The High Cost of Low Wage Jobs in Michigan

Okay, so is it really such a big deal that late last week, in a hen’s-tooth-rare bipartisan effort, Michigan lawmakers cribbed Mark Schauer’s minimum wage bill from his glory days in the Senate? Should he really earn special creds?

The gubernatorial candidate, along with more than a handful of Senate Dems, sure didn’t waste any time making political hay out of the bipartisan compromise to raise the wage to $9.20. Schauer capitalized on the situation with an unexpected visit to the Senate floor and a yoo-hoo to the press corp. Gongwer News described the hubbub of Schauer’s surprise drop-in — as he exercised a special privilege allowed to former Senators…

…to visit your old stomping grounds whenever you please, and Mr. Schauer used that to his advantage on Thursday when he swung by the press corps box to “say hello” and compliment current Senate Majority Leader Randy Richardville (R-Monroe) on passing legislation “almost identical” to a proposal he himself had presented (and the Democratic Party is already jumping all over that in the wake of the passage of the minimum wage increase in SB 934).

There’s nothing wrong with politicking in an election year. Schauer’s campaign manager should be commended. Very sharp. But, this showmanship should not occur in the absence of recognizing the truly salient issues at hand.

First, as we previously discussed, the Republican provenance of this minimum wage bill was certainly not born in the spirit of helping the working poor. Richardville crafted SB-934 to accomplish two goals — render moot the citizen-driven ballot initiative to raise the minimum wage to $10.10 (which polling suggests would very likely pass), and to suppress Democratic voter turn-out in November. It was a blatant double-edged effort to hack the democratic process.

As troubling as that may be, there is another principle that need stand above political gamesmanship — employers should be required to pay a living wage. Fair and just compensation is, at least in theory, as American as apple pie.

The Senate plan (SB-934) to raise the minimum wage to $9.20 by 2017 remains grossly inadequate. In fact, the Raise Michigan ballot proposal of $10.10 also falls short. The Michigan League for Public Policy finds that a single-person household currently requires $10.37 per hour to meet basic needs, and those numbers go up with children in the picture, especially in single-parent households where child care costs must be factored-in.

basic needs

There are other serious problems.

While the compromise plan indexes the minimum wage to inflation, it does so with the inadequate starting point of $9.20, thus guaranteeing that Michigan’s working poor will continue to earn less than a reasonable living wage, now and into the future. Additionally, the deficiency will grow in magnitude because the legislation slowly phases-in the $9.20 over several years, before indexing even enters the equation.

The adjustment for inflation clause also contains two trip-wire mechanisms intended to limit, or hold back altogether, increases in situations of economic stress involving either inflation or slumping employment. Under the bill, wages may not increase more than 4 percent in any given year, and no increase will be granted if unemployment tops 10 percent in the preceding twelve months. This may appear to make sense on the surface, but the law does not address how these mandated wage caps and freezes will be remediated into the future. Meaning, if the state suffers another prolonged economic downturn, the potential for the minimum wage to fall even further behind the inflationary curve escalates exponentially.

In 1968, when the prevailing minimum wage was $1.60, it equaled the purchasing power of $10.71 in 2013 dollars. It’s hard to believe it now, but that was enough money to survive on 46 years ago. Minimum wage earners in Michigan have lost nearly one-third of their purchasing power over the ensuing years.

value min wage graph

In their report, Raising the Minimum Wage: Good for Working Families, Good for Michigan’s Economy, the MLPP put it this way:

Since 1968, the real value of the minimum wage has dropped by 31%, despite nominal increases from the mid-1970s to 2008. If no steps are taken to increase and protect the value of the minimum wage, by 2024 its real value will be just $5.81 in 2013 dollars, an additional drop of 15%.

Michigan is selling its citizens, and thereby its economy, short with a minimum wage that hasn’t kept-pace with the value of the dollar. As more and more families slip into poverty, businesses suffer too.

The higher minimum wage would also increase the wages of 940,000 Michigan workers, either directly (641,000) or indirectly (299,000).Each of these workers would see their annual incomes increase modestly by an average of $2,256 – for a total of over $1.4 billion per year in additional earnings for all affected workers. Much of this additional income would likely be spent locally, increasing the state’s economic activity by almost $886 million over three years.

Over the past two decades, with the exception of several years following the 2006 incremental increase in the minimum wage to $7.40, Michigan’s lowest paid workers haven’t earned enough to keep a two-person household out of poverty. Michigan’s minimum wage policy has been pushing growing numbers of families into situations where government assistance has become an absolute necessity for survival, thereby forcing taxpayers to indirectly subsidize those businesses that refuse to pay a living wage.

Michigan’s business community is the real welfare queen here, particularly its fast food industry. A recent report from the University of California-Berkley Labor Center found that the families of fast food workers are twice as likely to receive state and federal assistance — fully 52 percent are enrolled in a safety net program, compared to 25 percent of the general workforce.

Those workers at the low-end of the earning scale are not typically teens either, as Republicans would have us believe. From the MLPP report:

Contrary to common assumptions, a majority of the state’s workers who would benefit from an increase in the minimum wage are not suburban teenagers without family responsibilities. Rather, they are adults who work at least 20 hours per week and contribute a significant amount to their household’s total income. An overwhelming majority of these workers have at least a high school diploma, and a significant number of them are also parents.

Age of WorkersFurthermore, the compromise legislation will continue the practice of the current age-based, two-tiered minimum wage system. Those under 18 years of age are compensated at a rate of only 85 percent of what adults earn for identical work, creating an incentive for employers to replace adult workers with teens. Just imagine if Michigan law made the same allowance for employers to pay those over 65 less money for the same job. The only difference is one group gets to vote, and the other doesn’t.

The idea of raising the minimum wage enjoys broad support in Michigan, with 54 percent saying they would vote to move it to $10 this year, and another 6 percent leaning towards the notion. A national Gallop survey found even wider support for a modest bump to $9. Polling revealed 76 percent of respondents favored the increase, including 58 percent of Republicans.

Yet, businesses are lobbying hard for pre-emptive laws to prevent states and municipalities from raising minimum wages higher than the federal law. There exists a patchwork of laws governing minimum wage across the nation, but none of them yet demand a real living wage. Only Washington and Oregon break the $9 barrier, and none currently exceed $10 an hour, but four states have laws on the books to phase-in such an increase. This year, Connecticut, Delaware, Maryland, Minnesota, West Virginia, and Washington D.C. have enacted laws to increase minimum wages. Legislators in Hawaii and Vermont passed bills on May 2nd and 9th respectively, each yet to be signed by their governors. With SB-934, Michigan is in the company of 37 other states with pending legislation in 2014.

No law is perfect, and it’s not disputed — the process of bipartisan cooperation is messy, but the economic flaws found in this proposed legislation are glaring and more than a little bit unethical.

Michigan’s workers and taxpayers deserve better.

DSCN0444Amy Kerr Hardin

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