Monday, May 8, 2017
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17 Reasons to Raise Indiana's Minimum Wage in 2017
May 2017 | Amy Carter & Maria Laster
The past three years, the Indiana Institute for Working Families has given more and more reasons to increase the
minimum wage. This year, we updated the list and added two new items with one
theme: public health. As minimum wage debates continue, the positive public
health outcomes cannot be overlooked or denied. Read on to see a compelling,
though not exhaustive, list of seventeen reasons to raise the minimum wage in
2017.
1. Working Towards Self-Sufficiency - 40 Hour Work Week: There is not one
county in Indiana where working full time (40 hours/week) at the minimum wage
of $7.25 per hour is sufficient to support even a single adult, as shown in our Indiana
Self-Sufficiency Standard 2016 report. A single adult has to work a
median 48 hours per week at the minimum wage in order to be self-sufficient.
The number of hours increases significantly - to 108 hours - for a single adult
with one preschooler and one school-age child. For a family with two adults, a
preschooler, and a school-age child, each
adult would need to work 64 hours for the family to be self-sufficient. Let’s raise
the minimum wage to a level that allows Hoosiers to spend time with the
families for which they are working so hard to provide.
2. Working Towards
Self-Sufficiency – Housing: A full-time (40 hours), minimum
wage ($7.25) worker in Indiana earns about $1,160 per month. The median
Fair Market Rent for a single adult in a one-bedroom home across Indiana’s
counties is $486, equaling 42% of a minimum wage worker’s monthly wages. The rule
of thumb for housing says that no more than 30% of a worker’s monthly
income should be spent on rent. However, national
data shows over a third of US households faced housing cost burdens
(meaning spending more than the rule of thumb) including 17% that are severely
burdened (spending 50% or more of income). In order to afford the Fair Market Rent for a
two-bedroom apartment, which is what a family with children needs, a
minimum wage earner must work 77 hours per
week, 52 weeks per year!
The minimum wage needs to be closer to $14 in order for a minimum wage worker
to afford housing at less than 30% of their income.
3. Working Towards Self-Sufficiency – Childcare: In Indiana, the
cost of childcare almost exceeds monthly earnings for minimum wage workers. In
2015, the average cost of childcare for families with one infant and one four
year old was over
$1,300/month! Comparing that expense to the monthly minimum wage for a
full-time worker, $1,160, it is not difficult to see why families are not
self-sufficient. Childcare
tax credits and state childcare vouchers can help, but not all children
receive vouchers. In January 2017, Indiana had
4,385 children on Child Care Development Fund (CCDF) waitlists. National
data from 2015, the most recent year for which we have data, suggests
that with the current investment in Child Care and Development Block Grant
(CCDBG), only 15% of children eligible for child care assistance are getting
support. A raise in the minimum wage could help make childcare more affordable for
those at two and three times the federal poverty level, thus leaving spots open to increase
access for low-income families who want this aid.
4. Public Opinion: A
strong majority of Americans support raising the minimum wage. According to a
2015 New York Times poll, 71%
of respondents favored raising the minimum wage to $10.10. The Bowen Center for
Public Affairs at Ball State University found in their 2015 Hoosier Survey that 64% of respondents were supportive of a minimum wage
raise to $10.10. While Democrats and Independents were more favorable, almost
46% of Republicans were in favor. It’s time for legislators to listen to their
constituents.
5. Tipped Workers – 26 Years
Without a Raise: Waitstaff in Indiana are paid $2.13 per hour by
their employers (29% of the minimum wage) according to the Department of Labor. Tips are
expected to cover the difference between that wage and minimum wage; if they
don’t, employers are to cover the difference. The last time tipped
workers saw a raise was a quarter-century ago (1991), even as the industry has
seen strong growth and profitability. Women make up the majority in tipped
occupations. According the National
Women's Law Center, gender gaps and poverty rates for tipped
workers are smaller in states where the tipped minimum wage is equal
to the minimum wage. See a simplified table of minimum wage, tipped wage,
and poverty rate of women in tipped occupations here. As
the fight for an increased minimum wage continues, tipped workers cannot be forgotten.
6. It's Not Just for Teens Anymore: Contrary to common perception, fewer than 20% of
workers earning the minimum wage or below are teens. Minimum wage workers
are not just high-schoolers earning spending money; they are at
least 20 years old and have greater family responsibilities. (Check out Table
1 here for a breakdown by age, gender, and race.) In Indiana
specifically, 88% of those who would be affected by an increase in the
minimum wage to $15 are age 20 and older.
According to a recent Economic
Policy Institute fact sheet, “the typical worker who would benefit
from a $15 minimum wage is a 36-year-old woman with some college-level
coursework who works full time.” The minimum wage conversation cannot be pushed
aside based on the perceived age of minimum wage workers. (Though there is no
justification for paying teenagers poverty level wages either. Perhaps a
conversation for another day…)
7. Gender Gap: Based on 2011-2015 data,
white and Asian Hoosier women holding full-time, year-round jobs earn $0.76 for
every dollar paid to white, non-Hispanic men. Black and Latina Hoosier women
earn even less, $0.66 and $0.54 respectively. This is unacceptable and raising
the minimum wage can help. More than 301,000
households in Indiana are female-led. Thirty-two percent of those households –
more than 97,000 – have incomes that fall below the poverty level. Increasing
the minimum wage, especially in these female-dominated professions, could give
these families more money for savings, child care, education, and housing. Because 3/5th of minimum wage workers
in Indiana are women, raising the wage is a good step toward equalizing pay.
8. Wage Erosion: Adjusted
for inflation, the minimum
wage peaked in 1968! (That's 49 years ago. 49 years!) The last federal raise was in 2009 and since then minimum
wage has lost 9.6% of its purchasing power. If the minimum wage had grown with
productivity, it would have been $18.85
in 2016. If it had only grown with average wages, it would still have been $11.35
in 2016. Because the value of the minimum wage has been left to erode due to
inflation, more workers are earning poverty wages. Reducing the erosion of
wages would be a good step towards reducing income inequality.
9. Low-
to Mid-Wage Workers Earning Less: Real
(inflation-adjusted) median hourly wages are down $0.84 since 2007, and 20th
percentile wages are down $0.73. See interactive data here. Raising the minimum wage would likely increase
these mid-range wages as well.
10. Race to the Bottom:
According to a 2016 report from the Bureau of Labor Statistics, 3.9% of hourly workers in Indiana
make at or below minimum wage. 3.9% represents 32,000
workers at minimum wage and 37,000 workers below minimum wage. That's more
than all neighbor states (Illinois 3.2%, Kentucky 3.5%, Michigan 3.7%, and Ohio
2.9%) and the U.S. average of 3.3%.
11. Myth of a Spike in Unemployment: Critics of raising the minimum wage often argue that an
increase will cause a spike in unemployment. However, seven decades of historical data
find no correlation between minimum wage increases and employment levels. On the contrary, in the considerable majority of instances
(68%), overall employment increased after a federal minimum wage
increase. In the most substantially affected industries, the rates were even
higher: in the leisure and hospitality sector, employment rose 82% of
the time following a federal wage increase, and in the retail sector it rose 73% of the time. Moreover, the small minority of instances in which
employment declined —either overall or in the indicator sectors—following a
federal minimum wage increase occurred during periods of recession or near
recession.
12. Economic Growth: In
a stagnant economy, increasing wages can lead to economic growth.
Low-wage workers tend to spend any additional income they receive on their
basic needs. If the minimum wage increases, these workers would pump money into
the economy, boosting GDP, which would produce job growth in the broader
economy. Economic Policy Institute supports this idea, saying that a “high pressure economy that
eliminates the remaining demand shortfall in the U.S. economy and leads to low
rates of unemployment and rapid wage growth would likely induce faster productivity
growth.”
13. Growing the Tax Base: Standard and Poor's cites
rising income inequality as contributing
to weaker tax revenue growth, making it more difficult for state and
local governments to invest in education and infrastructure. This year,
the Indiana General Assembly (IGA) discussed the expansion
of Pre-K education, which not only prepares students for academic and social
success, but allows
parents to work or go back to school. However, funding was not increased
as much as advocates suggested. Increasing the minimum wage could give the IGA
more money to provide supports for low-income Hoosiers (which helps them reach
self-sufficiency, which means more income for taxes, which can increase funding
for education, which helps people reach self-sufficiency, and so on and so
forth.)
14. Reduce Need of and Spending on
Public Assistance: According to a 2016
Economic Policy Institute report using Census data from 2012-2014, for
those in the lowest wage category (those earning up to $9.91/hour), a $1
increase in hourly wages reduces the likelihood of needing public assistance by
3.8%. So if this entire group consisting of 15.5 million workers had an average
$1 increase in hourly wages, there would be an approximate 3.8% decline in
dependence on public aid, or 600,000 fewer workers receiving benefits. The
study also found that for each $1 increase in minimum wage, benefit dollars for
all public assistance programs decreased by $199. If those making $9.91/hour or
less each had an average $1/hour raise, the expenditures on means-tested government benefit would go
down $3.1 billion annually.
15. Future Generations: Low wages not
only affect adults, but children as well. Research has found that
children being raised in poverty have worse physical, psychosocial, and
academic outcomes than more affluent peers. A recent
study of minimum wage increases showed that a $1 increase in minimum wage
implies a 9.6% decrease in neglect reports.
Raising the wage will help ameliorate the deleterious effects of poverty
on children, specifically reducing the risk of child welfare involvement for
children 0-12 years old.
16. Decreasing
Teen Birth Rate:
Teen parenthood costs the public more than $9 billion per year
and can decrease the
educational and employment outcomes
of both the teen and the child. A recent study done by an Indiana University
researcher found that a minimum wage increase of $1 would reduce the adolescent
birth rate by 2%, leading to about 5000 fewer adolescent births per year. As the
discussion on minimum wage continues, positive unintended consequences, like
the effects on public health, can be strong debate points and influences in
creating minimum wage policy.
17. Decreasing
Infant Mortality Factors:
A 2016 study looked at minimum wage, birth weight,
and post-neonatal mortality by state from 1980-2011 to see what effect minimum
wage had on infant mortality and birth weight. They found that a $1 increase
above the federal minimum wage decreased low birth weight births by 1-2% and
decreased post-neonatal mortality by 4%. In 2005, the social and health cost
for low weight births was over $26 billion! Imagine how great the impact is a
decade later. According to KIDS COUNT data from
the Annie E. Casey foundation,
Indiana does not compare well to neighboring states – 7.3 infant deaths per
1000 live births compared to 6.0 in Illinois, 6.7 in Kentucky, 6.6 in Michigan,
and 7.2 in Ohio. (You can see interactive data on infant mortality here.) Raising the minimum wage can not
only save money on public health outcomes, it can literally save lives.
