Will a Minimum Wage Hike Hurt or Help Worcester’s Economy?
Thursday, January 30, 2014
“Raising the minimum wage creates youth unemployment and makes it harder for unskilled individuals to find work,” said Christopher Pinto of the Worcester Republican City Committee. “Instead of boiling the frog — our economy — slowly to kill him, we should just raise the minimum wage to $22 / hour like (Sen. Elizabeth Warren) has suggested and get the killing of the U.S. economy over with.”
“I really think the whole minimum wage issue is all cosmetics. It's covering up a bigger issue,” said Ken Mandile, president and owner of Swissturn USA and head of the Worcester Tea Party. “Creating more jobs is the issue, and not artificially raising the cost of doing business.”
But advocates say the increased earnings would further fuel growth in the Commonwealth and give families a boost.
“For low-wage workers, any more money they get is spent immediately. It's going to get churned right back into our economy,” said Stephen Crawford with Raise Up Massachusetts.
“This is becoming the economy — (families) working full-time and on food stamps and still not making it,” said Frank T. Kartheiser, the lead organizer of Worcester Interfaith, a member of the Raise Up coalition.
Current efforts would increase hourly minimum to $10.50 or $11
While the federal minimum is likely to remain unchanged despite calls for action by President Barack Obama, efforts in Massachusetts to raise the minimum wage include current legislation and a ballot initiative set for next November.
“Both proposals would raise the wages of about half a million minimum-wage workers,” said Noah Berger, president of the Boston-based Massachusetts Budget and Policy Center. He said the increase would also restore the real value of the minimum wage to about what it was in 1968. “That decline in the minimum wage has contributed to increasing income inequality and a decline in quality of life.”
The first minimum-wage law in the nation was enacted in Massachusetts in 1912.
An increase from the current $8 an hour to $11 an hour — the proposed level by 2016 approved in the state Senate's bill — would impact the wages of 589,000 people across the state according to the latest estimates by MassBudget using a model developed by the Economic Policy Institute.
That number includes 485,000 whose wages would be directly affected and an additional 104,000 whose pay would likely be indirectly affected as the overall “wage floor” was lifted.
Additionally, “it could have a positive overall economic impact by giving people a little more money to spend,” according to Berger.
There's no conclusive correlation between adjustments to the minimum wage and employment.
Research from the Employment Policies Institute indicates a decline in employment inversely proportional with increases in the minimum wage. That Washington, D.C.-based nonprofit points to U.S. Census data that showed less than one in five minimum-wage recipients were working to raise a family on the minimum wage nationwide in 2009. The remainder were teenagers living with working parents, single adults, or dual-income couples.
But Berger said the “overwhelming conclusion” among economists was that the minimum wage did not negatively impact job creation.
Crawford, part of the Massachusetts coalition that successfully sought signatures for the ballot question this year, contends the effect of a raise for low-wage workers would be positive given an economy rooted in consumer spending.
Raise Up Massachusetts' proposal would increase the minimum to $9.25 in 2015 and to $10.50 in 2016.
“That's going to mean a few grand more for these families,” Kartheiser said. “What it also does is push up those workers just above the minimum wage.”
Both the ballot proposal and pending legislation would then index wage rates to the cost of living. Eleven states currently tie their minimum wage to the cost of living.
“We're very confident that, if this is presented to the voters in November, this will be successful,” Crawford said.
The $10.50 rate would directly and indirectly affect 17,400 workers in Worcester — 22 percent of the city's workforce — according to MassBudget.
An additional 7,600 in suburban Worcester would see their wages increase. Across the state, the increase would equal $825 million in additional earnings.
Representing religious congregations and neighborhood organizations in Worcester, Kartheiser said the interfaith coalition became involved in the campaign after a round of house meetings last spring where the coalition heard the need for more part-time jobs from families already employed. “They weren't earning enough money to pay their bills.”
“Yes, part-time is one way to make more money,” Kartheiser said. But raising the minimum wage was another option, so people “do not have to work 60, 70 hours” a week, he continued.
At least 30 state legislatures are expected to contemplate minimum-wage proposals this year according to a survey by The Associated Press.
The National Conference of State Legislatures tallied 22 bills introduced in 14 states and Washington, D.C. on minimum wage increases and related issues in the 2014 legislative session as of Jan. 27.
The Worcester Regional Chamber of Commerce's Sharyn T. Williams said her organization did not have a position on the current issue of a minimum wage increase.
“We are definitely monitoring the preparation of state efforts,” Williams said, “and we are definitely supportive of (House Speaker Robert DeLeo's) effort to reduce the cost of unemployment insurance on business as part of any proposal.”
John Giangregorio, the owner of a sports bar in Worcester, said the minimum-wage discussion was a distraction from the real focus of job growth.
“I never saw an issue get so much publicity that would have so little of an effect on the economy,” Giangregio said. With a small fraction of the workforce at minimum wage, the chair of the Canal District Business Association said those jobs were not meant to support a family. “You learn important skills, you don't bring a lot of skills to those jobs.”
“This is a feel-good measure to cover up the real issue, which is job creation.”
The tea party's Mandile said there was much more that could be done to spur growth. “If a company is forced to pay $11 an hour, they're going to hire the experienced worker over the inexperienced worker. So I think it will damage opportunities for young people.”
Crawford said the impetus of the campaign was to provide economic relief to low-wage workers.
“We're not saying this is the solution,” Kartheiser said, distinguishing between the proposed increase and a livable wage. Pointing to widespread support during the signature campaign, “people understand these aren't handouts. These are full-time workers.”
“If you put money into people's pockets, they're spending it in their neighborhoods.”
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