What Higher Minimum Wage Does for Workers and the Economy
Honest economists such as Federal Reserve Chairman Ben Bernanke have haltingly told the truth on the question of whether raising the minimum wage adversely affects the employment rate: “My response is that I think it doesn’t lower employment.”
Additionally, study after study has shown that 98% or more of all minimum wage increases have been directly spent back into the local economy, thus acting as a local economic stimulant.
Unfortunately, the “Fair” Minimum Wage Act falls short, would hurt small businesses in rural America, and maintains a repressive wage system that would keep workers in a state of poverty throughout our nation.
First of all, how long would it take a worker to climb out of poverty if every step he or she took was less than the distance to reach that poverty goal line? The answer is FOREVER. They would never get there. That has been the Congressional response to minimum wage worker needs for decades. The mantra has been, “Well something is better than nothing.” Clearly, that is not true if our path to escape poverty is forever blocked.
The failure of the Federal Minimum Wage (FMW) has manifested itself as 3.5 million workers falling out of work and into homelessness every year for the last 20 years. The single most costly item in the budget of every American is housing. That is why the Universal Living Wage campaign, since 1997, has chosen to index the FMW to the local cost of housing across America.
Unfortunately, the “Fair” Minimum Wage Act fails to to recognize that we are a nation of 1000+ separate economies. Everyone else knows the cost to live in Washington, D.C., is different from living in Harlingen, Texas, or Fort Lauderdale, Florida, or Santa Cruz, California. ONE SIZE DOES NOT FIT ALL! Let’s imagine the “Fair” Minimum Wage Act becomes law and the national standard becomes $10.10 per hour. This will not get one homeless minimum-wage worker off the streets of Washington, D.C.! At the same time, this will hurt small businesses in rural Fargo, North Dakota, and Cumberland, Maryland, and Erie, Pennsylvania.
By using the formula of the Universal Living Wage — using existing government guidelines to index the FMW to the local cost of housing — we ensure that a person working 40 hours in a week (be it from one job or more) will be able to afford basic food, clothing, shelter (including utilities), public transportation and access to a hospital emergency room.
Richard R. Troxell
Consult Looking Up at the Bottom Line…The Struggle for the Living Wage for supportive documentation.
Image by Lynn Friedman
On March 3, 2013, the Austin American-Statesman banner masthead read, “’Living Wage’ Proviso Targeted.” (See the article, “Dallas legislator aims to stop wage requirements in incentive deals.”)
Apparently, the Dallas legislature does not want Texas municipalities, Austin-led, to require companies to pay “living wages.” The federal minimum wage is $7.25/hour, but Austin, like the federal government, has now plucked an imaginary number out of the air and dubbed it a “living wage” at only $11.00/hour. For the moment, let’s put aside the issue as to whether or not a municipality should be able to exercise its power position of employer to extract better wages for its employees.
To be clear, $11/hour is not a living wage.
A living wage is an amount that ensures that a person working 40 hours in a week will be able to afford basic: food, clothing, shelter (including utilities), and public transportation. In Austin, it is $13.10/hour. This is calculated by using a 40-hour-a-week job, spending no more than 30% of one’s income on housing ( a national banking standard), and HUD’s Section 8, Fair Market Rent Formula. It is also calculated based on the cost of an efficiency apartment in Austin, which is $681 on average.
To pay a lower wage can result in economic homelessness. At this pay scale, 3.5 million people will again face homelessness in our nation this year.
Image by Ari Moore.
Last time, House the Homeless looked at some of the erratic ways in which people experiencing homelessness are counted during the annual attempt to define the extent of this social disaster. A question that might come to mind is, “Who says erratic is bad?” On the contrary, it’s good that communities have latitude to conduct the homeless census in whatever way is compatible with the bioregion, etc.
Who knows? Some municipality might come up with a better idea, one that could be adapted by others to the benefit of all. But ever since the federally mandated program started in 2005, there has been dissent, directed at either the whole concept in general, or some aspect of it.
In 2011, word came from Fremont, Ohio, that:
Despite recent data released by the U.S. Department of Housing and Urban Development showing homelessness is on the decline in the region, one local shelter director said the problem is just as prevalent as ever.
The story quoted the executive director of Fremont’s Liberty Center, Margaret Weisz, who may have spoken for many of her colleagues when she said:
Those numbers are misleading. In reality, homelessness is actually up. We have seen about a 30 percent increase over the last two years.
In Illinois, Susan Frick Carlman listed some of the things wrong with how the DuPage County census was made:
[...] driven in part by programming cuts at local domestic violence shelters, the county saw a 24 percent increase in families turning up at emergency and interim shelter sites during the latest fiscal year.
Also absent from the formal homeless equation are people who resort to friends and relatives when they lose their own homes — a practice advocates call ‘couch surfing.’
In the fiscal year that ended June 30, there were 1,486 people who used emergency shelters and other interim housing. Last year the number was 1,512.
That’s a difference of what, 26 individuals? In a year? The 1,486 remaining homeless people, divided by 26 per year… Extrapolate it out — that’s 57 years to get the rest of them under a roof. Some people have an unusual definition of progress, for sure.
The journalist also mentioned that:
Among other things, the yearly report found that workers must earn more than twice the minimum hourly wage of $8.25 to afford the average rent for a one-bedroom apartment in the county.
More than twice the minimum hourly wage, did you catch that? Meaning, even if Mama and Papa are both working full-time, it’s not enough.
Ken Korczak is a freelance journalist who covers environmental, energy, poverty, and political issues. Last year, he pointed out that North Dakota had the supposedly best economy in the entire United States, with a “stunningly low” unemployment rate of 3%. Then he asked, if the economy is so vibrant and the unemployment number so tiny, why are the homeless shelters in Grand Forks and Fargo turning away hundreds of applicants every night?
As a possible answer, Korczak recommends a program led by Dr. Jill Stein, the Green Party’s 2012 Presidential nominee, and Cheri Honkala, The Green New Deal, whose literature states its goals as ending unemployment and debt in America. Their point of view is based on a belief that the system is rigged by the two dominant political parties, which might as well be one party, since they are both totally controlled by corporations. They also believe that corporations will not voluntarily pay appropriate wages, and are all too eager to reduce employees and export jobs.
The program could be financed, Stein says, by:
[...] shifting from an economy in which the majority — the majority — of our discretionary budget is spent on war and the occupation of other countries, to an economy that provides the secure, just, peaceful future we all deserve.
They believe this could be done by returning military spending to the level of a decade ago, and by “getting rid of an array of other corporate welfare schemes — such as billions in subsidies to oil and coal companies, banks and others,” says Korczak.
There is more to say about the methods of counting people experiencing homelessness. The counting is useful and necessary, if there is to be a fair appropriation of funds. But aside from sheer numbers, there are other questions it is very useful to ask.
House the Homeless recently released the conclusions of its 2013 Civil Rights Survey. As co-founder Richard R. Troxell says:
We strive to hear what people have to say about their situation and involve them in creating and pursing viable options.
These paragraphs contain some amazing stuff. People are turned down for housing. Reason given: because they are homeless. Without the proper 30-minute warning, they get ticketed for sitting or lying down in public. When they show up for a court date, the journey is wasted because they are told to return another day. (This runaround had happened to about half of the survey’s respondents!)
More than a third of them had been wrongfully deprived of belongings, by the police, and an even one-third had had their identity papers confiscated. It is very difficult for someone experiencing homelessness to obtain a useful ID. To have their ID cards, birth certificates, discharge papers, or whatever, taken away, could be the equivalent of a death sentence.
Source: “Liberty Center director: Recent numbers of homeless are misleading,” TheNews -Messenger.com, 03/14/11
Source: “DuPage homeless numbers defy pigeonholing,” The Naperville Sun, 02/22/11
Source: “Homeless numbers grow rapidly,” Examiner.com, 09/18/12
Source: “2013 HtH Civil Rights Survey Summary,” HouseTheHomeless.org, 02/27/13
Image by mikecogh (Michael Coghlan).
What the U.S. Census bureau calls a “conventional” amount of money to pay for housing (PDF) is 30%. According to economics experts, a family is considered financially responsible if it spends just under one-third of its income on housing costs. More than that, and the household is considered financially “burdened.” About one-third is the standard for most rental housing programs.
A Census Bureau report says:
Because the 30 percent rule was deemed a rule of thumb for the amount of income that a family could spend and still have enough left over for other nondiscretionary spending, it made its way to owner-occupied housing too.
But there are exceptions. Indeed, a mortgage website says that it is following the guidelines of most lenders by allowing a total debt-to-income ratio of up to 36%. The government report explains this:
Many households whose housing costs exceed 30 percent of their incomes are choosing then to devote larger shares of their incomes to larger, more amenity-laden homes. These households often still have enough income left over to meet their non-housing expenses.
In other words, for some people, affordability is not an issue, no matter how big a chunk of their income they spend to put a roof over their head. Lifestyle choice is the only consideration. They want gourmet kitchens and swimming pools, and if they can afford it, good for them. However, the report goes on to say:
But for those households at the bottom rungs of the income ladder, the use of housing costs in excess of 30 percent of their limited incomes as an indicator of a housing affordability problem is as relevant today as it was four decades ago.
The 30% figure is generally accepted now, and is conventional in the sense that it has been quoted since around 1980 when the government set the rent standard for subsidized housing, which shouldn’t charge more than one-third of what a family had.
But there is a strange historical wrinkle that people don’t seem to think about. This recommended proportion that came into vogue 30-odd years ago was not the same as it had been a few years before. The number had “evolved,” as the government report explains. The received wisdom about the amount of family income that should be spent on housing was different wisdom from what it had been previously.
Some of us remember Home Economics class, where we were taught that only a fool would ever consider moving into a place that costs more than 25% of your income. You spent one-fourth on housing, and there were other recommended percentages for other things the budget needed to cover. But for renting or buying a place to live, a quarter of what you made should definitely be the limit. To commit to a greater obligation was the act of an irresponsible person.
In 1968, there was the Housing and Urban Development act, and the next year, the Brooke Amendment set the rent threshold at one-fourth of family income. For the mathematically unskilled, one-fourht is less than one-third. The recommendation used to be to spend even less of the family’s total income on housing.
And guess what? Before that, it used to be considered prudent, rational, and logical to spend only one-fifth of the family income on housing, which is an even smaller proportion. The National Housing Act in 1937 created the public housing program, which had a rent standard that stopped at 20%, or one-fifth of income.
In other words, our idea of the portion of income that is reasonable and prudent to pay for housing has suffered from expectation creep. Every so often, we are presented, by the shifting sands of the affordability concept, with a new normal. Somehow, while we weren’t looking, one of the Great Universal Truths was swapped out for a different Great Universal Truth. Within one human lifespan, the expectation went from “housing should cost one-fifth of what you make” to “housing should cost one-third of what you make.” One-third is more. A lot more.
So, all other talk of housing costs is resting on a big, slimy, insidious con job. That being said, the struggle continues to provide housing that people can afford, and to get people into jobs that pay enough so they can afford housing.
House the Homeless is located in Austin, TX, where the issues of work, wages, and the affordability of housing are particularly acute lately because of the Waller Creek project which is remaking the downtown area. HtH President Richard R. Troxell recently contributed to the public discourse about subcontractor wages, informing the County Commissioners and City Council about the Universal Living Wage campaign. The concept is staggeringly simple: Any person who performs a standard 40-hour-per week job ought to be able to afford shelter (including utilities), food, clothing, and at least public transportation.
It’s kind of amazing that anybody should need this explained. But subcontractor pay is not the only matter being discussed in Austin these days. Much more on Richard’s mind, and the minds of people experiencing homelessness in the city, is the redevelopment project. Matters seem to be poised at a cusp where the agencies serving the homeless can either seize a huge advantage or lose a great deal of their ability to benefit the destitute and the striving.
The Austin Chronicle‘s Ari Phillips interviewed Richard for a thoughtful piece about the Waller Creek project and its ramifications. We quote from that article:
Troxell estimates that about 1,000 homeless individuals use the creek corridor daily. Lately, he says, the city has been encouraging the police to keep the homeless out of the area, he believes to prepare for coming development. He imagines the future Waller Creek as much like the heavily commercialized San Antonio River Walk — homeless-free…
Troxell thinks nonprofits aiding the homeless need to work together and plan ahead to build resources and move their organizations elsewhere; otherwise, the business community will buy them out one at a time. ‘If they do get bought out, the homeless community will be run over by this wave of new energy that’s coming,’ he said. ‘A wave that will be very moneyed and very police-secure.’
In Van Nuys, CA, a 67-year-old woman was purposely set on fire as she slept on a bus bench — one of those unfriendly pieces of public furniture specifically designed to be uncomfortable, with rigid dividers between each designated seat. But maybe, through the layers of clothing she habitually wears, Violet Phillips didn’t even feel the bumps. To be soaked with flammable liquid and then lit on fire causes pain of a different order of magnitude. Undoubtedly, Violet feels the serious burns.
Violet is what people call her at the local churches, where she is acquainted with many parishioners. But she likes to keep to herself. Journalist Mike Szymanski spoke with a representative of the intensive care unit of the University of Southern California Burn Unit and learned that:
… [S]he would only say ‘God bless you’ in reply to people’s questions.
This abominable attack happened two days after Christmas, too late to be referenced in stories about the release of the National Coalition for the Homeless (NCH) report on hate crimes of 2011, but just in time to be included in the 2012 total. The individual who has been arrested, on suspicion of attempted murder, is 24-year-old male. Let’s see how this fits in with the NCH report, which says:
… [N]early all of the attacks were carried out by teenagers and young men.
A lot of these young so-called men reportedly do these things just for fun. On behalf of The Huffington Post, Saki Knafo spoke with NCH executive director Neil Donovan, who feels that one of the big problems is the desensitization caused by electronic games that cast people experiencing homelessness in the role of targets. Also contributing to the stigmatization and degradation are video productions like “Bag Lady Fights” and “BumFights.” Donovan calls it a “campaign of dehumanization.”
But how many attacks, or anti-homeless hate crimes, are we talking about? Here’s the breakdown:
… [A]t least 32 homeless people in the United States died as a result of violent attacks in 2011, as compared with 24 the year before. The report also tallied 73 non-lethal attacks against the homeless, a drop from the previous year’s count of 89.
Despite a serious lack of funding, since 1999, the NCH has taken on the mission and challenge of filling the informational void. Their latest report is titled “Hate Crimes against the Homeless: The Brutality of Violence Unveiled” and the 94-page PDF file can be downloaded from the top of the NCH homepage. The FBI does not define the homeless as a protected group, and is not interested in keeping track of anti-homeless hate crimes. But it does tally up other hate crimes in America, and here is the alarming thing, as Knafo puts it:
… [T]he number of lethal anti-homeless hate crimes counted by the group exceeds the government’s tally of deadly hate crimes in all other categories.
In other words, for several years now, the number of homeless people murdered because of who they are has exceeded the number of victims of fatal hate crimes from all other (racial, religious, etc.) motivations, added together.
It’s a terrifyingly stringent economy where they can’t even place a foot on the first rung of the ladder to success, or even modest prosperity. In the late ’70s, the “deinstitutionalization” trend started, and was supported by many factions, for reasons that seemed good at the time. Unfortunately, psychiatric institutions were not replaced by other support systems. The combination of these national changes with other factors resulted in the current crisis where people are getting killed simply because they don’t have a place to live. Another aspect of this situation is, the elderly and confused are not the whole population of people experiencing homelessness. An enormous number of young people are out there trying to make it on their own.
Susan Saulny’s “After Recession, More Young Adults Are Living on Street,” is a companion piece to her earlier video reportage “Young and Homeless: The Recession’s Impact on Young Americans.” She talks about Los Angeles, where in 2011, there were about 3,600 unfamilied kids on the streets. The city’s shelter could sleep less than one-fifth of them. Boston is bad, all cities are bad, but the suburbs or country are nearly impossible.
The young do have one advantage. They are not so likely to be victims of the anti-homeless hate crimes per se, being better able to blend into the population. Kids like to look scruffy, and sometimes it’s hard to determine who is rich and who is destitute, on the evidence of clothes and hygiene. Plus, the young are more easily able to run away. But in shelters, it’s a different story. Saulny says the young:
[...] tend to shy away from ordinary shelters out of fear of being victimized by an older, chronically homeless population.
What is the answer? One of answers is to make sure there are jobs, both for homeless youth, so they can afford to live someplace, and for the aimless young men who victimize the homeless for kicks. Richard R. Troxell, as we know, is co-founder of House the Homeless in Austin, TX, and author of Looking Up at the Bottom Line. He recently wrote:
I sit on the Board of the National Coalition for the Homeless that produced this report. I also sit on the Civil Rights Committee and we actually generated this report. The young need to be engaged in living-wage jobs. So we need to promote our stimulus recommendations to President Obama, in order to create jobs, and then those jobs need to pay living wages.
Please learn more about the Universal Living Wage.
Source: “Homeless Burn Victim, Violet Phillips, Remains in Critical Condition,” Sherman Oaks Patch, 12/28/12
Source: “Anti-Homeless Hate Crimes Detailed In New Report,” The Huffington Post, 12/21/12
Source: “After Recession, More Young Adults Are Living on Street,” The New York Times, 12/18/12
Image by danieljordahl.
For many decades, economists have sounded nearly unanimous in their condemnation of the minimum wage. The consensus view among economists was that minimum-wage rules resulted in lower employment, and that the most uneducated and unskilled workers were those most likely to lose their jobs due to a mandatory minimum wage.
Well, the research is in, and the majority of economists were wrong! Surprise! Minimum-wage laws actually don’t reduce employment. In fact, they increase the welfare of minimum-wage workers and their employers.
Who says so? None other than The Economist, the house organ of the economics profession, the gold standard of consensus among economists. In a recent “Free Exchange” column, The Economist dishes the numbers on minimum-wage laws and begrudgingly concludes, “Whatever their flaws, minimum wage laws are here to stay.”
Why? Because “whatever their flaws,” they work. The Economist cites a slew of data about the effectiveness of minimum-wage laws that has become available recently — data which refutes the long-held belief that minimum-wage laws increase unemployment.
Much of this data comes from Great Britain, which introduced a national minimum-wage law in 1999. The British government requires a minimum wage equal to about 46% of median earnings — compared with a less generous 40% in the United States. When Great Britain instituted the national minimum wage “worries about potential damage to employment were widespread,” says The Economist, itself a major worrier. “Yet today the consensus is that Britain’s minimum wage has done little or no harm.”
In case you’re having trouble with the British accent, “little or no harm” means the law did quite a bit of good — by every measurable standard:
Not only has it pushed up pay for the bottom 5% of workers, but it also seems to have boosted earnings further up the income scale — and thus reduced wage inequality. Wage gaps in the bottom half of Britain’s pay scale have shrunk sharply since the late 1990s. A new study by a trio of British labour-market economists (including one at the Low Pay Commission) attributes much of that contraction to the minimum wage. Wage inequality fell more for women (a higher proportion of whom are on the minimum wage) than for men and the effect was most pronounced in low-wage parts of Britain.
Again, let me translate from the British: The minimum-wage law boosted wages at the very bottom of the earnings scale — and all the way up the scale! As Richard R. Troxell, head of the campaign for a Universal Living Wage has eloquently argued, greater income at the bottom leads to greater spending at the bottom, boosting the entire economy. It also leads to lower government spending, lower taxes, and lower budget deficits, as those at the bottom rely less on government subsidies.
How is that possible — for increasing wages to increase profits? The Economist thinks much more work needs to be done to understand the relationship between employment and the minimum wage. The magazine goes part way by explaining that increased wages at the bottom lead to less turnover which saves more money for businesses than the wage increase costs them.
This lesson was not lost on Henry Ford. He paid workers more and thereby reduced the costs of building a car while increasing his profits. All of this is laid out in Richard R. Troxell’s book, Looking Up at the Bottom Line: The Struggle for the Living Wage. While it’s gratifying to see The Economist finally reverse its kneejerk objections to a guaranteed living wage, they have a long way to go to make up for the delays caused by their previous incorrect statements about the mythical damage caused by a minimum wage.