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Higher Minimum Is No Threat To Businesses, Jobs

By JOHNNY E. WILLIAMS

May 03, 2013

Although decades of research indicate that raising the minimum wage does not adversely affect employment, this untrue claim is recycled whenever the Connecticut General Assembly considers providing working people with a small wage increase.

Businesses can easily adjust to the negligible cost increase without shutting down or laying off workers. This was evident during a U.S. Senate hearing March 14 on the Harkin-Miller minimum wage legislation, which seeks to raise the federal minimum wage to $10.10 an hour by 2015 — higher than President Barack Obama's $9 proposal.

At the hearing, Massachusetts Sen. Elizabeth Warren told David Rutigliano, representative of the Connecticut Restaurant Association and partner in SBC Restaurant Group, that data analysis suggests that raising the hourly minimum wage to $10.10 over three years would increase the price of a fast-food entree by only 4 cents. This means a typical item costing $7.19 would cost $7.23.

Given this minute increase in price, Sen. Warren asked Mr. Rutigliano to explain why a $10.10 hourly minimum wage is unsustainable for restaurants. He said the minimum wage increase has far more dire consequences for full-service restaurants. But costs to full-service restaurants, if the minimum wage is raised, are only half of those faced by fast-food restaurants because more of the latter's workers earn minimum wages.

Sen. Warren said that a minimum wage of $10.10 would increase a typical full-service restaurant's entree at the higher price of $14.40 by a mere 8 cents. Her exchange with Mr. Rutigliano disclosed what I am sure many Connecticut politicians know — the proposed state Senate bill to increase the state's minimum wage to $9.50 will not hurt businesses' bottom line.

Despite this, politicians such as Gov. Dannel P. Malloy show their political courage is reserved only for business interests when they propose to incrementally increase the state's minimum wage to a paltry $9 by 2015, without linking it to the Consumer Price Index to keep up with inflation. Malloy justifies his shameless minimum wage proposal by suggesting it would make life "a little easier for working people in our state, without adversely impacting the business community."

Malloy's proposal is reasonable to him because it favors highly profitable businesses that employ the 100,000 or so workers in the state with minimum or below minimum-wage jobs. The truth is that increasing the minimum wage to $9 an hour over a two-year period will do little to change workers' precarious economic condition. The governor's proposal will only provide a minimum-wage worker supporting a family of three with an annual income of $18,720 in 2015 — barely above the 2013 federal poverty line of $18,480. This is well short of the 1968 peak minimum wage of $1.60, which if adjusted for inflation would be $10.50 an hour or $21,840 a year.

Even the governor's anemic minimum-wage proposal, like any legislation seeking to help low-wage workers in our state, faces stiff resistance in the legislature from American Legislative Exchange Council national chairman Rep. John Piscopo, R-Thomaston, and others. These politicians falsely assert that most minimum-wage workers are students, retired or second-income earners who don't rely on their wages to live. Contrary to this claim, the overwhelming majority of minimum wage workers are adults, not teens, and they contribute a substantial portion of their households' incomes. According to the Bureau of Labor Statistics, fully three-quarters of minimum-wage earners are 20 or older.

Though the Fair Minimum Wage Act of 2013 seeks a $10.10 federal minimum wage, Jeannette Wick-Lim, a University of Massachusetts economist, argues that this proposal, like Gov. Malloy's, merely enables low-income earners to inch closer toward the federal poverty threshold. Even if the minimum rate was $12.30, Wick-Lim's analysis suggests it would not be enough for one-worker families living in Connecticut with young children to escape poverty.

Legislators must move beyond debating whether raising the minimum wage causes job loss, because it is clear that it does not. Priority must be given to determining how the state can use minimum wages as a stepping stone to maximally support low-wage workers. This means giving Connecticut's workers the minimum income necessary for them to meet basic needs —a living wage based on the cost of living in Connecticut rather than an arbitrary minimum. This would ensure that Connecticut citizens, working an ordinary 40-hour a week job, can afford shelter, food, health care and other basic necessities.

Johnny E. Williams is an associate professor of sociology at Trinity College.