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MassFiscal Says Warren’s Minimum Wage Increase “Flawed”

Thursday, March 21, 2013

 

Mass Fiscal Alliance says that Senator Elizabeth Warren's suggestion of raising the state's minimum wage to $22/hr is "fundamentally flawed," and could hurt the state.

"Old, honorable and fundamentally flawed is how the New York Times described an increase to the minimum wage in 1987. Today, elected officials are still using the same emotional explanations for increasing the rate without looking at the facts," said Paul D. Craney, Executive Director of Massachusetts Fiscal Alliance.

Warren made the increase suggestion at an Education, Labor and Pensions Committee hearing, suggesting a push to $22 an hour.

"Massachusetts is one of 18 states that has a higher minimum wage rate than the federal law. Most studies point to the fact that increases to the rate hurts those that need it the most,” said Craney. “The NY Times figured this out in 1987 and many employers know this today. It's just a shame some of our elected leaders haven't caught up to reality.”

Opening Up the Debate

Currently Federal law sets the minimum of $7.25 per hour. Twenty-three states have a minimum wage rate the same as the Federal rate. The border states of New York and New Hampshire have lower rates than Massachusetts.

Attention has been brought to minimum wage again recently, as President Obama has stirred up debate, asking states to set rates at $9 per hour by the end of 2015.

Some lawmakers in the state have proposed increasing the rate to $10 now and $11 in three years. Massachusetts Treasurer, Steven Grossman, described the state minimum wage hike to $10 an hour as “thoughtful and sensitive.”

“The debate over raising the rates for the minimum wage continues to draw emotion and proponents see the issues as a matter of fairness,” said Mass Fiscal in a recent memo. “In contrast to some perceptions, a majority of minimum wage workers are teenagers entering the workforce, and not adults trying to raise a family.”

The group pointed out that, according to the Bureau of Labor Statistics (BLS), 21% of hourly employed teenagers earn minimum wage or less compared with about 3% of workers age 25 and over. Of this small percentage of adults earning minimum wage or less, 94% also have a spouse that works as well.

In 8 out of 10 families supporting children, the minimum wage job accounts for less than 20% of the total household income.

A Solution?

Mass Fiscal say that the solution for helping the small percentage of minimum wage workers who are trying to support a family lies in the Earned Income Tax Credit (EITC), which allows low income households to receive a tax credit based on their income level. The law gives those with lower income a higher the tax credit, which permits targeted low income households to receive a break rather than the minimum wage pool in general.

 

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