MARY TRUCKS: Minimum wage impact is wider than many think

By Mary Trucks

FiveCAP, Inc. executive director

A great deal of research has shown that low-income families spend what they have, and it stands to reason. When people are just getting by, or relying on assistance programs to help meet their basic needs, they are making sacrifices based on what they can’t afford.

Families who are living paycheck-to-paycheck shuffle that money between bills, food, transportation and other necessities. Any extra they receive goes to catching up or stocking up. And low-income families tend to spend locally, especially in rural areas, where the price of gas makes driving to other communities to fill basic needs cost prohibitive.

These points are important in considering whether or not to raise the minimum wage because the additional income earned by these lowest-paid workers would be directly infused into the local economy. Many of the same businesses owners who worry over the increase in payroll will experience an increase in profits as a result of their employees having more to spend.

This is not a discussion of disposable income, it’s about paying people a wage they can survive on. Working full time at the current minimum wage barely raises a single person above the poverty line, so parents working these low-wage jobs are raising their children in poverty. The recently recommended minimum wage increase to $10.10 is simply closer to the amount needed for someone to become self-sufficient.

The goal of the war on poverty – and all anti-poverty measures including food, cash and utilities assistance programs – is to help people become self-sufficient and increasing the minimum wage would go a long way toward helping the 1 million Michigan workers that would be impacted by this increase do just that.

The Michigan League for Public Policy issued a report on raising the minimum wage that examines who will be impacted by the hike. A common misconception cited by those who are against the increase is that the majority of low-wage workers are middle-class teenagers, and their age somehow disqualifies them from the right to earn a living wage.

This fallacy doesn’t hold up under facts. The majority of low-wage workers are, in fact, adults who work at least 20 hours a week, with 85 percent being 20 or older. In Michigan, 86 percent of low-wage workers have graduated from high school, 31 percent have attended college, 10 percent have an associate’s degree and 11 percent have earned a bachelor’s degree or higher.

Many of these people have children to support, with one in five Michigan children being raised by low-wage parents.

The MLPP report cites a 2011 study by the Center on Budget and Policy Priorities that analyzes the impact of increased income on the educational success of children and shows a “modest, but statistically significant, increase in young children’s academic performance and future adult earnings,” for every additional $1,000 in annual family income. This wage increase, therefore, will produce future generations that become exponentially more self-sufficient, decreasing the burden on an already overtaxed safety net.

In one industry alone, this impact would be significant. MLPP cites a UC Berkeley Labor Center report from October called “Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast-Food Industry,” that shows 52 percent of fast food workers’ families are enrolled in one or more safety net programs. This is twice as high as the 25 percent of the general workforce enrolled in assistance programs.

In Michigan, these workers alone account for $251 million in costs for Medicaid, the Children’s Health Insurance Program and food stamps.

As the cost of necessities has increased over the last several decades, the real value of the minimum wage has fallen, decreasing by 20 percent since its peak value in 1968. It’s time for the value of an employee’s hard work to meet back up with the cost of living.