Two Ways to Fix Inequality

| March 26, 2014

Working people can't afford to eat. Last year one in five Americans was on food stamps. In Vermont, the number was one in six. These people work: Six in 10 households nationally earned money the month they started getting help; nine in 10 worked in the previous or following year.

People earning the minimum wage can't afford to eat if they also want to live indoors. With heat.

At Vermont's 2013 minimum wage, $8.46 an hour (it's now $8.73), two full-time, year-round job holders bring in a total of about $2,900 a month. According to Hunger Free Vermont's analysis, based on the basic-needs budget of the Vermont Legislative Joint Fiscal Office (JFO), their bills leave them a deficit of about $2,100 each month.

Of course, not all families have two earners. Almost a third of Vermont's children live with one parent, and a third of the state's single mothers are poor even though they work full time.

Government subsidies help. Still, the working couple described above, with two kids, enrolled in every program on the menu — food stamps, childcare, tax credit, etc. — will find itself about $15,000 in the hole by the end of the year.

It's no wonder that 2,800 Vermonters are either homeless or "precariously housed" on any given night. And thousands more have no food in the fridge. "In low-income families, food is paid for last," says Dorigen Keeney, program director at Hunger Free Vermont. "So when they don't have enough money to live, they're hungry."

Montpelier is proposing an increase in the minimum hourly wage to $10 in 2015. That would bring the wage up to its 1979 level, accounting for inflation. In other words, even if the minimum wage is raised to $10, the lowest-paid workers will not have had a raise in 35 years.

Meanwhile, Vermont's total personal income grew 20 percent from 2002 to 2012, while median income dropped 5.5 percent, according to Public Assets Institute.

The woman changing the hotel sheets is not making money. Maybe you aren't, either. But someone is.

In fact, the Washington Post reports that America's wealthiest have gained back everything they lost in the recession, "and then some." And yet, we are told, Vermont's employers cannot afford to pay their workers enough to eat and still pay the rent.

"We support the idea that everyone should be making a living wage, but we need to balance that with employers' ability to pay those wages and not drive them out of business and create higher unemployment," Lucy Leriche, deputy secretary of the Vermont Agency of Commerce & Community Development, told Vermont Watchdog.

The state, our leaders tell us, cannot ask the put-upon employers to raise wages and still pay workers for the time they need to go to the doctor or stay home with a sick child. Not yet, anyway. "At this point in time, there really isn't enough support to pass the [earned sick leave] bill," Speaker of the House Shap Smith told Vermont Public Radio, explaining why he is not bringing the bill to the floor. "These are the kinds of things that take some time to move forward." Smith suggested that more study might be needed.

Support, history, data? This bill has them all. Thirty sponsors, 72 percent support among Vermonters polled. Public institutions from Vermont Businesses for Social Responsibility to the Times Argus editorial board are behind it.

Earlier versions of the paid sick day bill "date back a decade or more," VTDigger reported.

Studies of the effects of both a higher minimum raise and paid sick leave are plentiful — and positive. "In most of the minimum wage studies performed to date, the expected reduction in demand for labor has either been nonexistent or of relatively small magnitude," notes a recent memo on the minimum wage prepared by Kavet, Rockler & Associates for the JFO. The economists calculated that a rise to $10 might cost 250 jobs in Vermont, or less than 0.1 percent of total employment.

In San Francisco and elsewhere, raising the minimum wage has coincided with job growth and has had a negligible impact on profits.

But do we really need more data to show that higher wages are good for low-income workers? That taking time off when you're sick is good for the sick person, her coworkers and — if she happens to serve food, which a large number of minimum-wage workers do — her customers?

I mean, has there ever been an improvement to workers' lives that the Chamber of Commerce did not decry as the first step toward widespread catastrophic business failure? The Chamber of Commerce will never support higher wages or better working conditions. Can we just stop asking them, and move on?

There are only two ways to fix economic inequality.

One is for employers to pay more, which means that executives and stockholders earn less. Since CEOs were earning 209 times their workers' salaries in 2011, there's room for redistribution. But companies won't do this on their own. And unions, which once had the power to force them, are weak. It's up to government to make it happen.

The other way is for the government to make up the difference in workers' buying power. If we were interested in ensuring economic security for everyone, it would mean a lot of workers and a lot of money.

After all, a graph in the Kavet memo shows that for a single parent with one child to earn the state's living wage, without government subsidy — that is, to take in enough for groceries and clothing, rent, gas, childcare and the rest, plus insurance and savings — she'd need $30 an hour.

And if we are in a "post-work" economy, as some economists believe — where global capital doesn't need as many Americans, or as many humans, as it did — a whole lot more of us will soon be short of buying power.

At the moment, the government is disinclined either to mandate better pay or to do what it takes to save the hindmost from the devil. Republicans in Washington are even arguing that penury is good for poor people — that, as Wisconsin Rep. Paul Ryan put it, a child receiving a free school lunch has "a full stomach and an empty soul."

But even in our Democratic state, lawmakers' distaste for discomfiting the comfortable ends up hurting the already hurt. Remember that $15,000 deficit in the minimum-wage earners' family budget? What prevents them from getting ahead is called the "benefit cliff." They reach a point where they earn too much to qualify for the subsidies and tax credits but not enough to make ends meet without those benefits.

The Kavet memo, while unreservedly endorsing a $10 wage, finds that a hike to $12.50 would have this perverse effect.

That is not an argument against raising the minimum wage, however. It is an argument for figuring out how to ensure that a raise in pay will mean a rise in standard of living. The memo's authors recommend that the legislature reconcile benefit-eligibility guidelines with higher wages.

Signing the National Industrial Recovery Act in June 1933, which put millions of people to work by winter, President Franklin D. Roosevelt declared: "It seems to me to be ... plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By 'business' I mean the whole of commerce as well as the whole of industry ... and by living wages I mean more than a bare subsistence level — I mean the wages of decent living."

What economy deserves to exist if it cannot provide even a bare subsistence for everyone? Can any moral Vermonter argue that it is bad for the economy to pay poor people more? What, after all, is an economy for?

Full disclosure: Public Assets Institute founder and president Paul Cillo is Judith Levine's domestic partner.


Comments (6)

Showing 1-6 of 6

Let's look at two examples that those who want to raise the minimum wage use in their campaign.

1 McDonalds - if they pay out more in wages do they raise their prices to cover the increase in costs and who spends money at McDonalds - those making a minimum wage - so they gain wage increase and lose by higher living cost.

The same is true for Walmart. If their costs go up will they raise their prices? It seems to me, who once was poor to the point all my clothes were hand downs, that Walmart has been a blessing for the poor, with AFFORDABLE prices.

I do not have the answer but I think that by talking about raising the minimum, wage political people are just pandering to the emotions of those making the minimum wage.

They talk about bringing American jobs back to the US. But they cannot show us a large group of companies that will find it economical to bring those jobs back. YES, they can show us an occasional company but we needs hundreds of companies.

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Posted by Lyle Hughart on 04/07/2014 at 12:25 AM

You're not included because you did not want to be.... I chose to be a teacher of thirty years, and I knew I'd never make money.... But I make a difference. If we are further punishing those who are in "that group" , who is going to pay our salary? Sure, millionaires try to avoid paying taxes, but they also spend, and there are sales taxes. Do we really want to continue to drive them and their money to more friendly, foreign countries? Quit whinning, get off your butts and work.... Two jobs, if you need/want...., Do you really think the rich got that way by sniffling about what others earned with their planning and industry? Wake up! We are poor by choice. We are rich by experience. Wealth(& politicians) provide nothing but misery. Why would you want a share of that?

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Posted by BetterdeadthanRed on 04/05/2014 at 11:21 AM

Bernie Sanders for President!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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Posted by Melia Udall-Bond on 04/05/2014 at 10:02 AM

Raising the minimum wage won't stop the fundamental problem of inequaltiy...human nature. and we need to stop believing that it will. You can pay a worker more money, and he can use that money to invest in the future, save for retirement, or send his kids to college. He could also use that money to buy a few extra lottery tickets, or buy another pound of weed.
There are no guarantees with increasing the minimum wage. We should instead focus on individual accountability. What I mean by that is making sure that we don't give more handouts to people that are making destructive life choices, and help out those of us who are trying to get out of poverty. At present, there is lots of government aid fraud, and we need Democrat political leaders who are willing deal with it, even if they lose votes.

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Posted by Alexander Darr on 03/31/2014 at 3:03 PM

One question I have had and no one has addressed How much of this purposed wage hike will make it to a workers pocket and how much will find it's way back to the government in the form of taxes? One other thought to ponder in 1972 the min wage was 2.25 per hour it will now go over 10 per hour that's a five hundred percent increase. Has any other wage gone up that much in that amount of time?

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Posted by Brian Martin on 03/28/2014 at 1:05 AM

"What, after all, is an economy for?"

For the benefit of those who own it.

Most of us are not included in that group.

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Posted by Justin Boland on 03/26/2014 at 12:20 PM
Showing 1-6 of 6

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