TIME Business

The $15 Minimum Wage Is a Bellwether of the New Living Wage

Fast-Food Strikes in 50 U.S. Cities Seeking $15 Per Hour
Robert Wideman, a maintenance mechanic at McDonalds Corp., shines the shoes of a Ronald McDonald statue outside of a restaurant while protesting with fast-food workers and supporters organized by the Service Employees International Union (SEIU) in Los Angeles, California, U.S., on Thursday, Aug. 29, 2013. Bloomberg—Bloomberg via Getty Images

When $13 an hour isn't enough

A little less than two years ago, a group of courageous New York fast food workers went on strike, outlandishly insisting on a $15-an-hour wage and launching an unlikely David-versus-Goliath battle to raise pay for tens of millions of Americans in dead-end jobs.

Goliath is falling.

On Tuesday, word leaked that the mayor of Los Angeles will soon propose raising the city’s minimum wage to more than $13 in the next three years – an increase that would lift pay for hundreds of thousands of struggling Angelenos.

The plan neither meets the now iconic $15 demand of low-wage workers everywhere (though with cost-of-living adjustments built in, it would get there by 2023), nor guarantees the right of workers to freely form a union – a critical step in solidifying wage increases and improving other working conditions.

But pointing out these shortcomings only highlights just how far the nation has come. For who, on that cold November day two years ago, could have envisioned that a proposal to raise the minimum wage in America’s second largest city to more than $13, a nearly 50% increase over three years, would not only be taken seriously but would strike some as being too modest?

Who could have envisioned that under pressure from their left, moderate New York governor Andrew Cuomo would endorse a minimum wage of more than $13 for the nation’s largest city (New York), and Chicago’s dyed-in-the-wool pragmatist mayor Rahm Emanuel would throw his weight behind a $13 wage floor in the nation’s third largest city?

Who could have imagined that in 2014, business leaders in Seattle would actively support and help enact an unprecedented $15 minimum wage law, only to be one-upped by the San Francisco business community, which has agreed to let one of the country’s most liberal electorates vote on an even faster increase to $15 this November?

Who could have foreseen techs and janitors at Baltimore’s Johns Hopkins and teachers’ aides and cafeteria workers at schools in Los Angeles successfully bargaining contracts guaranteeing $15 an hour, or businesses like Michigan’s Moo Cluck Moo deciding to raise employees’ pay to $15 just on principle?

By themselves, any of these victories – along with the passage of more modest but still significant wage increases in cities like San Diego, Berkeley, Santa Fe and Washington and in states including Maryland, Michigan, Minnesota, Hawaii, Vermont, Connecticut and Massachusetts – could be dismissed as an aberration. Together, they represent the start of an inexorable march toward a new social compact, one in which America’s workers are no longer cast aside as dispensable factors of production whose output is to be maximized at the lowest possible cost.

Looking ahead, we can ask: Which state will be the first to set a $15 minimum wage? Which big fast-food company will be the first to guarantee a minimum hourly wage that is double the industry standard? When can we expect to see a living wage become a core labor standard guaranteed to all workers across the country?

For four decades, wages have flat-lined, even as worker productivity has continued to grow. Low-wage jobs now form the core of America’s economy, comprising seven of the ten occupations with the largest projected growth over the next decade. Now middle and working class people in this country are rightfully insisting on a larger share of the nation’s prosperity.

In years past, right-wing politicians and their corporate backers may have been able to subdue this agitation with references to “job creators” and patronizing warnings against “hurting those you want to help.” But Americans – low-wage workers, middle class families and even many business owners – have had enough.

A powerful movement is afoot to create a decent life and a truly sustainable economy for us all. Giants beware.

Arun Ivatury is a campaign strategist with the National Employment Law Project.

TIME Business

Labor Day: Raising the Minimum Wage Stiffs the Poor

Demonstrators take part in a protest to demand higher wages for fast-food workers outside McDonald's in Los Angeles on May 15, 2014.
Demonstrators take part in a protest to demand higher wages for fast-food workers outside McDonald's in Los Angeles on May 15, 2014. Lucy Nicholson—Reuters

There are at least three better ways to help low-income workers — and few ways that are worse

Another Labor Day, another bold plan to increase the minimum to help the working men and women of America!

On Monday, Los Angeles Mayor Eric Garcetti will announce a proposal to jack his city’s minimum wage from $9.00 all the way up to $13.25 over three years. That puts him ahead of President Obama, who has called for goosing the federal minimum wage from $7.25 to $10.10.

Increasing the minimum wage is typically sold as a way of aiding poor people — LA business magnate and philanthropist Eli Broad says Garcetti’s plan “would help lift people out of poverty.” But it’s actually a pretty rotten way to achieve that for a number of reasons.

For starters, minimum-wage workers represent a shrinking share of the U.S. workforce. According to the Bureau of Labor Statistics (BLS), the percentage of folks who earn the federal minimum wage or less (which is legal under certain circumstances) comes to just 4.3 percent of hourly employees and just 3 percent of all workers. That’s down from an early 1980s high of 15 percent of hourly workers, which is good news — even as it means minimum wage increases will reach fewer people.

What’s more, contrary to popular belief, minimum-wage workers are not clustered at the low end of the income spectrum. About 50 percent of all people earning the federal minimum wage live in households where total income is $40,000 or more. In fact, about 14 percent of minimum wage earners live in households that bring in six figures or more a year. When you raise the minimum wage, it goes to those folks too.

Also, most minimum-wage earners tend to be younger and are not the primary breadwinner in their households. So it’s not clear they’re the ones needing help. “Although workers under age 25 represented only about one-fifth of hourly paid workers,” says BLS, “they made up about half of those paid the federal minimum wage or less.” Unemployment rates are already substantially higher for younger workers — 20 percent for 16 to 19 year olds and 11.3 percent for 20 to 24 year olds, compared to just 5 percent for workers 25 years and older — and would almost certainly be made worse by raising the cost of their labor by government diktat. While a number of high-profile economists such as Paul Krugman have lately taken to arguing that minimum wage increases have no effect on employment, the matter is far from settled and basic economic logic suggests that increases in prices reduce demand, whether you’re talking about widgets or labor.

Finally, there’s no reason to believe that people making the minimum wage are stuck at the bottom end of the pay scale for very long. According to one study that looked at earning patterns between 1977 and 1997, about two-thirds of workers moved above the minimum wage within their first year on the job. Having a job, even one that pays poorly, starts workers on the road to increased earnings.

If we want to actually raise the standard of living for the working poor via government intervention, the best way to do it is via transfer payments — food stamps, housing subsidies, or even plain cash — that directly target individuals and families at or below the poverty line.

University of California sociologist Lane Kenworthy, a progressive who has called for a more generous social safety net, argues that virtually all increases in income for poor families in the U.S. and other wealthy countries since the late 1970s have been a function of “increases in net government transfers — transfers received minus taxes paid.” That’s partly because workers in poor households often have “psychological, cognitive, or physical conditions that limit their earnings capability” and partly because today’s “companies have more options for replacing workers, whether with machines or with low-cost laborers abroad.”

To be sure, arguing that you want to increase direct aid to poor families doesn’t give a politician the same sort of photo-op as standing with a bunch of union leaders on Labor Day and speechifying about the urgent need to make sure an honest day’s work is rewarded with a living wage.

But making just such a case could have the benefit of actually helping poor people in the here and now. Certainly a savvy politician could sell that to voters who know the value of hard work — and the limits of economic intervention.

 

MONEY Fast Food

WATCH: McDonald’s is Promising Even Faster Food

About 800 Florida McDonald's restaurants are guaranteeing a one-minute drive-thru experience or you'll get free food.

TIME poverty

Politicians Give Living on Minimum Wage a Whirl

Bloomberg New Energy Finance Summit
Ted Strickland, former Governor of Ohio Jin Lee—Bloomberg/Getty Images

Tim Ryan, Ted Strickland and Jan Schakowsky took part in #LiveTheWage challenge, and Illinois Governor Pat Quinn agreed to try it in the future

Former Governor of Ohio Ted Strickland said in Sunday op-ed that he tried and failed to live on the minimum wage last week as a part of the #LiveTheWage challenge.

“Washington is in a bubble that keeps our representatives away from the experiences of those they actually represent,” Strickland wrote in Politico Magazine. “We need to understand the challenges faced by Americans who are being left behind in our economy.”

He wasn’t the only politician trying to understand the setbacks faced by low-earning workers. U.S. representatives Tim Ryan (D-Ohio) and Jan Schakowsky (D-Ill.) also took part in the challenge, which asks participants to live on only $77 a week — the typical amount of money an employee relying on the current $7.25 minimum wage can put toward all their expenses, not counting utilities and rent.

Ryan and Schakowsky began the challenge last Thursday, which was the fifth anniversary of the last federal minimum wage increase, ABC News reports. Both reps support raising the minimum wage to $10.10 an hour.

“So far I have lost some weight, which is not bad for me, but must be tough for low wage workers all over the country,” tweeted Schakowsky. “#LiveTheWage just gives me a glimpse into the life of a low wage worker. Point is $7.25 isn’t enough to live on.”

At an event Sunday, Illinois Governor Pat Quinn agreed to Schakowsky’s request to that he, too, live on the minimum wage, in advance of a ballot measure in Illinois on Nov. 4 to raise its minimum wage to $10 in 2015, the Associated Press reports.

TIME Humor

Watch: Kristen Bell Plays a Minimum-Wage Mary Poppins

Feed the birds, y'all

+ READ ARTICLE

In case you had any doubts about whether Kristen Bell is one of Hollywood’s most talented dames, check out this amazing Funny or Die video in which she plays a fed-up Mary Poppins who quits her job because her pay sucks. The best part is when she looks in the mirror and her reflection is a Republican. Also props to Funny or Die for finding the perfect kids to play Jane and Michael Banks.

Babysitters of the world, unite!

TIME Economy

New Data Show Faster Job Growth in States With Higher Minimum Wage

Labor Secretary Perez Discusses Raising Minimum Wage During Visit To DC Restaurant
U.S. Labor Secretary Thomas Perez, second left, and Representative George Miller (D-CA) visit a Sweetgreen restaurant to discuss minimum wage, June 16, 2014 at Dupont Circle in Washington, DC. Alex Wong—Getty Images

Findings could undermine the argument that raising the minimum wage hurts job growth

New data show that the 13 states that raised the minimum wage this year are adding jobs at a faster pace than those that did not.

State-by-state hiring data released Friday by the Labor Department reveal that in the 13 states that boosted minimum wages at the beginning of this year, the number of jobs grew an average of 0.85 percent from January to June. The average in the other 37 states was 0.61 percent, the Associated Press reports.

The findings could undermine the argument that raising the minimum wage hurts job growth, a view held by major conservative lobbies. The Congressional Budget Office reported earlier this year that a minimum wage of $10.10 could bring 900,000 people out of of poverty, but would cost 500,000 jobs nationwide.

“It raises serious questions about the claims that a raise in the minimum wage is a jobs disaster,” said John Schmitt, a senior economist at the liberal Center for Economic and Policy Research. The job data “isn’t definitive,” he added, but is “probably a reasonable first cut at what’s going on.”

President Barack Obama has supported raising the minimum wage, saying that it will help the economy and businesses.

Some economists said that data was inconclusive and that it’s too early to say whether minimum wage hikes hurt job growth. The rate of job growth was the highest in North Dakota, where the local oil and gas boom has spurred the economy but there has been no minimum wage increase. “It’s too early to tell,” said Stan Veuger, a scholar at the American Enterprise Institute. “These states are very different along all kinds of dimensions.”

[AP]

TIME Retail

IKEA Is Going to Raise Minimum Wages in All its U.S. Stores

Contractors work on construction of a new IKEA store in Miami, May 20, 2014.
Contractors work on construction of a new IKEA store in Miami, May 20, 2014. Christina Mendenhall—Bloomberg/Getty Images

IKEA will use MIT's Living Wage Calculator to calculate minimum earnings for staff, leading to an average 17% hike

IKEA, the world’s largest furniture retailer, plans to raise the minimum wage in all of its U.S. stores by using MIT’s Living Wage Calculator, which estimates the base pay needed to survive in a particular city – a move that could set a new standard expected for major retailers.

Huffington Post quotes Rob Olson, the chief financial officer of IKEA U.S., as saying that the average store minimum wage will increase by 17% to $10.76 per hour on Jan. 1. Employees at each of the 38 stores will have a different base salary depending on the cost of living in the city they’re in, ranging from $9-$13 per hour. Olson notes that the average minimum wage at U.S. stores will be $3.51 higher than the current federal minimum wage, which is $7.25 per hour. “It’s all centered around the Ikea vision, which is to create a better everyday life for the many people,” Olson told the Huffington Post.

The move is only the most recent illustration of divided stances on minimum wage reform. The heated national debate has been marked by protests waged by McDonald’s workers demanding higher pay. Meanwhile, Seattle voted to raise its minimum wage to $15 an hour in May — the highest minimum wage in the country. The International Franchise Association opposed the decision, calling it “unfair and discriminatory minimum wage plan,” according to the Washington Post. Barack Obama has been a proponent of higher minimum wages, reflected in a decision to hike the minimum wage for federal contractors up to $10.10—a move that he suggested should be adopted throughout the country.

Although other companies such as Gap Inc., have vowed to raise the base pay for stores nationwide, IKEA is the first major retailer to use a living wage calculator when setting salaries. Olson says that the new base pay salary is meant to be a selling point to recruit more talented employees, according to the Washington Post. While IKEA’s new minimum wage hike could sharpen the company’s image, it’s perhaps a greater sign to other companies of an impending trend in the workplace.

MONEY Careers

7 Ideas That Could Make Life Easier for Working Parents

140623_HO_WorkingParents_1
Alamy

Experts gathered Monday at The White House Summit on Working Families to discuss ways to reduce the conflicts between the office and home. One working mom thinks these seven ideas would make for a good start.

All that “girls can, too” stuff that was popular when I was growing up seems to have paid off.

Women now comprise 47% of U.S. workers, according to the Bureau of Labor Statistics, and 6 in 10 women are now the sole, primary, or co-breadwinners for their families—echoing the results of Money’s own recent survey.

So great, we did it. Kudos to us. We are a new generation of women on top.

But for those of us who are also moms, working a double shift—at the office for the big cheese and then at home for the little bosses—doesn’t give us time to rest on our laurels. Or rest at all. Life is a constant juggling act, and one in which the balls are always dropping and the audience is booing.

Facebook’s Sheryl Sandberg may make work-life balance sound like a cakewalk, but a $800 million pay package buys flexibility that’s not really available to those of us with less made-up sounding salaries, not to mention workers making the $7.25 federal minimum wage.

For most working moms like me, work and home are in near-constant conflict. While your family gets that you need to work in order to put dinner on the table, your employer may not make it easy for you to make it home in time to put that healthy meat-and-veg casserole in the oven. (Pizza again?) Or pick up your fifth grader from school. Or take care of a sick baby. (Did I mention that my son is home with a fever today? Insert mommy guilt here.) And then there’s child care, which presents special challenges this time of year when school lets out for summer. (Check out some ideas for saving here.)

Only 14% of Americans think our public policies and workplace policies are keeping up with the changes in the workforce, according to a Center for American Progress survey.

On Monday, the White House and the Center for American Progress convened an event—The White House Summit on Working Families—aimed at finding solutions for the challenges working families face. At the plenary session, Claudia Goldin, a professor of economics at Harvard University; Mark Weinberger, CEO of professional services firm EY; Makini Howell, owner of Seattle’s Plum Bistro Restaurant; and Mary Kay Henry, president of Service Employees International Union; came together to offer their thoughts for what could help. These seven ideas caught my eye:

1. Make the school day more reflective of the work day. “There’s no reason school begins with a six-year-old,” said Goldin. “There isn’t any reason why it can’t start at three or four years old. There is no reason why school ends at 2 or 3 o’clock. And there is no reason—and sorry to all the kids—why it ends in June.”

2. Get parents at the top to set a standard. “When I was offered this job, I asked my kids, ‘Should I do this?'” recounted Weinberger, CEO of EY, which surveys its employees annually on flexibility. “My daughter asked ‘Will you still be able to keep the commitment to us?’ And I said absolutely, I was a father first.” Three months later, he said, he was in China giving his first speech as CEO when he was asked if he would be attending that evening’s dinner. Weinberger responded by saying that he had to leave for his daughter’s driving test. “Not a single person remembers my great speech, but I got hundreds of emails from people telling me what that freed them up to do.”

3. Require paid sick leave. “If I have a worker who dedicates five, 10 years of their life to my success and my small business, my question is why not pay a sick day?” says Howard, who helped pass paid sick leave legislation in Seattle. “When you care enough about your employees to provide a safety net, they don’t abuse what you offer…and if I can’t trust you to tell me when you’re sick, I should have more issues than you having a paid day off.”

4. Make paid maternity leave a must. “If someone who is working has a child or has a disability and has to leave that job, and then has to search for another job, that’s a cost for everyone in the system,” said Goldin, pointing to California’s law, which pays 55% of an employee’s base weekly wages for up to six weeks.

5. Boost wages for caregivers. “Childcare workers are building the brains of the next generation to be globally competitive,” said Henry. To that end, caregiving needs to be better rewarded as a profession, she said. “These need to become jobs people could raise their families on. Home-care and childcare workers could be the autoworkers and steelworkers of the future.”

6. Bump up minimum wage. “The number one issue is how do we drive wages up at the bottom of economy so that wage pressure on jobs in the middle can increase,” said Henry. “It’s not about whether we can make ends meet with one job, it’s about families doing three jobs and becoming ships passing in the night to care for children.” Howell, who was involved in helping bump Seattle’s minimum wage to $15, echoed this sentiment. “We have this race-to-the-bottom mentality in wages,” she said. “But raising the minimum to $15 puts more money into the economy since my workers are another business’s consumers.”

7. Encourage companies to invest in flexibility. “Many industries have become more flexible,” said Goldin. That’s in part due to technologies that allow employees to work remotely, she added, noting that she hopes other industries will follow.

TIME White House

Obamas Hope Daughters Will Try Minimum Wage Work

Barack, Sasha Obama
U.S. President Barack Obama with daughter Sasha participate in a community service project at the D.C Central Kitchen in celebration of the Martin Luther King, Jr. Day of Service and in honor of Dr. King's life and legacy on January 20, 2014 in Washington, DC. Olivier Douliery-Pool—Getty Images

President and first lady Want Them To See "Getting a Paycheck Is Not Always Fun"

Growing up in the White House, Sasha and Malia Obama are largely isolated from the experiences of everyday Americans. To counter that isolation, first lady Michelle Obama said in a recent interview she hopes her daughters will “get a taste of what it’s like to do that real hard work” with a minimum wage job.

“We are looking for opportunities for them to feel as if going to work and getting a paycheck is not always fun, not always stimulating, not always fair,” President Barack Obama added in an interview with Parade Magazine released Friday. “But that’s what most folks go through every single day.”

But, nonetheless, 15-year-old daughter Malia Obama apparently grabbed a job as a production assistant on the set of Steven Spielberg’s upcoming TV series Extant. No word yet on how much that pays.

TIME Business

Underpaying Employees Can Hurt a Company’s Bottom Line

Fast-Food Strikes in 50 U.S. Cities Seeking $15 Per Hour
Fast-food workers and supporters organized by the Service Employees International Union (SEIU) protest outside of a Burger King Worldwide Inc. restaurant in Los Angeles, California, U.S., on Thursday, Aug. 29, 2013. Bloomberg—Bloomberg via Getty Images

There's little evidence to indicate that raising wages will lead to job losses, and studies show that high-wage companies fare better than lower-wage ones.

Just this week, Seattle workers won a significant battle when the city raised its minimum wage to $15 an hour. Richmond, Calif, recently voted to hike theirs to $13 by 2018, while polls indicate San Francisco voters favor a $15 minimum. Even the CEO of McDonalds is somewhere between neutral and positive on raising the minimum wage.

People continue to argue that increasing the price of labor will reduce the number of jobs. However, the oft-cited study in the fast-food industry by economists David Card and Alan Krueger show small to no negative employment effects. And a comprehensive study of minimum wages in European countries concludes that there is “no general evidence that minimum wages reduced employment.” But even if higher minimum wages do cost jobs, should U.S. policymakers care? Maybe not.

Contrary to what you may think, the U.S. is actually a comparatively low-wage country. According to data from the Organisation for Economic Co-operation and Development, in 2013 the U.S. ranked 23rd out of 28 industrialized countries in terms of hourly earnings. These data suggest that the U.S. can easily afford to pay more and not jeopardize its competitive standing.

Moreover–and this is important–there is essentially no relationship between average hourly earnings and that country’s competitiveness as measured, for instance, by balance of trade statistics. In 2012, countries with high wages—such as Germany, the Netherlands, Sweden and Denmark, to take a few examples—ran a large balance of trade surpluses, while low-wage countries such as Portugal, Iceland and the U.S. ran a balance of trade deficits.

Nor, for that matter, do high-wage companies invariably suffer, as University of Colorado Denver management professor Wayne Cascio’s comparison of higher-wage (and benefits) Costco with lower-wage (and benefits) Sam’s Club so nicely illustrated. The issue is not what people cost, but what they can do, their innovativeness, and their productivity. Poorly paid people are more likely to quit, and turnover is costly. Underpaid people are unlikely to be engaged with their work or to exert discretionary effort. There is simply little reason to believe that raising wage rates will unduly harm country or company competitiveness.

But most fundamentally, policymakers need to ask what sort of economy they want to create: a) an economy with low-wage jobs—and maybe one with few environmental or safety protections as well—such as Bangladesh, or b) an economy with high-wage employment and working conditions that do not sicken and kill people—think Denmark or Singapore.

Some years ago I had the privilege of working with the Ministry of Manpower in Singapore. Although Singapore has no national minimum wage, the government has consistently pursued policies to raise not just the education and training levels of the workforce, but also income. Early in Singapore’s history, it was a hub for low-cost manufacturing. When low-wage manufacturers complained they would be forced to move their operations out of Singapore as wage levels rose, the government’s response was: learn to be more efficient and productive, or go. Why would the government want to encourage the preservation of low-wage work—a policy that would also retard the growth in national median income?

Missing from the minimum wage discussion are the effects of wages and other job conditions on people’s physical, psychological and economic well being. And what about the “social pollution” caused by companies who pay people so little that their food and health care must then be subsidized by the public? Many advanced industrialized economies have chosen a “high road” policy path that has produced higher incomes and, not coincidentally, much better health outcomes such as longer life expectancy and lower rates of infant mortality. Economics teaches us that trade-offs are inevitable. Trading off job quality for job quantity might be a poor choice.

Jeffrey Pfeffer is Thomas D. Dee II Professor of Organizational Behavior at the Graduate School of Business, Stanford University.

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