(MintPress) — “America’s low‐wage economy is marked by two extremes. On the one hand, workers earning at or near the minimum wage are seeing the real value of their paychecks diminish steadily over time, as the cost of living increases while their wages remain stagnant. After nearly half a century of neglect, today’s federal minimum wage of $7.25 per hour is decades out of date. In terms of purchasing power, its value is 30 percent lower today than it was in 1968,” say the authors of a new study on big business and the minimum wage by the National Employment Law Project (NELP).
While many studies have been done indicating that increasing the minimum wage doesn’t dramatically impact employment levels, the study found that most people earning minimum wage work for large, profitable corporations.
This week, activists numbering in the hundreds in cities like Chicago, Miami, Pittsburgh and other locations across the U.S. demonstrated, calling for a rise in minimum wage. The protests, occurring on the anniversary of the day when the federal minimum wage was last increased three years ago, were part of the “National Day of Action” to raise the minimum wage.
The protests took place as Congress prepares to debate the topic in Washington.
New report shows growing divide between corporate profits and worker compensation
The NELP, a national advocacy organization headquartered in New York for employment rights of lower-wage workers, looked into the connection between the opposing extremes of stagnant wages and soaring corporate profits in their report.
Currently, the federal minimum wage is $7.25 per hour. It was last adjusted in 2009, up from $6.55 per hour.
According to the Economic Policy Institute in Washington D.C, there are now 28 million Americans who are earning minimum wage.
Mary K. Henry, international president of the Service Employees International Union (SEIU), and Christine L. Owens, the executive director of the NELP, wrote in an article published by CNN Tuesday, which was the third anniversary of the last increase in the federal minimum wage, “For the last three years, while the prices of gas and milk have risen steadily and the richest 1 percent have enjoyed huge tax breaks, the federal minimum wage has remained frozen at $7.25 an hour, which amounts to just $15,080 a year — as long as you get paid for any time you take off. That’s more than $7,000 below the federal poverty line for a family of four. As a result, the purchasing power of the minimum wage has slowly eroded — in just three years, its real value has sunk to $6.77 per hour, a nearly 50-cent drop.”
The NELP study also showed that while the share of low-wage jobs is increasing, as five industries that are comprised primarily of low-wage workers have grown faster than total employment since the end of the Great Recession. Industries including food services, accommodations, retail trades and arts, entertainment and recreation were all named.
Two-thirds of America’s low-wage workers are employed by corporations with more than 100 employees, and the nation’s biggest low-wage employers are faring well since the end of the recession. Ninety-two percent were profitable last year, and 63 percent are more profitable than they were before the recession, according to the report, which looked at Census data from 2009–11.
And even more disturbing is that in the 50 companies that employ the largest number of low-wage workers, CEOs made an average of $9.4 million, which translates to 450 times more than the gross income of a full-time worker who makes $10 an hour, the report found.
“While a great deal of attention has been directed at the role of Wall Street and the financial sector in driving economic inequality in the U.S., it is important to recognize that the top low‐wage employers also bear responsibility for the growing disparity between corporate profits and worker compensation,” the report concludes.
Congressional connection
A bill to improve the economic climate of the middle class, heavily crafted by Iowa Sen. Tom Harkin, called the Rebuild America Act, was introduced in the spring.
The bill wants to provide $20 billion in grants into the nation’s schools for the modernization, renovation and repair of early learning facilities, K-12 public schools and community colleges.
It will also dedicate $300 billion for investments including roads, bridges and energy efficiency systems.
And, it seeks to raise the federal minimum wage and provide more paid sick leave so that illnesses can be better treated.
Economist James K. Galbraith said of Harkin’s proposal, which is currently under review by the Senate Finance Committee, “Senator Harkin once again demonstrates his vision and leadership by presenting a bill that would actually forge what others only talk about: a powerful, effective and wide-ranging strategy to rebuild our American middle class.”
And just last month, some Congressional Democrats went a step further, joining forces with activist Ralph Nader to pass a bill that would raise the minimum wage to $10 per hour immediately, and then index it to the Consumer Price Index after one year.
Protests pushing for raise in minimum wage heat up
Tuesday, groups demonstrated all over the country on “National Day of Action” to raise the minimum wage.
In Pittsburgh, Arthur Rawls, a Navy veteran, makes $8.48 an hour — which translates to about $13,000 a year — clocking in 30 hours a week at a clothing store, joined the protest.
“They aren’t giving full-time, so I try to cut hair on the side,” he said. “I try to do the best I can, but by the grace of God is the only way I’m making it. If I got sick or missed a day’s work, I would be up under a bridge today trying to make ends meet,” the Pittsburgh Post-Gazette quoted him as saying.
Rawls says he’s never made more than $10 an hour.
Part of the debate over an increase in the minimum wage occurring now amongst economists is what impact a potential increase could have overall for the economy.
Mark Price, a labor economist at the Keystone Research Center, says part of the problem is that economic theory and empirical research don’t agree.
“The theories argue that an increase in the minimum wage would generate unemployment, that it would drive up costs for employers and employers and would lay people off,” he told the Post-Gazette.
However, some studies conducted over the last two decades suggest otherwise.
“When the minimum wage went up, it didn’t result in a loss of employment,” Price explained. “There are a lot of different mechanisms for a minimum wage increase to be absorbed.”
Wage increases among low-income workers are likely spent and funneled back into the economy and some economists contend productivity increases when people are paid more.
And it was a similar scene Tuesday in Miami this week, where members of activist group 1Miami and others pushing for Congress to increase the federal minimum wage rallied.
Protesters at the rally heard stories from those who are earning minimum wage, who shared their stories of living paycheck to paycheck and being taken advantage of by employers.
The director of 1Miami Eric Brakken told the crowd, “Their fight is our fight, their struggle is our struggle,” the Huffington Post reported.
Those from Brakken’s group were joined by other supporters who say that keeping wages low at a time when the cost of living continues to increase is simply wrong.
And Henry and Owens agree. “The bottom line is that people who work for a living put their money right back into our economy. What business in this country needs right now is customers and too many hardworking Americans aren’t making enough money to get by. If we raise the federal minimum wage and demand the 1 percent pay their fair share to reduce income inequality, we will boost our economy, help small business grow and create jobs.”