How Much Would DC Minimum Wage Workers Gain From $15 an Hour?

March 7, 2016

The Economic Policy Institute has answered a question long on my mind: How much are minimum wage increases actually worth when they’re phased in over time? The answer, as one would guess, is not as much as they seem because inflation erodes purchasing power.

EPI does more than confirm the hunch, however. It reports actual dollar values, using three different inflation estimates for minimum wage increases that will be on state ballots in November — and one that might be on the District of Columbia ballot.

Set aside the if and the why. Here’s what we learn about how much minimum wage workers would actually gain if voters had a chance to decide. How that if would pan out seems fairly certain.

As with one of the California proposals, they’d get a relatively big bump the first year — $2.00 more it would seem, if measured from the current rate. Inflation would take a bit of a bite, however, leaving them with somewhere between 23 cents and 47 cents less, depending on which estimate we look at.

Annual increases then get smaller, and inflation chugs on. So by 2020, the apparent $15.00 is worth somewhere between $13.76 and $13.41 in today’s dollars. In other words, what looks like an increase of nearly 43% for the District’s minimum wage workers could actually be about 15% less.

This isn’t to say that the campaign should be fighting for a significantly higher minimum wage. Nor that voters, if they can, should decide that the proposed new minimum wouldn’t make a enough of a difference to risk the job losses, cutbacks in hours, etc. that the Chamber of Commerce and its business association allies warn of.

For one thing, they always sound off when minimum wage increases are in the offing. And the alarms have thus far proved so much hot air — or mostly that.

We can’t altogether discount job losses and the like because, as economist Jared Bernstein has said, “the research doesn’t have a lot to say” about such a large minimum wage increase.

Harry Holzer, another leading labor economist, leans toward caution, but also concludes that the research on past minimum wage increases doesn’t supply grounds for a clear, reliable prediction.

We’re on surer ground when we look at the known knowns. For example, if the District’s minimum wage were $15 today, a full-time, year round worker earning that would have virtually no money left after paying the median rent for a one-bedroom apartment.

If the worker were a single mother with two children, she’d be short about $6,000 a month for basic needs, plus taxes, according to EPI’s family budget calculator. On the other hand, she’s short $800 a month more at the current minimum wage rate.

The minimum wage is one, though hardly the only reason that income inequality in the District is greater than in any state — and almost every large city, as the DC Fiscal Policy Institute recently reported.

Households in the top fifth of the income scale have, on average, 30 times the income of those in the bottom fifth, though they’ve lost a negligible amount since the Great Recession set in. Households in the middle fifths have more in real dollars now.

But those in the bottom fifth have nearly 14% less — a mere $9,300, on average. This is far less than what a full-time, minimum wage worker gets paid, clearly indicating the need for a broader range of remedies than the proposed increase.

For one thing, converting the hourly wage to full-time, year round probably overstates a family’s income because so many retail employers schedule workers only when customer traffic indicates they need them.

Looked at from these several perspectives, the $15 an hour minimum wage seems a modest proposal — a necessary, but not sufficient measure to reduce income inequality by lifting what the bottom fifth has to live on.

DCFPI, which has favored the increase in the past, has some other recommendations, including what I infer are limits on the just-in-time scheduling practices that a bill the DC Council is considering would set.

The District would still need a strong safety net — and not only for residents whose incomes now drag down the average for the bottom fifth. Some low-wage workers might lose their jobs if employers had to pay them $15 an hour — even if they regularly receive tips and can thus legally be paid as little as $2.77 now.

We simply don’t know, but we shouldn’t pretend there’s no risk. Nor should we assume that workers active in the Fight for $15 campaign and its allies do.

As Bernstein argued awhile ago, they may have weighed the potential costs and benefits and decided they’d “be more likely to come out ahead” with the large increase they’re demanding. The District as a whole, including its yawping restaurant owners would too.

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What Could Cut the Poverty Rate Right Now

February 20, 2014

A nice, short video from the Half in Ten campaign tells us five things we can do to cut poverty today. They’re actually four things Congress can do — and one that it shouldn’t.

They’re all modest, middle-of-the-road proposals, reflecting both pending legislation and priorities identified in the President’s latest State of the Union address. That alone should tell you that they won’t have an easy time getting through Congress, though polls indicate bipartisan support from voters.

Here they are, with supporting details from the video and others I’ve added.

Create Jobs. What Half in Ten has in mind here are investments in renewable energy, other “growth sectors” and infrastructure projects, e.g., repairing our pot-holed roads and crumbling bridges, improving public transport.

We’re still 7.7 million jobs shy of the number needed to bring the unemployment rate down to its pre-recession level — 600,000 fewer than when the video was created, but still a daunting number. The recommended investments would help close the gap — as might the next thing, according to many economists.

Raise the Minimum Wage. In other words, Congress should pass the Fair Minimum Wage Act, which has been awaiting a vote for about a year and a half now.

As I’ve written before, the bill would raise the federal minimum wage to $10.10 an hour by 2016 and then link it to a commonly-used consumer price index so that it wouldn’t again lose purchasing power due to inflation.

The bill would also, over a longer period of time, raise the federal tip credit wage — now and since 1991 stuck at $2.13 an hour — to 70% of the regular minimum wage and then link it to preserve this ratio.

In the late 1960s, Half in Ten says, the minimum wage was enough to lift a family of three out of poverty. A full-time, year round job at the federal minimum wage now pays less than the federal poverty line for a two-person family.

Expand Access to High-Quality Pre-K and Childcare. This, as you probably know, is a high priority for the President and a broad spectrum of advocacy organizations. They’re focused especially on children in low-income families, more than half of whom start school at a disadvantage — and never catch up.

A bill reflecting the Obama administration’s proposal — the Strong Start for America’s Children Act — would make pre-K available for more low-income four-year-olds and, at the same time, establish quality standards. It also seeks to raise quality in programs for younger kids.

The Half in Ten video, however, focuses on the immediate pocketbook issue. Low-income families, it says, spend, on average, 40% of their income on childcare. More money for publicly-funded programs and/or subsidies to help pay the rates other programs charge would obviously leave more leftover for other needs.

Make the Workplace Family Friendly. Three priorities here. One is mandatory paid sick leave for the more than 40% of private-sector workers whose employers don’t see fit to grant it voluntarily. The percent in roughly double for low-wage workers, who can least afford to take unpaid leave.

A second priority is paid family leave so that workers can take time off for a broader range of compelling reasons, e.g., childbirth, a sick family member in need of care. Only 212% of workers have this benefit now.

And of the 59% who have an unpaid family leave guarantee under the federal Family and Medical Leave Act, about two million need, but can’t afford to take it, according to a recent survey.

A bill now pending in Congress would take care of both these issues — and without adding a penny to the federal debt, says one of the cosponsors.

The third priority is legislation to further strengthen the Equal Pay Act. Women still earn only 77 cents for every dollar men earn. Various reasons for this, but an estimated quarter to a third of the gap may reflect discrimination.

Don’t Make Poverty Worse. In other words, Congress is to refrain from further cuts to programs that provide cash or near-cash benefits to people in need.

Half in Ten flags SNAP (the food stamp program), which, as you know, was recently cut. It lifted nearly five million people above the poverty threshold in 2012, according to the Census Bureau’s Supplemental Poverty Measure.

Also flagged are unemployment insurance benefits, which lifted more than 2.4 million above the poverty threshold.

So Congress will surely make poverty worse if it doesn’t renew the recently-expired Emergency Unemployment Compensation program — or does, but trims it back again. The former seems more likely than the latter, unless Republicans rethink their position.

This is, in a way, a sad agenda because it’s largely based on pending legislation, which is largely based on what stands at least a remove chance of passing in this highly-divided, deficit-obsessed Congress. Sad also because chances seem pretty remote for much of it.

But one never can tell. So the thing we can do right now is to weigh in with our elected representatives on these five things — unless, of course, we’re disenfranchised District of Columbia residents. Sigh.


Why Homeless People Aren’t Working … Or Working And Homeless Anyway

November 21, 2011

The tool I use to produce this blog provides some interesting stats — among them, my most-viewed posts. I note, with interest, that an old post makes the top-viewed list almost every week.

It’s entitled “Why Don’t Homeless People Just Get a Job?” Are people actually asking this, I wonder.

At the time I wrote, the recession was in full swing. Now it’s officially 29 months behind us. Yet we’re facing a big jobs crisis.

Not Enough Jobs

The unemployment rate is higher — stuck at about 9%. The number of jobless people actively looking has increased from 13.2 million to nearly 13.9 million.

And the economy has shed about 1.3 million more jobs. It would need to create more than 11 million to bring the unemployment rate back down to when the recession set in.

So one reason homeless people don’t get jobs is the same as the reason millions of housed people don’t. There just aren’t enough jobs out there.

But, of course, it’s not that simple.

Challenges to Getting the Jobs Out There

The very fact of homelessness makes work searches more challenging. Blogger Steve Samra — the source for my original post — speaks from first-hand experience about these.

But, as with the current job shortage, the biggest challenges, I think, aren’t unique to homeless people. They have to do with the reason people are homeless to begin with, i.e., not enough income to pay for a roof over their heads.

For some, there are barriers to gaining — and maintaining — employment of any kind. These include mental and physical health problems, substance abuse and other severe disabilities.

For those not too disabled to work, finding a job and then going to it may cost more than they can pay.

There are up-front and ongoing transportation costs. For some, also formidable child care costs and/or the also formidable costs of home care services for disabled family members who can’t get them through Medicaid.

And then there’s the big issue of job requirements.

Many communities have passed laws to clear homeless people off the streets — possibly away altogether. So homeless job seekers may have criminal records for loitering, storing belongings on public property, etc.

The National Employment Law Project reports that many employers are running criminal background checks to screen out applicants — even for entry-level jobs that involve negligible security risks. Others post job announcements that pre-screen.

And now applicants are being screened out because of bad credit records — an ironic Catch-22 for people who are trying to get work that will enable them to pay their bills.

Last but certainly not least is the issue of education credentials.

The monthly Bureau of Labor Statistics reports consistently show the highest unemployment rates for adult job seekers with less than a high school diploma or GED. Rates drop at each education level — down to a current 4.4% for those with a bachelors degree or higher.

We read that college graduates are accepting jobs as wait staff, truck drivers, sales clerks and the like. That’s tough competition for those who traditionally fill these jobs.

Working, But Still Homeless

Yet some fraction of homeless people are working. No national figure. So a little back-of-the-envelope from my hometown.

According to last January’s homeless count, 38% of homeless adults in families and 20% of single adults in the Washington, D.C. metro area were working.

No way of knowing how many of them were working full time or at what. We do know, however, that a full-time minimum wage job in the District, where the hourly rate is $1 higher than the federal minimum, would yield an annual take-home income of a little under $16,440.*

Rent on a modest one-bedroom apartment, including basic utilities would leave the worker with about $44.00 per month for all other expenses — less than the costs of bus fare to and home from a five-day a week job.

In short, we’ve got a complex of policy issues here — jobs, income supports, anti-homelessness laws, hiring practices, education, affordable housing and a minimum wage that’s worth less than it was 40 years ago.

There, Googlers. Aren’t you glad you asked? I am.

* This reflects deductions for Social Security and Medicare payroll taxes at the current reduced rate, but not what might be withheld for income taxes.


Home Care Workers Denied Basic Wage Rights

July 24, 2011

My sister died just the way she wanted to. At home, with her bed near the window so that she could look out and watch her cats playing.

This was possible only because she had 24/7 home health care, provided by a quiet, caring, capable aide.

Most people who receive home care aren’t in the last stages of a fatal disease. Some are like my guest blogger Laura and her brother, whose disabilities would make it unsafe for them to be home alone.

Most, however, are elderly people who need some variable mix of services to continue living independently. My mother-in-law, for example, is able to contentedly “age in place” because a home health aide comes in to help with housekeeping, grocery shopping and the like.

All told, more than 10.3 million Americans need some form of long-term care. The U.S. Department of Health and Human Services expects the number to rise to 27 million by 2050.

Will enough qualified care workers be available to serve the many millions who’ll be best off at home? Doubtful unless some major policy changes are made.

Here’s the first — and to me a shocker. Home care workers* are, at this point, exempt from federal minimum wage and overtime requirements.

Twenty-one states and the District of Columbia provide some coverage under their own wage laws. Here in the District, as in five of these states, only the minimum wage is required — not the overtime rate.

As the National Employment Law Project explains, the federal exemptions reflect an over-broad interpretation of a carve-out Congress made when it extended coverage under the Fair Labor Standards Act to domestic workers.

NELP recommends two related regulatory fixes. No Congressional action required — thank heavens! There is, however, a bill pending in Congress that would force the Labor Department to act.

In 2009, the average home care worker wage was $9.34 an hour. The average annual wage would thus have been $20,283, assuming full-time, year-round work and no overtime. Barely enough to lift a family of three above the federal poverty line.

But PHI, which advocates for long-term care workers, tells us that a large percentage work only part-time or for part of the year. Average annual earnings were thus $16,800.

As a result, 46% are poor enough to qualify for benefits like food stamps and Medicaid. Sadly ironic when so many of them indirectly get their wages from Medicaid.

Needless to say, morale is low and turnover high — an estimated 50%-80% a year.

Clients who need stability have to continually adjust to new caregivers — and new caregivers to them.

Employers incur ongoing recruitment and training costs. A vicious cycle here since the more they spend due to turnover, the less they’re ready to invest in turnover-reducing wages.

And, of course, some of the best potential candidates look elsewhere from the get-go.

Still, that average hourly wage is more than the minimum the FLSA requires. And the fixes NELP recommends wouldn’t compel states with higher minimums to cover home care workers.

So what would a more appropriate federal rule achieve? Some important things, I think.

First and foremost, it would entitle all home care workers to the same base-level hourly rates as the vast majority of other workers in the country. This would mean, among other things, that they’d be paid for time spent traveling from one client to the next — and, of course, time-and-a-half for extra long hours.

It would also formally recognize home care work as a genuine paraprofessional occupation — one that entails far more than providing some “companionship” to elderly and disabled people.

These two changes would help ensure a sufficient supply of well-trained, experienced home care workers — the sort we’d want for ourselves and our family members.

Emphasis here on “help” because the FLSA rule change is, as logicians say, necessary but not sufficient. It would, however, rectify what seems a clear case of economic injustice.

There are currently about 1.7 million home care workers in the country. The Bureau of Labor Statistics projects 2.5 million by 2018. That’s an awful lot of hard-working people to leave at risk of poverty.

If you agree, you’ve got a chance to weigh in right now.

The Department of Labor is holding two call-in “listening sessions” on the home care exemption. They’re scheduled for Monday, July 25 and Wednesday, July 27, both 4:00-5:00 EST. Call-in number and passcode here.

* Home care workers belong to one of two occupational categories in the Bureau of Labor Statistics’ classification system — home health aides and personal care aides. This issue brief from PHI details duties and distinctions.