Minimum Wage Policy Center

JSPAN POLICY PAPER - June, 2004

We are taught in Deuteronomy 15:11 that "there will never cease to be needy ones in your land, which is why I command you, open your hand to the poor and needy kinsman in your land."  Though the Torah recognizes that we cannot necessarily eliminate all poverty, we are taught that we must work to alleviate its impact. Making sure the poor are provided for is a responsibility for society as well as for the individual. While we are commanded to give tzedakah and “provide for the poor according to their needs” (Katubot 67b), our tradition also teaches us that it is more important to help a person become self-sufficient than it is to give that person a handout. Maimonides taught that enabling people to support themselves is the highest form of charity. An increase in the minimum wage would allow those in entry-level jobs to be less reliant on federal assistance programs and to become more self-sufficient. An increase in the minimum wage is necessary to restore buying power to minimum wage workers. In addition, it is necessary to link the minimum wage to the annual Consumer Price Index to address the ongoing need to sustain a flexible, realistic minimum wage level, reflective of changing economic conditions. Since passage of the Fair Labor Standards Act of 1938, which established a minimum wage and required Congressional approval for each increase, minimum wage increases have generally failed to keep pace with the rise in consumer prices. Erosion in the real value of the minimum wage has had a serious impact on the standard of living of the working poor. Moreover, erosion in wages of low-wage workers has been a major factor underlying persistent poverty and a steadily widening income gap. The federal minimum wage is currently at $5.15 an hour, and was last increased in 1997. A full-time minimum wage worker earns $10,712 per year, well below the federal poverty threshold of $14,824 for a family of three. Contrary to charges by opponents of an increase, studies have found that a moderate rise in the minimum wage does not reduce employment opportunities or harm small businesses. Economic conditions, not moderate minimum wage increases, determine the level of unemployment, these studies have shown. Further, almost 70 percent of minimum wage workers are adults, contrary to assertions by opponents that most minimum wage workers are teens. Forty percent of the 1997 increase went to families in the bottom 20 percent of the income scale, workers who earn on average $14,000 a year. The federal government has a primary responsibility for alleviating poverty and for ensuring conditions that allow families to move from poverty to economic self-sufficiency. This includes the guarantee of a minimum wage sufficient to allow families to support themselves. The promise of America, and the demand for a decent family life for all, requires prompt passage of legislation to raise the minimum wage.

MYTH: Raising the minimum wage would impact very few people. FACT: An estimated 6.9 million workers (5.8 percent of the workforce) would receive an increase in their hourly wage rate if the minimum wage were increased. Due to "spillover effects," the 10.5 million workers (8.7 percent of the workforce) earning up to a dollar above the minimum would also be likely to benefit from an increase. Single mothers would benefit disproportionately from an increase - this group makes up just 5.7 percent of the total workforce, but represents 10 percent of workers who would be affected by an increase. More than two million married men and women with children under age 18 would also benefit from a hike in the minimum wage. MYTH: An increase in the minimum wage is not an effective way to move people out of poverty. FACT: Wrong! 18 percent of the benefits would go to households with annual incomes less than $10,000, and another 32 percent of the benefits would go to households with annual incomes between $10,000 and $25,000. As welfare reform and welfare-to-work programs push more low income people into the workforce, increasing the minimum wage could play a significant role in ensuring that these people will be able to support their families independently, without cash assistance. Critics of a minimum wage hike often contend that the earned income tax credit is sufficient to assist those in poverty and that raising the minimum wage is superfluous. However, the minimum wage is meant to work in combination with the earned income tax credit and other anti-poverty programs to lift people out of poverty. Alone the earned income credit is insufficient. MYTH: The majority of people earning minimum wage are teenagers and are not the primary breadwinner in their families. FACT: Evidence from the 1996-97 minimum wage increase shows that the average minimum wage worker brings home more than half (54 percent) of his or her family's weekly earnings. Adults (age 20 or older) make up 68 percent of workers whose wages would be raised by a minimum wage increase. One third of these workers are parents of children under age 18, including almost a million single parents. MYTH: Increasing the minimum wage would force small businesses to fire employees. FACT: A 2000 study by the Economic Policy Institute failed to find any systematic, significant job loss associated with the 1996-97 minimum wage increase. These results are similar to other studies of the 1990-91 federal minimum wage increase, as well as to studies of several state minimum wage increases. New economic models that look specifically at low-wage labor markets help explain why there is little evidence of job loss associated with minimum wage increases. This model recognizes that employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale. A 1998 survey of small businesses by the Levy Institute found that fewer than .33 percent reported having reduced employment because of the 1996-97 increases in the minimum wage.

Take Action--Write your Congressional Representative!

• Pennsylvania State Senate votes to increase minimum wage
• Elected Officials Are Wavering on Voting to Raise Minimum Wage
• ‘Minimum Wage Hike Needed Now’ JSPAN Tells PA Senate Panel

JSPAN invites your input on all position papers. Please send all replies to jspan@jspan.org.