"Waging" Fairness

This column actually appeared in The Philadelphia Inquirer a week ago, and it contains a lot of the standard boilerplate that has been used to defeat attempts to raise both the minimum wage for states as well as the federal government.

Minimum wage hike? Maximum problems
By Mike Flynn

Oscar Wilde once cynically remarked, "All bad art is the result of good intentions." The same is often true of bad economic policy. A case in point: This month, the Pennsylvania Senate will consider a bill to raise the minimum wage - possibly to as high as $7.15 an hour.

The minimum wage was introduced in 1938 to combat the exploitative working conditions in an economy reeling from depression and economic shocks. Although economic realities have drastically improved since then, much of our discourse on the subject has not.

I think this Letter to the Editor that appeared in the Inquirer on Tuesday (referencing an earlier opinion column) shoots Flynn’s “economic conditions have greatly improved” myth all to pieces.

Carl Witonsky has it correct when he notes repression in China and compares it to the destruction of the middle class in the United States ("Repression U.S. style," March 7). What he doesn't seem to realize is that his outsourcing to a foreign country is what has spurred this destruction.

An unemployed machinist or computer technician doesn't give a hoot that the middle class in China or India is progressing. He is forced to take a minimum-wage job because outsourcing has eliminated his job and driven down wages and benefits. We are regressing to the days of long hours, low pay and no benefits - to say nothing of dangerous working conditions.

It's time for people to realize that the jobs this administration has touted as having created are too often minimum wage and/or part-time with no benefits. Try paying for health insurance with that.

Patricia Lee Sicilia
Philadelphia

Continuing with Flynn's column...

Many still imagine the minimum wage as one of the front lines in the battle for economic justice, with unscrupulous bosses on the one side and the downtrodden masses on the other.

If only it were that simple.

If Flynn cares to look, I’m sure he wouldn’t have to go far to find “downtrodden masses” in soup kitchens and halfway houses. Also, just because the majority of unemployed people are on “mail claim” doesn’t mean that that “downtrodden mass” no longer exists either.

Caricatures like these have long allowed adherents of wage-hike policies a political free ride, despite the obvious costs of their proposals. If a company is forced to raise wages, it will also be forced to cut jobs or reduce hours in order to maintain a profit margin.

Companies do that ANYWAY even when they’re profitable. All it takes is one downward turn in the God-almighty stock price for the clarion call of “10 percent workforce reduction” to start sounding and the parade of unfortunates to the company conference rooms for the dreaded “meetings with H.R.” to begin anew.

Usually, entry-level positions are the first to be cut. This is a mere setback for a teenager starting his first job, but a disaster for a single parent, or sole earner of a family household.

I don’t know what information Flynn is basing that statement upon, but I’ve found the opposite to be true. In my experience, there are two main criteria that are used by companies to determine who stays and who goes: 1) salary, and 2) function (it also happens at times to settle old grudges, I'm displeased to admit). If you work in a “cost center” that doesn’t create revenue to sustain itself, and you’re bringing in what is by comparison a big salary, then usually you’re one of the first to get let go. However, if you earn less, you’ll probably keep your job, but your workload will at least double.

According to David Macpherson, a Florida State University economist, a wage increase in Pennsylvania would lead to the loss of more than 10,000 entry-level jobs and the economy would take a $350 million hit.

Is it too much to ask to provide a bit more information on how Macpherson came up with this grim assessment, such as how long he studied the PA workforce and what industries he surveyed, for example?

Meanwhile, the supposed benefits are minimal. Nearly half of all minimum-wage earners are teens or young people still living with their parents - many of them quite wealthy. Most are part-time employees. Eighty percent of the benefits of a raise in the minimum wage would go to families that are not poor.

How does Flynn come up with this “eighty percent” number? How does he define “not poor”?

Since he doesn’t have answers, I thought it best to include the following information (accessible from this link (concerning Pennsylvania's attempt to raise the minimum wage)):

How Many Pennsylvanians Would Benefit?

According to the Pennsylvania Dept of Labor and Industry, 257,000 or 7.9 % of the Pennsylvania's hourly workforce would benefit from a one dollar per hour increase in the state's minimum wage. 528,000 Pennsylvanians or 16.3% of the state's workforce would benefit from a two dollar per hour increase in the state's minimum wage. (According to data compiled by the PA Dept. of Labor and Industry from 2003 U.S. Dept. of Labor BLS Current Population Survey)

Who are Minimum Wage Workers?

- According to the PA Department of Labor and Industry, 75% of minimum wage workers are adults aged 19 and over. It is not true that the minimum wage is mostly an issue for teenagers.
- About 25% are in the 19-25 age group, where the reduced buying power of the minimum wage is a major factor in pricing college out of the reach of many working families. In the 70s a student could pay for tuition, room and board at a state college with a part-time, minimum wage job working on average 20 hours a week. Today, even a full-time minimum wage job would not come close to meeting college expenses. A student paying in-state tuition at would have to work 40 hours a week plus overtime to earn basic college expenses. For example, West Chester University tuition, room & board charges total $10,614 -- not including university fees, textbooks, transportation, etc. (And of course, a full-time student can not work full-time. Consider also that our neighboring states have lower college tuition rates and higher minimum wages—talk about brain drain)
- Women are twice as likely to earn the minimum wage as men. As we all know, a small family in poverty is, all too often, a mother with one or two children. It is no mere coincidence that nearly one out of five children lives in poverty—their mothers are minimum wage workers.
- Of adults over the age of 25, senior citizens are twice as likely to make the minimum wage as their younger counterparts.

Continuing again with Flynn's column...

While there remains a perception that large corporations will merely be reaching a little deeper into their already deep pockets in order to finance the wage hike, 97 percent of Pennsylvania firms are small businesses. They would be particularly ill-equipped to deal with the costs of raising employee wages.

How does Flynn define “Pennsylvania firms”? Firms based in this state, doing business in this state, or both? Does he account for firms that are based elsewhere that have some kind of operations or presence of one type or another in this state?

This is not to say that nothing useful can be done. Legislators have a great opportunity during a special hearing March 21 and 22 to work toward developing an Earned Income Tax Credit (EITC) in the commonwealth. This program, providing tax-free income, was originally instituted to reimburse working families for their federal income tax. Its success led a number of states to enact their own programs.

A tax credit? Is this guy serious? How the hell is that going to help a low-wage earner support themselves or a child, pay health care costs (which probably are exorbitant, because I’ve never heard of a low-wage job with decent benefits) and also pay commuting costs, as well as other expenses?

The Pennsylvania legislature could increase the credit according to the number of children in a household. Under such a program, a household head working full time and making minimum wage could potentially earn an effective wage rate of more than $7.20 an hour.

Working families with incomes of less than $25,000 a year receive 94 percent of federal EITC benefits. The program is specifically tailored to help those who are most in need. A wage hike, by contrast, simply disperses the money to whoever is making minimum wage, regardless of family income.

First of all, if a family income is approximately $25,000 a year, then we’re talking poverty of Dickensian proportions, and the tax credit would provide only marginal relief anyway. Second, sure the wage increased is “dispersed,” and then it is probably consumed immediately by the costs I mentioned above.

As former President Bill Clinton said: "We can increase the Earned Income Tax Credit by a couple of billion dollars a year and, far more efficiently than raising the minimum wage, lift the working poor out of poverty."

Yes, I know both Clinton and Gore supported the Earned Income Tax Credit, but Gore also supported raising the minimum wage. Also, Clinton wanted to let the states handle the minimum wage issue, and I believe he was talking about the best means for the federal government acting by itself to address the issue of unemployment and “the working poor” in this country.

As stated in this Wikipedia article:

Alternatively, in the United States, many economists see the Earned Income Tax Credit (EITC, a wage subsidy) in the Federal income tax as providing the poverty-fighting benefits of the minimum wage without the non-budgetary costs, while being superior to most welfare state anti-poverty programs. One problem has been that many of the working poor (the target of this program) have a hard time with the tax forms needed to receive the EITC payment. There may also be long delays between when the money is needed and when the EITC payments are received. That is, a person might become eligible for the EITC in April but then get laid off for the rest of the year. But this person would not get help from the credit until nearly a year later (since Americans pay their taxes in April). Further, like with the minimum wage, those people working at home taking care of children and other loved ones do not receive any benefits; only those doing paid labor are rewarded.

Resuming Flynn's column for the last time...

There is no reason why the needs of low-income families throughout the state cannot be met with reasoned, considered policies. It is not enough merely to want to do good. To paraphrase somewhat, the road to economic stagnation and increased unemployment can be paved with good intentions. And good intentions are not enough.

Mike Flynn (flynn@epionline.org) is director of legislative affairs at the Employment Policies Institute in Washington.

Flynn’s arguments are the typical sickening nonsense I always hear whenever anyone tries to raise the minimum wage. In Pennsylvania, there are three different bills in the legislature dealing with this issue, and my guess is that small businesses and an army of lobbyists have already worked them over ad nauseum to make sure they all get the breaks they want. For me, the bottom line is that it’s time for someone to “light a fire” under our politicians on this and move with speed (which of course, the Repugs will do eventually and try to claim credit for everything). After all, they had no problem getting it in gear on their unvouchered-expense, 2AM legislative pay raise last summer before ending their session, did they?