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Underpaying Workers Raises Pressure on Strained Government Agencies

Andrew Burger headshotWords by Andrew Burger
Investment & Markets
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Campaigns to raise the minimum wage have stirred up a hornet's nest of debate and controversy across the U.S. Shaking the foundations of U.S. society, historically wide disparities in income and wealth are now at the forefront of today's political and economic debates.

Nowhere is this more apparent than the debate about raising minimum wages. Prodded into action by protesting low-wage workers employed by huge, highly profitable service-sector companies such as McDonalds and Walmart, city governments around the country have or are considering raising minimum wage levels to what's considered a fair living wage of $15 per hour.

Firing up the debate, Seattle passed a law raising the minimum wage to $15 an hour last year. Voters in San Francisco approved raising the minimum wage to $15 an hour as well. Doing so will improve the livelihoods of an estimated 142,000 people working in the City by the Bay – 23 percent of the workforce. Raising the minimum wage in Seattle will improve the lot of some 102,000 workers – 21 percent of those working in the city, the city said.

The disputed right to a "living wage"

Supporters of raising the minimum wage point out that by not paying a livable wage to workers, large, highly profitable companies are essentially freeloaders. Under-paying employees forces working Americans to seek financial aid and other assistance from government agencies, which raises the strain on public budgets as well as other resources.

“Making minimum wage dooms you to a life of hardship and toil,” Fast Co.exist assistant editor, Jessica Leber, wrote in a May 19 article. “We in the U.S. have accepted or ignored this situation for a long time, while companies make billions of dollars by paying their workers less than enough to survive.”

A growing number of city governments around the country are taking action to remedy the situation. The Los Angeles City Council on May 19 voted 14 to 1 to draft an ordinance that would raise the minimum wage to $15 an hour by 2020. If approved, the measure would provide a substantial boost in income to some 800,000 workers, who now must be paid a minimum $9 an hour.

Chicago's City Council voted to raise the minimum wage to $13 an hour by 2019 last December. Proposals to raise minimum wages to $15 per hour or higher are also being considered in New York and Washington D.C. A bill to raise the minimum wage in San Diego to $11.50 is to be before the voting public as a referendum this year. Nationally, raising the federal minimum wage has risen to the top of the Democratic Party's campaign platform.

Raising the minimum wage: The impacts

Supporters of raising minimum wages point out that income and wealth for the top percentiles of Americans have skyrocketed over the course of recent decades while real (adjusted for inflation) wages and income for the large majority are lower today than they were the 1970s. What has emerged as a result is a less upwardly-mobile society composed of a very small class of “super-rich,” a shrinking middle class, and a large and growing class of working poor.

As has long been the case, detractors assert that raising minimum wages will stifle economic growth and new business formation. Higher labor costs, they say, will either be passed on to consumers in the form of higher prices and/or will drive businesses elsewhere.

In a video produced by MoveOn.org, former Labor Secretary Robert Reich, now chancellor's professor of public policy at the University of California, Berkeley, puts forth three good reasons supporting the case for raising minimum wage levels. During his brief, two-and-a-half minute presentation, he also refutes three assertions commonly cited by opponents, including the assertion that higher minimum wages will prompt businesses to relocate.

Connecticut is looking at taking a somewhat different approach to addressing the issue of fair wages, Fast Co.exist's Leber highlighted in her May 19 article. A proposed bill before the state legislature would assess a fee of $1 per hour for every worker being paid less than a “livable” wage of $15 per hour on all companies with 500 or more employees. The revenues would be devoted to state programs for early childhood development and social services.

"It’s time for us to stop subsidizing these corporations. It’s time they redesign their business models to pay their employees a wage they can live on," one of the bill's sponsors, Democratic state Rep. Peter Tercyak, wrote in a Connecticut Mirror op-ed last year.

*Images credit: 1) Flickr -- Fight for 15 New York/All-Nite Images; 2) US Bureau of Labor Statistics; 3)  Raise Illinois Action;  4) MoveOn.org

Andrew Burger headshotAndrew Burger

An experienced, independent journalist, editor and researcher, Andrew has crisscrossed the globe while reporting on sustainability, corporate social responsibility, social and environmental entrepreneurship, renewable energy, energy efficiency and clean technology. He studied geology at CU, Boulder, has an MBA in finance from Pace University, and completed a certificate program in international governance for biodiversity at UN University in Japan.

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