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Making Change: To Hike or Not to Hike the Minimum Wage

Friday, January 20, 2006 at 2:57 PM

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It's been nine years since the federal government set the minimum wage at its current level of $5.15 - or less than $11,000 per year for a full-time worker. Efforts are afoot in Ohio, and a number of other states, to raise it, and as usual, the idea has both ardent support and substantial opposition. As part of Making Change: Building the Region's Future, ideastream's Cindi Deutschman-Ruiz reports.

Stacey Dotson is in her mid-20s, a slender woman with an easy smile, a gentle manner, and three small children. Until recently, the single Mom (who has her high school diploma, but no college degree) lived in Youngstown, where she says she found less-than-stellar job opportunities.

Stacey Dotson: I’ve done fast food restaurants. I’ve done waitressing; some customer service; telemarketing.

Dotson’s made as little as $2.13 an hour, she says - that was a waitress gig, where tips were intended to bring her wage up to at least the minimum wage, but didn’t always do so. Dotson says the most she’s ever made is $7.25 an hour. Having received only occasional financial support from her kids’ father over the years, Dotson has become well-acquainted with what it means to raise a family on a very low income.

Stacey Dotson: You pay the very minimum amount on this bill here to be able to pay this one next month, and it’s just hard, deciding do we need heat this month, or do we need lights this month.

Dotson says she brought her kids to Cleveland because it promised better job opportunities and more community support. Right now, the support she’s getting is in the form of training with an organization called Towards Employment - which helps low-wage workers learn the skills necessary to get and keep higher-than-minimum-wage jobs. And it is important earn more than the minimum wage because, according to Dotson,

Stacey Dotson: You can’t live off minimum wage anymore. that’s my belief. I don’t believe it’s even possible to raise a family on minimum wage.

Dotson isn’t alone in that belief. Amy Hanauer is executive director of Policy Matters Ohio, which advocates raising the minimum wage.

Amy Hanauer: A full-time min wage worker brings in less than $11,000 a year at this point. So there just comes a point when you want to ask, how do we value work in this society, and what ought a full-time worker be paid.

Right now, at $4.25 per hour, Ohio’s basic minimum wage is actually below the federal minimum, set back in 1997. Kansas is the only other state with a minimum below the federal level of $5.15. According to Hanauer, that means Ohio is behind the times.

Amy Hanauer: 15 states and Washington D.C. have all taken steps to increase their min wage above the federal level, so it’s clearly a trend.

A measure to hike Ohio’s minimum wage to $6.85 per hour could be on the November ballot. Proponents are in the process of gathering the necessary signatures.

But the suggested change faces substantial opposition from those who say hiking the minimum wage is bad policy, and bad for business. There’s another argument against raising the minimum wage, though, according Mark Schweitzer, assistant vice president and economist at the federal reserve bank of cleveland. His studies have shown that raising the minimum wage just doesn’t help poor people.

Mark Schweitzer: We looked to see whether or not after min wage hike, states had higher or lower proportion of poor families. Our data showed they had higher rates of poor families after a minimum wage increase.

He explains the outcome this way:

Mark Schweitzer: One year after min wage increase, wages are up for workers who had been below the min wage. Two years, up not as much as would have been. Min wage increases the wage of worker temporarily, but it’s not a prolonged increase. Well, that’s not good for your income.

On the other hand, according to Schweitzer, most business are not unfairly burdened by hikes in the minimum wage.

Mark Schweitzer: The min wage is a policy where the effects of it are distributed throughout the economy. Nobody can obviously point and say they bear this very large cost.

Policy Matters’ Amy Hanauer agrees.

Amy Hanauer: There was a study of the 96/97 federal min wage increase that found no significant job loss. there’ve been studies of states that increased their min wage in comparison to neighboring states that didn’t, and they found very little effect.

But Schweitzer says the reason states experience little impact is because the minimum wage affects few people. According to federal data, about 74 million American workers were paid hourly in 2004. Of those, 2 million people - a few hundred thousand of them in Ohio - earned the federal minimum or less.

So, if negative effects on the economy are negligible when you raise the minimum wage, and raising the minimum wage doesn’t lift people out of poverty, then there’s no reason for a hike, but there’s also no reason to oppose it. Come November, you may have the opportunity to vote on which conclusion you support. Cindi Deutschman-Ruiz, 90.3.

Tags

Making Change, Regional Economy/Business - Analysis and Trends, Regional Economy/Business - News

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