By now, you’ve heard just about all of the pros and cons of raising the minimum wage. As it stands, the national wage is at $7.25/hr. The Democrats overwhelmingly support an increase while the Republicans are determined to block any such action. While there are legislators who are willing to compromise, like Senator Susan Collins (R-ME), they are few and far between. It seems pretty unlikely that any kind of increase will come from this Congress. Most likely, an increase would need to come from an executive order (extremely unlikely) or a newly elected Congress. Even if the federally mandated minimum wage won’t change, what about Pennsylvania?

Whether you are a Pennsylvania resident or an out-of-state resident, you have a stake in the wage. If you’re out-of-state, the minimum wage could effect you if you decide to get a student job or an in-state job after school ends. Like the national mark, Pennsylvania has a $7.25 minimum wage. As I mentioned in my first post, some states actually have lower wages (depending on the occupation). Three neighboring states, New York, New Jersey, and Ohio, are above the federal mandate. New York sits at $8.00 while New Jersey is at $8.25. Meanwhile, Ohio’s is slightly less than the other two because it’s at $7.95 (“Minimum Wage Laws in the States”) Yet, Pennsylvania has remained firm in keeping a $7.25 rate. Should it stay like this?

Understandably, Pennsylvania is just as divided as the rest of the country. Rick Bloomingdale, President of the Pennsylvania AFL-CIO (a prominent union), thinks that an increase would work “if we are serious about growing this economy, it’s simple economics.” Conversely, the President and CEO of the Pennsylvania Chamber of Business and Industry, Gene Barr, believes “Some people will get a raise. … But you’re giving that at the expense of other people” (Giammarise). With a union leader and a business administrator, you’re unsurprisingly going to get opposite opinions. Pennsylvania Governor Tom Corbett, a Republican, has opposed any such increase. Like many of his Republican colleagues, Corbett is afraid that a wage increase would hurt the employment rate and the economy as a whole. However, Corbett’s days in office may be numbered. With the Pennsylvania gubernatorial election coming this November, Corbett’s numbers don’t look good. According to one of the most recognized polling institutes in the country, the Franklin & Marshall Poll, Corbett’s approval rating is a meager 23%. While it’s very possible that his approval rating could surge as the race heats up over the summer, Corbett has a steep a mountain to climb. According to another esteemed poll, the Quinnipiac Poll, 38% of Pennsylvanians would support Obama’s “10.10 Plan”, 16% support increasing the wage to something less than $10.10, and 14% support a wage higher than $10.10. Therefore, Pennsylvanians overwhelmingly support some kind of increase–68%. Let’s hypothesize and assume that Corbett loses re-election for governor. Among the Democratic candidates currently vying to oppose Corbett this fall, most vehemently support a raise. Rob McCord, the current state Treasurer, has included a $10.70 minimum wage into his platform (Corbett Approval Rating Inches Upward in Latest Poll). Meanwhile, the two other notable Democratic gubernatorial candidates, Allyson Schwartz and Thomas Wolf, both support Obama’s “$10.10 Plan”. Though McCord is the only candidate to propose an original wage, Schwartz repeatedly challenged Corbett while serving in Congress and Wolf has publicly slammed Corbett during his campaigning. If Corbett is re-elected, you will almost certainly see the wage remain at $7.25 for the next 4 years. Under a new, Democratic governor, there’s about a 50/50 chance of an increase. Sure, the Democratic governor would push for an increase, but the Pennsylvania state senate is heavily Republican. Therefore, it may not make a difference who is elected when it comes to seeing an increase.

So, since you have a stake in Pennsylvania’s minimum wage, what would you like to see?

Works Cited

“Corbett Approval Rating Inches Upward In Latest Poll – CBS Philly.” CBS Philly. N.p., n.d. Web. 16 Apr. 2014. <http://philadelphia.cbslocal.com/2014/01/30/corbett-approval-rating-inches-upward-in-latest-poll/>.

Giammarise, Kate. “Pennsylvania Urged to Raise Minimum Wage.” Pittsburgh Post-Gazette. N.p., 22 Mar. 2014. Web. 16 Apr. 2014. <http://www.post-gazette.com/news/politics-state/2014/03/23/Coalition-urges-Pa-to-raise-minimum-wage/stories/201403230195>.

“Minimum Wage Laws in the States.” United States Department of Labor, 1 Jan. 2014. Web. 14 Apr. 2014. <http://www.dol.gov/whd/minwage/america.htm>.

Let’s recap…The minimum wage currently sits at $7.25/hr. The Republican base staunchly rejects any increase. The Democratic base staunchly supports President Obama’s “$10.10 Plan”. If you’ve been keeping up with my posts, either willingly or by unlucky placement into my CI group, you’d know that neither side really wants to budge because there are so many pros and cons in the minimum wage debate.

As referenced in my last post, the Congressional Budget Office, or CBO, released its “$10.10 Plan” review in mid-February. According to the report, Obama’s plan would bring 900,000 families out of poverty, but lower employment by 500,000 workers. The CBO, which is a non-partisan sector of the government, projected that an $8.25 minimum wage would have the best possible outcome (Lowrey). It would lift the most families above the poverty line while allowing the employment rate to increase. Essentially, an $8.25/hr. wage wouldn’t prompt businesses to lay off employees because it still wouldn’t outweigh turnover costs. At the same time, this new minimum wage would keep up with inflation.

So, what’s the problem? The Republicans want $7.25 while the Democrats want $10.10. Isn’t $8.25 a good compromise? Apparently not. While any kind of compromise between the two sides seems far-fetched, Senator Susan Collins (R-ME) isn’t giving up hope quite yet. As a Republican, Collins knows that it’ll be very difficult to get her base to budge. In her eyes, the current minimum wage is too low while Obama’s plan is too high. Though she hasn’t publicly supported the CBO’s $8.25 estimate, she wants to see the wage moved somewhere around that point. When referencing how an increased minimum wage would impact her home state, Collins said, “I’ve talked to employers in Maine who have said they would have to curb hiring and actually have to lay people off with that kind of increase [from the “$10.10 Plan”] …but they are open to a more modest increase, they could accommodate that” (Desjardins). Doing her best Henry Clay impersonation, Collins is trying to be the modern-day “Great Compromiser”. Here is her loosely outlined plan:

The Susan Collins Plan:

Wage: Somewhere between $7.25-$10.10. The two most popular numbers in that range are $8.25 (the CBO’s estimation) and $9.00 (Obama’s original proposal). While it’d make sense that she’d opt for the lower of the two wages (given that she’s a Republican), Collins is apparently open to discussing the higher end of the spectrum.

Incentive 1: How does she plan to get Republicans to budge? Collins proposes to amend Obamacare’s definition of a “full time” employee. Under the Affordable Care Act, employees working 30 or more hours per week are considered “full time”. As a Republican, she would want that minimum number of hours to increase to something like 35 or 40. Since the minimum wage only applies to “full time” employees, this new wage wouldn’t apply to an increased number of “part time” workers. She feels that the Republican base may be more open to a minimum wage increase if there would be less workers eligible to earn a salary at the minimum wage.

Incentive 2: Congress should provide an extension of small business tax credits. For most large businesses, a slight increase in the wage wouldn’t really be a problem. However, many small businesses would find it difficult to pay their employees more (especially if they only have a few employees). By providing a tax break, small businesses could direct some of their previously tax-allocated money to their minimum wage earners’ salaries.

Sen. Susan Collins (R-ME)

Final Thoughts

In the spirit of compromise, how does this one shape up? What do you think of Susan Collins’ plan? Do you think that the CBO’s plan is better or more feasible? In any case, it should be noted that Collins’ plan is pretty unlikely to garner difference-making support.

Works Cited

Desjardins, Lisa. “A Republican Tries to Save the Minimum Wage Increase.” Cable News Network, 01 Apr. 2014. Web. 02 Apr. 2014. <http://www.cnn.com/2014/04/02/politics/collins-minimum-wage/>.

Lowrey, Annie. “Minimum Wage Increase Would Have Mixed Effects, C.B.O. Report Says.” The New York Times, 18 Feb. 2014. Web. 01 Apr. 2014. <http://www.nytimes.com/2014/02/19/business/mixed-results-in-us-study-of-increasing-minimum-wage.html?_r=0>.

As mentioned in my first post, President Obama has publicly supported a rise in the minimum wage. Early last year, the President championed an increase from $7.25 to $9. However, during his State of the Union earlier this year, Obama began endorsing Sen. Tom Harkin’s (D-IA) and Rep. George Miller’s (D-CA) “$10.10 Plan”. While putting pressure on Congress to pass legislation on behalf of all American workers, Obama somewhat took matters into his own hands. In February, the President signed an executive order requiring federal contractors to pay their federally-funded employees at least a $10.10 wage per hour. Obama promoted the new wage by saying, “This will help families. It will give businesses customers with more money to spend. It doesn’t involve any new bureaucratic program. So join the rest of the country. Say yes. Give America a raise (The Guardian).” While many minimum wage earners would gladly accept a higher salary, is it in their best interest? At this time, I’d like to examine Obama’s $10.10 plan.

For:

While only a small percentage of Americans actually earn the minimum wage, an increase could make a tremendous impact. According to University of Massachusetts-Amherst economist Arindrajit Dube, a wage increase would reduce the poverty rate by as much as 1.7%. While this percentage seems small, it would bring 4.6 million people above the poverty line. Meanwhile, it would also reduce the nation’s number of poor by 6.8 million people (over the course of a few years). At the same time, the “$10.10 Plan” could go a long way in helping the state of the American economy. As many economists refer to it, The Great Recession technically ended in 2009. While slowly improving, the economy is still in a delicate condition. In order to end The Great Recession, more minimum wage jobs were created. That way, more Americans would be earning a consistent wage even if it was less than a desired amount. Counter intuitively, increasing the number of poor people was actually a beneficial part in halting the economic downturn (because at least people were earning something). Now that the economy is improving, economists like Arindrajit Dube believe that elevating the wage will speed up the recovery. He predicts that it could allow the economy to fully recover 2 years sooner than at its current pace (Berman).

Against:

Just about every economist would tell you that the minimum wage needs to be periodically adjusted in order to account for inflation. While there is much disagreement whether or not this is the time to adjust the wage, The Congressional Budget Office, or CBO, thinks that it needs to be raised…just not to $10.10. Instead of $10.10, or even the previously proposed $9 wage, the CBO suggests that an $8.25 wage is the perfect amount. Converse to the findings of esteemed economist Arindrajit Dube, the CBO estimates that nearly 500,000 jobs could be killed by a $10.10 wage. Why? Well, if the wage goes up, many companies which rely on cheap, manual labor may resort to labor-saving machinery in low-skilled activities. For instance, take an automotive warehouse. An American company, like Ford, might initially spend more money on assembly-line machinery if it means paying employees less in the long-run. The CBO predicts that an $8.25 minimum wage would serve as the perfect compromise because it wouldn’t be drastic enough to turn to machinery as opposed to human labor (Morici).

Summary:

In conclusion, Obama’s endorsement of the “$10.10 plan” has prompted both praise and criticism. Some economists believe that this new wage would lower the number of people living below the poverty line. In addition, it could greatly speed up the economic recovery timetable from The Great Recession. However, a sector of the the executive branch, the CBO thinks that an $8.25 wage would account for inflation and deter unemployment better than a $10.10 wage. The CBO estimates that $10.10 is way too high and could actually cause companies to turn to machinery as opposed to actual employees.

Works Cited

Berman, Jillian. “A $10.10 Minimum Wage Could Lift About 5 Million Out Of Poverty.” The Huffington Post. TheHuffingtonPost.com, 02 Jan. 2014. Web. 15 Mar. 2014. <http://www.huffingtonpost.com/2014/01/02/1010-minimum-wage_n_4532723.html>.

Morici, Peter. “Raising Minimum Wage to $8.25 Is Best Option.” UPI. United Press International, 19 Feb. 2014. Web. 15 Mar. 2014. <http://www.upi.com/Top_News/Analysis/Outside-View/2014/02/19/Raising-minimum-wage-to-825-is-best-option/UPI-92521392813041/>.

“State of the Union Address 2014 – Full Text of President Obama’s Remarks.” Theguardian.com. Guardian News and Media, 28 Jan. 2014. Web. 15 Mar. 2014. <http://www.theguardian.com/world/2014/jan/28/state-of-the-union-address-2014-full-text>.

As briefly mentioned in my first post, San Francisco has a self-imposed minimum wage well above the national requirement. Widely recognized as one of the most progressive cities in the country, San Francisco enacted a nation-leading minimum wage back in 2004 (currently at $10.74).  A little over ten years later, the jury is still out. Some economists and city officials believe that it’s paid dividends for the City by the Bay, while others think it’s been a detriment. With all of the recent talk of a new $10.10 national requirement, I thought it’d make sense to look at a case study of sorts. Without any further ado, here is how Frisco, the 14th most populous city in the country, has been affected by a $10+ minimum wage:

For:

Ten years ago, a higher minimum wage wasn’t a national topic of discussion. Neither President Bush nor Senator John Kerry even mentioned the issue during any of the 2004 Presidential debates. Nonetheless, San Francisco decided to be the nation’s lab rat. From 2004-2011, private employment rose 5.6% and 3% in neighboring Santa Clara County. When we think of minimum wage workers, many of us probably think of fast-food workers. If, say, McDonald’s or Burger King had to pay its workers more per hour, they’d employ less people, right? Wrong. San Francisco has actually seen an astounding 17.7% increase among food-service workers. Traditionally, big businesses have been against a higher minimum wage. Obviously, many feel that they shouldn’t pay more money for equal work. However, big businesses in S.F. have tremendously benefited from the higher wage. In fact, businesses are spending less money because, on average, they’ve had their turnover costs reduced by 60% (Berfield). What does this mean? Yes, businesses are paying more money to their workers but they’re paying less overall because they don’t have to spend as much on training new employees. If employees are satisfied with their pay rates, they won’t leave to find a better job.

Against:

If people are paid more money, prices will increase. It’s an economic fact that can’t be ignored. The question prompted by a new minimum wage isn’t whether or not things will become more expensive (they will), but if they will become more affordable. For instance, food prices have increased by almost 3%. Food, unlike other expenditures, is at least a three-time per day necessity. That means every time that you go out to a restaurant, go food shopping, or stop at a convenient store for a snack, you will have to pay more. While 3% seems insignificant, it does add up. In addition to food, the prices of medication and gasoline have also witnessed <5% increases (Roberts). These increases in expenditures have caused some minimum wage workers to call for a new, higher wage of at least $15/hr. To keep up with inflation, San Francisco has had to increase it’s minimum wage from $10.55 to $10.74. It makes one wonder that if some San Franciscans want about $4.50 more after 10 years, will they want that much again in another 4 years? Would some be calling for a $19.55 minimum wage by 2024?

Summary:

Clearly, there are strong arguments for and against Frisco’s progressive minimum wage. The arguments for are somewhat surprising as they seem contrary to common thought. Businesses are spending less? Private employment has gone up? Food-service employment has skyrocketed? Meanwhile, the argument against is more of a look toward the future. If things like food, gas, and medicine have increased a little, will they keep going up? Will this start a chain reaction where people will keep needing more and more basic wages? Essentially, will an increased wage cause things to rapidly inflate and spiral out of control?

Loose Ends:

• It should be noted that a rise in food service workers, DOESN’T mean that people are settling for lower wage jobs because they can’t find higher wage employment. “Underemployment” is taken into consideration when figuring out the employment rate.
• Similarly, part-time workers have their own employment rate. Therefore, the 17.7% increase DOESN’T mean that people are just getting part-time jobs as opposed to being totally unemployed.

Works Cited

Berfield, Susan. “San Francisco’s Higher Minimum Wage Hasn’t Hurt the Economy.” Bloomberg Business Week. Bloomberg, 22 Jan. 2014. Web. 22 Feb. 2014. <http://www.businessweek.com/articles/2014-01-22/san-franciscos-higher-minimum-wage-hasnt-hurt-the-economy>.

Roberts, Chris. “Study: Minimum Wage Increases Could Mean Loss of Jobs in SF .” The San Francisco Examiner. N.p., 19 Jan. 2014. Web. 22 Feb. 2014. <http://www.sfexaminer.com/sanfrancisco/study-minimum-wage-increases-could-mean-lose-of-jobs-in-sf/Content?oid=2680102>.

If you were watching The State of the Union last week, you may have heard President Obama’s lengthy support for a minimum wage increase. Obama encouraged the country’s lawmakers to “give America a raise.” Currently, the minimum wage stands at $7.25/hour. While President Obama initially championed an increase to $9, he now supports the “$10.10 Plan.” Not only does the President believe that the name is catchy, but more importantly, he feels that it will strengthen the national economy. Before you say that you’re for or against, take a minute and review some important wage-related statistics (The Wall Street Journal).

Key Takeaways from the Video

• As of 2012, 2.8% of all workers earned the minimum wage or less
• Over half of minimum wage earners are younger than 24
• About 3/4 of minimum wage earners are part-time workers
• Almost 2/3 of minimum wage earners are women
• 19 states have a higher minimum wage than the federally mandated mark of $7.25
• San Francisco mandates a “living” minimum wage of $10.50 but it suffers from high inflation. The value of $1 in S.F. is about $.61 per the national average.

With these statistics in mind, it’s now time to look at the general arguments for and against a minimum wage increase…

For:

If the minimum wage were to increase, more Americans would be removed from the “below poverty line” classification. As a result, the government would not have to allocate as much in subsidies for things like food stamps. Next, most economists would tell you that a higher wage would reduce turnover costs and increase productivity. Basically, workers would be more satisfied with, say a $10.10 wage, and wouldn’t try to upgrade their jobs. In addition, they’d have more motivation to work harder and produce better goods and services. Lastly, a higher wage would keep salary in-line with the current inflation rate. Since the value of the dollar has gone down (not necessarily related to the recent recession), the minimum wage would need to go up to allow workers to pay for increasingly expensive items. If the wage is stagnant, minimum wage earners’ salaries wouldn’t go as far in the open market. With an increase in the wage, workers would spend more money and help the economy.

Against:

If the minimum wage were to increase, businesses would increase their prices. Think about it, if a company knows that you’re earning more, won’t they charge you more? Next, unemployment would increase. While there would be less people living below the poverty line, there would also be less people with jobs. Most employers would be forced to pay more money to less workers. There are some exceptions, as CostCo has demonstrated (CostCo Pays More Because It Can), but  most businesses would not follow suit. Lastly, companies would be enticed to replace workers with machines. While in the short-run skilled machines would be expensive to purchase, they’d be cheaper in the long-run. Essentially, companies would be paying a one-time flat fee over smaller, continuous fees. Also, machines don’t require benefits such as life insurance, vacation days, or maternity leave.

At this point, you may be sitting squarely on the fence. If you were previously leaning one way, hopefully you’re recognizing some strong arguments for the other side. Over the course of these five civic issue blog posts, my goal isn’t to persuade. Instead, I hope that you come to a conclusion after my fifth and final post. If you’ve been following this debate recently, or not, I’d like to make you aware of some important economic information going forward. In your opinion, they may make a difference.

Economic Terminology and Loose Ends:

• The national unemployment rate does not account for all unemployed workers. It only accounts for workers who are without jobs AND “actively looking”.
• The Federal Reserve (a.k.a The National Bank) lowered the amount in the nation’s “stimulus package” last week. This is an indication that the Federal Reserve Board of Governors feels that the economy is improving.
• With the announcement that the “stimulus package” was decreased, the stock market experienced great fluctuation. This, perhaps, is an indication that corporations are not as confident in the American economy as the Board of Governors.

Works Cited

                      O’Donnell, Jayne. “Costco Pays More … Because It Can.” USA Today. Gannett, n.d. Web. 02 Feb. 2014. <http://www.usatoday.com/story/money/business/2014/01/29/costco-wages-walmart-federal-minimum-wage-obama/5029211/>.

“Who in America Earns Minimum Wage?” Video. The Wall Street Journal, n.d. Web. 02 Feb. 2014. <http://live.wsj.com/video/who-in-america-earns-minimum-wage/EDEB8B62-96D1-4FEE-B95E-85E4E80E21FE.html#!EDEB8B62-96D1-4FEE-B95E-85E4E80E21FE>.