Working for a Living (Wage)

By Kathleen Hunter, Stateline.org. Posted January 23, 2006.

Nearly one-half of Americans now live in states that require wages higher than the $5.15 an hour set by Congress nine years ago. And the trend of states raising their minimum wages in the face of federal inaction shows no sign of fading.

Just since the start of the year, one state has increased its minimum wage, a governor from each party has announced a wage hike is on his agenda, and supporters are rallying in six states where campaigns are under way for wage-hike initiatives on the November ballot.

On Jan. 17, Maryland became the 18th state to set a minimum wage higher than the federal level of $5.15 an hour when the Maryland General Assembly overrode Republican Gov. Robert Ehrlich's veto of a bill raising that state's minimum wage to $6.15 an hour.

The same day, New Mexico Gov. Bill Richardson (D) in his annual State of the State address proposed raising his state's minimum wage to $7.50 an hour -- up from $5.15 an hour -- over the next three years.

Even Republican Gov. Arnold Schwarzenegger of California ventured into what is traditionally considered the territory of Democratic politicians and called for a $1 increase in California's minimum wage -- to $7.75 from $6.75 -- during his annual address to the Legislature earlier this month.

"The economy has bounced back, so it is now time for those who often work the hardest and earn the least to benefit from California's growth," Schwarzenegger said in his speech.

Ballot initiative campaigns are under way in six states, including in Nevada, where voters will consider a pioneering measure this November. Nevadans will decide whether to enact a bifurcated minimum wage requirement in which companies that don't provide health benefits for employees would be forced to pay a higher minimum wage than those that do. Minnesota already requires employers with annual receipts of $625,000 or more to pay higher wages than smaller companies.

Experts say the growing patchwork of laws setting various wage floors across the country is driven largely by the longest period without a congressionally mandated increase since the federal minimum wage was introduced in 1938.

"I think it will continue to be a hot issue for the states in 2006," said Jeanne Mejeur, who tracks minimum wage issues for the National Conference of State Legislatures.

Mejeur predicts as many as 30 states could consider legislative proposals to increase the minimum wage this year, including 11 states where such proposals will carry over from 2005.

Efforts to place minimum wage hikes on the ballot this November also are afoot in Arizona, Arkansas, Michigan, Montana and Ohio, according to the Ballot Initiative Strategy Center.

Washington state, which in 2001 became the first state to mandate automatic increases in its minimum wage tied to inflation, currently has the highest minimum wage of any state -- $7.63 an hour, according to the NCSL.

Like Washington, Oregon pegs annual increases in the minimum wage to the Consumer Price Index to keep pace with inflation, and Nevada will do the same if the November ballot item passes.

Federal law requires that all workers covered under the Fair Labor Standards Act are paid at least $5.15 an hour. Two states -- Kansas and Ohio -- set a minimum rate below the federal $5.15 mark for some workers who aren't covered under the federal law, such as waitresses. Six states have no minimum wage law at all, while 24 have formally adopted the federal rate as the state minimum.

Supporters of minimum wage increases claim they are needed to help lift people out of poverty and to strengthen workers' bargaining clout, while opponents argue that the minimum wage is too blunt an instrument to effectively combat poverty.

"I'm opposed to the minimum wage because I think it gives people a very wrong idea of how wages are determined in our country and how people get higher wages. … The notion that the government is going to somehow protect our wages is just unrealistic," said Richard Burkhauser, professor of policy analysis and economics at Cornell University.

Because a large portion of minimum-wage earners are actually middle-to-upper-class teenagers, tools such as the earned-income tax credit are better at targeting the working poor, Burkhauser said. States such as Minnesota and New York have added supplements to the federal earned-income tax credit, which since the late 1990s has provided refunds to low-income wage earners, particularly single mothers.

Opponents also have argued that requiring companies to pay higher wages results in lower overall employment rates.

Burkhauser said he was particularly concerned about the current trend towards automatically increasing the minimum wage to account for inflation. "That has all sorts of potentially mischievous unintended consequences," such as companies being tied into ever-higher wages during times when inflation is high but the economy is stagnating, he said.

But advocates for the poor still urge minimum wage increases as one of many strategies to combat poverty and to raise the living standards of low-income people. They also contest the notion that raising the minimum wage leads to layoffs.

"These are workers who have the weakest bargaining leverage and are most likely to be exploited, particularly in a period where you have a weak labor demand and a large labor supply," said Jared Bernstein, senior economist at the Economic Policy Institute, a think tank that supports minimum wage increases.

Bernstein said he particularly supports efforts to tie minimum wage increases to inflation. Otherwise, wages for the lowest earners actually decrease in real terms every year there is no increase, he said.

Kathleen Hunter is a staff writer for Stateline.org.

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