Raise the Minimum Wage in Pennsylvania
The Governor and his Cabinet will Enjoy Salary Hikes of 25 percent. Minimum-Wage Workers Deserve No Less.
On Jan. 19, when Gov. Ridge is sworn into office for a second term, he and most of the Cabinet will receive salary hikes of 25 percent or more - dollar increases that range from $22,000 to $28,000 per year. Fairness and sound economics dictate that the governor and Legislature should also raise the state's minimum wage to $6.50 per hour, a raise of just over 25 percent.
Fairness. Many Pennsylvania workers haven't seen a raise of 25 cents in two decades, never mind one of 25 percent. In metropolitan Pittsburgh from 1979 to 1997, for example, low-wage earners saw their inflation-adjusted hourly earnings drop from $6.51 to $5.25.
Even during the prolonged 1990s economic recovery, Pennsylvania workers who make close to the minimum wage have gained little ground. From 1994 to 1997, Gov. Ridge's first term, the hourly earnings of low-wage Pittsburgh-area workers actually fell by a penny an hour.
Because low-wage earners didn't make much to begin with, falling wages have meant rising poverty. Thirty percent of Pittsburgh-area workers now take home less than the $7.89 per hour necessary for a single full-time earner to lift a family of four above the federal poverty line. This compares with only 18 percent who fell below the same poverty wage cutoff in 1979.
Opponents of a higher minimum wage argue that increases are poorly targeted and benefit suburban teen-agers. The evidence suggests otherwise. The average minimum wage worker brings home more than half his or her family's weekly earnings. Thirty-five percent of the income gains from the last federal minimum wage increase went to the poorest 20 percent of families. Over two- thirds of those who benefited from recent increases were adults.
Good economics, part one. What about the old bugaboo that raising the minimum wage will eliminate low-wage jobs, hurting those it is supposed to help? A growing body of evidence shows that modest increases in the minimum wage do not reduce employment and, in some cases, actually increase it. This happens, for example, if workers paid a higher minimum wage quit less often and low-wage establishments thus have fewer unfilled job openings. One illustration of this phenomenon: After New Jersey raised its minimum wage above Pennsylvania's almost a decade ago, employment at New Jersey fast-food restaurants rose compared with employment in nearby Pennsylvania fast-food restaurants.
Good economics, part two. A higher minimum wage can also help stimulate improvements in productivity and quality, the foundation for better living standards. A higher minimum wage forces the lowest-wage employers to focus on approaches more creative than profiting at the expense of their workers. Retail customers may get served more quickly because inexperienced workers are not fumbling over the cash register. Recipients of elder care may find that the aides who helps dress or bathe them today is the same person it was last month.
While small business will resist an increase in the minimum wage, the best small firms know that a higher minimum is not anti-competitive; it just shifts the basis of competition toward improving productivity and quality.
Lessons from the past. Although the idea now seems almost quaint, Americans and Pennsylvanians used to subscribe to the idea that low-wage workers should share in the benefits of an expanding economic pie. From 1947 to 1968, minimum-wage workers saw their inflation-adjusted annual income rise 150 percent even while unemployment remained low. If we had not departed from the principle that low-income workers should share in the benefits of higher overall living standards, the minimum wage would now be around $11 per hour.
Even $6.50 an hour is, of course, a miserly wage - enough to generate an annual income only half the size of Gov. Ridge's upcoming salary increase. Studies of what it actually costs to buy food, clothing, housing and other basic necessities demonstrate that a real living wage for most Pennsylvania families is in the range of $8 to $12 per hour. But $6.50 is better than $5.15.
Referendums on minimum-wage hikes in California, Oregon and Washington suggest that voters agree that full-time workers should make closer to a living wage. In November, Washington state voters approved an increase to $6.50 by a two-to-one margin.
When state Rep. Mark Cohen introduces a bill at the beginning of the upcoming state legislative session to raise the Pennsylvania minimum wage in stages to just over $6.50 an hour, the governor and legislative leaders should enact this increase into law.