TREADMILL TO NOWHERE: MANY LOW-WAGE WORKERS DO NOT SEE EARNINGS GAINS EVEN AFTER SIX YEARS

TREADMILL TO NOWHERE: MANY LOW-WAGE WORKERS DO NOT SEE EARNINGS GAINS EVEN AFTER SIX YEARS

New Findings with Pennsylvania Data Contradict Stories Told By Business Groups

Higher Earnings for Many Depends on Increasing PA’s Minimum Hourly Wage

Harrisburg, PA – The Keystone Research Center (KRC) today released fresh data demonstrating that many Pennsylvania workers with annual earnings below the poverty level in 1998 still earned below the poverty level six years later.

“KRC’s new findings underscore that many low-wage Pennsylvania workers are on a treadmill rather than an escalator,” said economist Stephen Herzenberg, a co-author of KRC’s Briefing Paper, Stuck on the Bottom Rung of the Wage Ladder.  “For these workers, earning closer to a family supporting income requires Pennsylvania to increase its minimum wage.”

To conduct its study, KRC obtained data from the Pennsylvania Department of Labor and Industry on Pennsylvania workers with low annual earnings in 1998.  Among 670,000 individuals who started out with below-poverty-level earnings in 1998, 261,000 – about two in five – still had below-poverty-level earnings in 2004.  (These 261,000 workers earned less than $13,020 in 2004, which translates to less than $6.26 per hour for a full-time, full-year worker.)

In a larger group of 1.8 million Pennsylvania workers with annual earnings in 1998 of less than 150% of the poverty level for a family of three, nearly three-quarters (72%) were still earning less than 150% of the poverty line in 2004 or were out of the sample i.e., they worked very little in 2004 or had left Pennsylvania. 

KRC’s findings are consistent with recent national studies that also show that many low-wage workers stay mired near the minimum wage.  A December 2005 study by Heather Boushey of the Center for Economic Policy Research (CEPR) in Washington, D.C. found that

• more than a third (37%) of prime-age adults in jobs paying within a dollar of the 1997 minimum wage of $5.15 remained in jobs paying this amount or less (adjusted for inflation) three years later;
• only 39% of workers had moved up to jobs paying more than a dollar above the minimum wage;
• the remaining 24% of workers did not work at all three years later.

KRC’s findings contradict the rosy impressions left by advocates for the National Federation of Independent Business based on a study that used mid-1980s data.  “The notion that the minimum wage is a launching pad to a substantially higher wage in a year or two is a nice concept,” said Mark Price, a co-author of the Briefing Paper.  “For many Pennsylvania workers it just happens not to be true.”