Policy: Labor

Federal minimum wage hike would affect states differently -- and that's a plus for Democrats

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Jobs,Labor,PennAve,Joseph Lawler,Economy,Minimum Wage

The typical laundry worker in Pascagoula, Miss., made just $8.67 an hour in 2012, according to the Bureau of Labor Statistics.

Someone working the same job in Seattle, however, earned $11.94 an hour — nearly 40 percent more.

The minimum wage proposed by President Obama and congressional Democrats, a $10.10 hourly rate, would affect most fast-food workers in places like Pascagoula, but not in high-wage places in Seattle.

That’s true for other low-wage occupations as well. Laundry workers in Hot Springs, Ark., make just $8.86 an hour, but their counterparts in Stamford, Conn., earn $13.39. Cashiers in Charleston, W.Va., make $8.68 hourly, but in the District of Columbia, they pull down $10.68.

The United States' diversity -- geographical and economic -- means that a one-size-fits-all federal minimum wage is less desirable than wage floors established at the state or even local level, say analysts like the conservative Heritage Foundation's James Sherk. He says that minimum-wage hikes can lower employment, just as, he says, mandating an increase in the price of any other service or good would reduce demand.

Currently, the federal minimum wage is $7.25. As of this year, however, 21 states and D.C. have set their rates higher, with Washington state leading the way with a $9.32 minimum hourly rate that is pegged to grow with inflation. The states with higher minimum wages tend to be wealthier states with higher prevailing wages, in the Northeast or on the West Coast. One prominent exception is Florida, which since 2006 has had a rate that increases with a cost-of-living formula and is now $7.93.

The federal rate is binding for the other 29 states, some of which have no minimum, or have a minimum lower or equal to the federal minimum. They are mostly poorer states in the Midwest and South.

The differing minimum wage laws by states are no accident, but instead reflect those state governments setting wages that are more appropriate for their populations — meaning, not too high to discourage employment, suggests Sherk. “A minimum wage that’s going to have a small effect in Los Angeles is going to be different from one that is going to have a small effect in rural Texas,” he told the Washington Examiner, warning that if the rate is set too high and the effect is too big, “you are going to do damage.”

But to minimum wage proponents, the fact that a $10.10 federal minimum wage is higher than some — or all — states would set it is a central point of the plan, not a bug.

“I would say that, right now, the federal level is just too low,” said David Cooper, an economic analyst with the Economic Policy Institute, a think tank associated with labor groups. “It’s fine that there’s some variation,” Cooper said, but setting a minimum across the country ensures that no workers are left behind in low minimum-wage states as the economy improves — a matter of fairness, he says.

Cooper also argued that a federal minimum could help in a situation such as Hurricane Katrina. A hike in the federal minimum wage would have meant a raise for many workers in Louisiana who would have otherwise have fallen behind workers in other states whose wages were growing even without any change to the minimum.

Cooper explained that a full-time minimum wage worker at the current rate makes about $15,000 annually, below the federal poverty level of $15,510 for a family of two. Previously, the minimum wage had been sufficient — before its value was eroded in the 1970s and ‘80s — to keep a family of three above the poverty line, which today would be $19,530. By that standard, the inflexibility of the federal minimum wage doesn’t matter, for the time being: it’s currently too low throughout the U.S.

In the past, the Economic Policy Institute has suggested that the minimum wage should simply be set as a share of average wages — such as half, where the minimum wage was effectively in 1964. That would mean a minimum of roughly $12 today. Cooper says tying the minimum to average wages is a good idea, but that indexing it to inflation, as the bill proposed by Sen. Tom Harkin, D-Iowa, and Rep. George Miller, D-Calif., would do, is politically an easier sell.

Some politicians in high-wage cities are trying to significantly raise their minimum wages above the federal or state levels. For instance, Seattle’s mayor has pushed for a $15 rate. For reference, parking lot attendants in Seattle make an average of $11.63. San Francisco, Santa Fe and Albuquerque, N.M., and D.C. have all raised their local rates. The county councils in Montgomery and Prince George’s counties in Maryland, adjoining D.C., have voted to raise their minimums to $11.50 by 2017.

Advocates of the federal wage hike are likely to be on board with movements in Seattle and elsewhere to go above and beyond. But the more important goal, for them, is to make sure that poorer areas don’t go below.

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