Federal and state minimum wage increases still uncertain

Serghino René
and Alex Bloom

In a move that could make the minimum wage in Massachusetts the third highest in the nation, House and Senate legislators agreed to raise the pay to $8 an hour by 2008.

The proposal’s fate still rests on Governor Mitt Romney’s decision to sign or veto the plan. Romney, a potential 2008 presidential candidate nominee, was a strong supporter of matching the minimum wage with inflation during his 2002 governor campaign.

But it’s unclear whether he will back down from his prior position to sign the proposal.

Either way, his decision comes at a time when federal lawmakers are also pushing for an increase in the minimum wage.

Citing that raising wages is a vital first step, Senator Ted Kennedy has introduced the Fair Minimum Wage Act, which would increase the minimum wage to $7.25 an hour in three steps over the next two years. The increase would affect nearly 7 million workers, giving one minimum wage earner $4,400 a year to spend on education, healthcare, rent and groceries.

According to a recent report by the Democratic Staff on the Committee on Health, Education, Labor and Pensions, the cost of living has dramatically increased since the last minimum wage increase in 2001. Prices for daily essentials such as gas, health care and housing have risen significantly. An AFL-CIO poll suggests that almost two thirds of Americans are worried about prices rising faster than their income.

Congress has received 8 pay increases in the last nine years, totaling over $31,000, according to the report, while presidential pay has increased 100 percent since 1997.

Although the nations productivity has increased 18 percent, the nations minimum wage has remained at $5.15 an hour. If the minimum wage had increased at the same rate as presidential pay, the nation’s average wage would be at $10.30 an hour.

By that standard, even Massachusetts has a long way to go. But at least the state legislature is moving in the right direction.

Their proposal would increase the wage from $6.75 per hour to $7.50 per hour by Jan. 1, 2007. An additional 50 cents would be added a year later, making Massachusetts the third highest minimum wage in the country behind Washington and Oregon, which index their rate with inflation.

The agreement does not include raising the base pay of tipped workers who typically earn $2.63 an hour, nor does it mention indexing. However, the state has made a commitment to revisit the minimum wage on a regular basis.

State Rep. and chairman of the Committee on Labor and Workforce Development Michael Rodrigues, D.-Westport, is pleased with the final decision on the minimum wage and firmly stands behind his conviction that indexing the wage is a mistake.

“It’s poor public policy, poor fiscal policy and poor economic policy to base future wages on indexing,” Rodrigues said.

Based on a 40-hour work week, the increase will boost these workers’ earnings from about $14,000 a year to $16,500. Eighteen states presently have a higher minimum wage than the federal minimum wage, which has remained the same since 1997 at $5.15 an hour.

The last time lawmakers considered raising the minimum wage was in 1999. It went from $5.25 per hour to $6 per hour by 2000. In 2001, it increased again from $6 per hour to $6.75 per hour.

The newly proposed increase would affect an estimated 315,000 workers in the Bay State. Of those workers, 60 percent are women and 76 percent are adults older than 20. About 76 percent work 20 hours per week or more and 46 percent work full-time.

A minimum wage increase may benefit low-income workers, but for business owners utilizing minimum wage workers, it means an increase in costs. Those business owners argue that they will be forced to hire less, and the few jobs that they can afford would be even more competitive to obtain.

“Simple economics tells us that the more you increase cost, the less demand there is for a product, so [raising the minimum wage] is a balancing act,” said Rodrigues. “We don’t want to reduce the opportunity for people to get summer or part-time employment.”

Raymond Exil, McDonalds area supervisor for Roxbury, Egleston and Hyde Park locations, has been working with the franchise for eighteen years. He says the minimum wage increase is a bad idea.

“We have the desire to hire more people, even kids,” said Exil, “but we may have to step back a bit and focus more on hiring full-time workers.”

Unfortunately, for low-skilled workers, it may be more challenging to find jobs, especially those that pay above minimum wage.

“Small businesses see an upward cost pressure that makes it hard to compete with larger enterprises like a Wal-Mart or a Home Depot,” said Marc Greenbaum, professor at Suffolk University Law School.

Given that Massachusetts has one of the highest costs of living in the nation, Harris Gruman, executive director of Neighbor to Neighbor, an organization that helps low-income and working class people, faults businesses for being short sighted and unwilling to view the bigger picture.

“If people get paid less than what they can live on, I question if that is a real job,” said Gruman. “That’s slavery. Rather than give jobs where people still need public housing and welfare, we need to find jobs that pay at least basic living expenses. Studies have shown that raising the minimum wage has helped local economies and boosted jobs. For every job lost, more jobs are created.”

Gruman said the beauty of the deal is that raising the minimum wage will add a significant economical boost to the local economy and other communities like Fall River, Holyoke, Lynn and Worcester.

“When you pay low wage workers, they spend their money locally,” said Gruman. “They don’t take trips to Paris or invest it in the Japanese Stock Exchange.”

But that money shouldn’t just be handed out. Rodrigues says that Massachusetts has been progressive in providing for low wage workers, but at the same time, they need to have skills worth the pay rate. Raising the minimum wage just lowers the level of the economic ladder and he suggests that we need to get employees on the ladder to move up.

“We need to increase skill sets to give low wage workers an opportunity to learn additional skills to demand jobs that earn more than minimum wage, whether that’s learning English, getting your GED or going into a career with a known career ladder,” said Rodrigues.