than the living wage. Shortfalls verified thus far average $1.75 per hour.

Many of the under-paid workers, Catania says, “are unable to care for themselves and their families due to extremely low wages.” This, he implies, may distract from the challenges of providing high-quality care “for our most vulnerable and fragile residents.”

Probably also creates undue pressures on public benefits programs, including Medicaid. If those underpaid home care workers have full-time, year-round assignments, they’ll earn $22,360 — well under the District’s Medicaid income cutoffs for working parents and their children.

What really seems to have gotten Catania’s goat is a recent audit by the DC Inspector General, which found that executives in some of the Medicaid-funded agencies were getting paid far more than industry standards — “more than the President of the United States,” he exclaims.

Lots more in some cases. Salaries for the top five averaged nearly $315,290.

So it isn’t as if these Medicaid contractors can’t afford to pay the living wage. What they can’t afford, if Catania’s bill passes, is to go on ignoring it. Because they would then become ineligible for further funding from the District’s Medicaid program.

Why, I wonder, is there no comparable penalty for all contractors covered by the living wage law? Seems that the worst that can happen to them is an order to pay what they should have been paying all along.

Meanwhile, we District taxpayers are subsidizing their savings because at least some underpaid workers earn so little as to qualify for public benefits. Don’t look for much in tax revenues from them either.

So non-complying contractors profit from our tax dollars, but they effectively put the squeeze on local programs our community needs. On our striving, lower-income residents too.

DC Living Wage Act Not Live Yet

Back in July, the DC Council’s Economic Development and Housing and Workforce Development Committees held a joint hearing on how — or perhaps I should say whether — the District is enforcing two laws intended to make more good-paying jobs available to D.C. residents.

Just getting around to the outcomes, but the issues are still relevant.

One of the laws, the First Source Act, requires most contractors on projects funded in whole or in part with at least $100,000 in District funds to hire D.C. residents for at least 51% of all new jobs created by the project.

The other, the Living Wage Act, requires most, but not all companies that provide services to the District under contracts worth at least $100,000 and those with subcontracts worth $15,000 or more to pay employees working on the contracts a “living wage.” This requirement also applies to businesses that receive at least $100,000 in D.C. government assistance, e.g., a loan, grant or tax increment financing.

The law defines a “living wage” as $11.75 per hour and directs the Department of Employment Services to make annual adjustments in the rate, based on increases in the Consumer Price Index. The just-published 2010 rate is $12.50 — same as the unpublished rate for 2009.

The occasion for the hearing was an auditor’s report on compliance with these laws in real estate development projects formerly managed by two quasi-public independent corporations.

Bottom line was that DOES hadn’t been effectively monitoring compliance with the First Source Act and that the District had neither implemented nor enforced the Living Wage Act. As a result, the District and its residents lost at least $14.4 million. This apparently does not include the unknown amount lost in illegally low wages.

The auditor testified that she couldn’t do a complete job because the Fenty administration tried to stonewall her investigation. Same thing happened to the Councilmembers at the hearing. No one from the administration showed up, invitations notwithstanding.

However, the Attorney General’s office reportedly sent a letter asserting that “living wage regulations were indeed being enforced.” The quote her is from Housing Complex blogger Lydia DePillis. If verbatim, it’s something of a mystery because the District published proposed rules to implement the act eight days after the year.

The notice states that proposed rules were previously published in mid-March 2007. The new proposal, it implies, was necessitated by a 2009 amendment to the act. Nothing said about why a final rule wasn’t issued during the intervening year and a half.

However, the auditor’s report says that the City Administrator’s office asked DOES and the Office of Contracting and Procurement to hold off on implementing the living wage requirement until a fiscal impact study was completed. Didn’t know that District administrations were authorized to postpone enforcement of laws the Council had enacted.

In any event, we’ve got proposed rules now.

I flip to the enforcement section. All I see relevant to the living wage requirement is a paragraph saying that complaints “shall be made in accordance with, and subject to” the relevant provisions of the act.

So I go back to earlier sections. I find that businesses covered by the act are required to maintain, for three years, payroll records for employees who should be getting a living wage. They’re also required to provide the head of the contracting or assistance agency or other District “entity” with a list of these employees, if requested. Nothing about reviews of the records or any other process to ensure compliance.

So it seems that the burden of enforcement falls to workers who don’t get paid enough — and local nonprofits with the time and resources not only get them the wages they’re owed, but to ensure they understand their rights and, so far as possible, feel secure in asserting them. Active monitoring will apparently also be left to nonprofits.

Now, maybe the problem is just the bare-bones approach to regulation writing. Maybe DOES and OCP will establish genuine monitoring, worker education and complaint support processes.

But I hope the Economic Development and Housing and Workforce Development Committees stay on the case. The Living Wage Act isn’t the answer to the high rate of poverty in D.C. But it could make a difference. And those wages, after all, are our taxpayer dollars.