Minimum Wage Gaps Growing

New Orleans      There are twenty-one states where workers are still frozen at something equivalent to the federal minimum wage at $7.25.  Those states are disproportionately better “red than fed” in the South and West with a smattering in the Midwest and even the Northeast.

I’m not saying there are any surprises here, but the line-up is a rogues list of woe for workers:  In the South, count Alabama, Georgia, Kentucky, North and South Carolina, Louisiana, Mississippi, Texas, and Virginia for nine of the twenty-two.  In the West, we have Idaho, Oklahoma, Nevada, North Dakota, Utah, and Wyoming adding another six.  The Midwest is sadly also very well represented with Indiana, Iowa, Kansas, and Wisconsin for their four while the East adds two with Pennsylvania and New Hampshire.  The gap between these twenty-one states, along with several others that are hovering right near them like Missouri, Montana, New Mexico, and even Illinois, is widening the inequality gap not only between the rich and the rest of us, but even between low-and-moderate income families and their counterparts in other states.

Even with a Democratic governor, it’s not an easy road.  In Louisiana, John Bel Edwards has been turned back by the Republican-dominated legislature three times that he has tried to raise the state minimum wage.  It’s gotten so bad that a state constitutional amendment that would raise the minimum wage to $9 per hour, if approved by the voters, has even picked up support from the New Orleans Times-Picayune.  There were recent efforts to allow cities to set their own rates apart from the state level by vacating a law passed after an ACORN and Local 100 effort won an increase twenty years ago at the ballot box.

These issues were  highlighted in an analysis in the New York Times that talked about the effective rate across the country is now wildly different than the federal standard as other, very populated states, like New York and California, along with major cities like Seattle have raised their wages.

Averaging across all of these federal, state and local minimum wage laws, the effective minimum wage in the United States — the average minimum wage binding each hour of minimum wage work — will be $11.80 an hour in 2019. Adjusted for inflation, this is probably the highest minimum wage in American history.  In 21 states where the minimum wage is still frozen, workers have lost 16% of their buying power.

Furthermore, as their analysis also indicated the main business boogeyman held up as the rationale for keeping wages abysmally low has also continued to erode:

a huge study released in April analyzed 138 different state-level minimum wage increases since 1979. The authors found largely no net negative employment effects, though they did find some in sectors exposed to international trade. And University of Washington economists revised an initial study of Seattle’s recent minimum wage increase that had showed significant negative effects on earnings for some workers. The new study found that the downsides were more muted.

Wrap your mind around this inequity.  If the “effective” national rate is $11.80 per hour now, then workers in these twenty-one states at $7.25 are almost hopelessly underpaid.  A national worker at fulltime hours would be making $24,544 annually, while workers in the left-behind states would make $15,080 fulltime, which is $9464 per year or almost 63% less that the theoretical national worker.  Of course, left-behind state workers actually are farther behind, because the national effective rate was an average after the rest of us pulled the really higher paid hourly workers down closer to our level, making their premium look and spend even more.  Furthermore, since the rate has changed, minimum wage workers are losing purchasing power even as others are gaining.

This kind of inequity at the bottom is as unjust as the gap between all workers now in America and the rich, and should be the easiest part of the inequality gap to eliminate, especially if Congress would act for everyone rather than mainly the rich as well.

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Minimum Wages, EITC, and Prison Recidivism

Frankfurt      Professor Fred Brooks of Georgia State University shared with me a dense academic paper by Amanda Agan and Michael Makowsky, economics professors at the universities of Rutgers and Clemson respectively.  The title of the paper was “Minimum Wage, EITC, and Criminal Recidivism,” which is not normally the kind of thing that comes into your email inbox and is greeted with an “Oh, boy!”  Upon closer reading though, maybe that’s the wrong way to think about finding such a paper, because the professors did some heavy data lifting to allow them to postulate interestingly on the impact of raising the minimum wage, especially, whether it would reduce the incidence of former prisoners finding themselves back behind bars because of the what they term the “unemployment effect” and the calculation of the costs and benefits of working lower waged jobs versus the likely income from illegal activity.

They looked at six-million records of prisoner release in more than a dozen states in a relatively short period up to 2014.  They compared the release data with records of return and the impact of minimum wage increases in the same areas up to a maximum hourly wage at the time of $9.50 per hour.  What they seem to have found is that the recidivism rate was a little under 3% less for every fifty-cent increase in the minimum wage in a locality for both men and women former prisoners.  They found a significant decrease for women when there was an increase in Earned Income Tax Credits, though they could not find the same for men.  All of that is very, very interesting.  They hesitate to speculate on the policy impacts, but of course that’s not a problem for me.

When they look at the different impacts of EITC for women they speculate that it has to do with the fact that many are single women heading households with children.  They seem not to factor in the additional childcare credit that EITC provides households with children that might provide significantly more appreciable benefits to women in such situations that single men ex-prisoners trying to navigate the highly discriminatory job market for ex-cons.

They don’t decry the impact of frozen minimum wages federally and in many of these states, but of course I can, since the marginal impact of a fifty-cent increase might yield much lower rates of recidivism in states where we won one-dollar an hour increases or, as they point out in the future, any areas where a significant improvement up to $15 an hour is achieved.  They also don’t condemn the short-sightedness of conservative, Republican legislatures attempting to refuse to allow cities to increase minimum wages within their boundaries in Alabama, Florida, Louisiana, Texas and elsewhere even though proportionately the incident of prison population is more minority and more urban and the releases are also coming into cities.  Allowed to have higher minimum wages, as many areas have approved at the ballot box, could drastically reduce crime rates as well as lower the percentages of those returning to jail.

The mind boggles at the potential policy impacts that this study hints might be possible with fair wages and equitable wage distribution.  Is anyone listening out there?

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