From a Minimum Wage to a Living Wage

The Origins of the Federal Minimum Wage

The federal minimum wage was implemented iFDR LW quoten 1938 as part of the Fair Labor Standards Act as a response to the aftermath of the Great Depression. At the time President Franklin D. Roosevelt faced oppo
sition to establishing a $0.25 minimum wage
. In defending the necessity of a basic wage standard, F.D.R. declared that “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country” and “by living wages, I mean more than a bare subsistence level—I mean the wages of a decent living” (1933, Statement on National Industrial Recovery Act).[1] Since 1938 the federal minimum wage has been raised nine times, reaching today’s current $7.25 an hour, established in 2009.

However, an individual working full time at the federal minimum wage earns just $15,080 annually,[2] putting them just above the poverty threshold as established by the Census Bureau[3]. Dr. Diana Pearce of the Center for Women’s Welfare (CWW) at the University of Washington describes poverty as not being able to meet your basic needs and having to make the difficult decisions of going without and choosing between necessities.[4]

From Poverty Thresholds to a Self-Sufficiency Standard

Dr. Pearce created the Self-Sufficiency Standard in the mid-1990s as a way to measure the amount of income necessary for individuals and families to meet their basic needs without needing to be reliant on public or charitable assistance. This budget includes the basics, nothing extravagant,  including components such as housing, transportation, food, and childcare if you’re a parent. The Standard has been calculated for 37 states and can be accessed at: www.thecalculator.org.

The Alliance for a Just Society, a national network of 12 community and racial justice organizations, places the basic living wage for a single adult in Washington state to be $16.04. For a single adult with a school age child the basic living wage rate would be $22.12. They determine their living wage rates based on the estimated budgets for basic necessities for different household types (using a similar budget as the Self-Sufficiency Standard). In their 2013 Job Gap Study they find that 41% of all job openings in Washington state pay less than a living wage for a single adult and that for every job that pays at least a living wage there are eight job seekers.[5] Unfortunately, since the end of the Great-Recession there is growing concern that low-wage, part-time work is becoming our country’s new employment norm.

It is important to note that there are varied estimates about the specific dollar amount needed to constitute “a living wage.” While it can be easy to get hung up on debating which amount is “most correct”, it is important to see these numbers as important tools for understanding the current discrepancy between the actual costs of living that individuals and families face and current wage standards.

The Birth of the Living Wage Movement
The Living Wage Movemaking min wage a living wagement is attributed with originating in Baltimore in 1995 when a coalition of church groups and labor unions successfully advocated that the City council raise the minimum wage from $4.25, the federal minimum, to $6.10 for city contract workers. This effort took shape when people working in homeless shelters and soup kitchens began noticing a recurring trend:  people were coming in for food and housing assistance even when working.[6]

Since Baltimore implemented one of the first city ordinances paying workers above the federal and state minimum wage, over 120 communities have enacted living wage laws[7]. However, most of the local wage mandates only covered city contract employees or were targeted at airports or specific industries such as hotels. In Washington State, Bellingham[8] and now SeaTac[9] have city ordinances that pay some employees above the state minimum wage of $9.32.  As for local minimum wage laws, only nine localities have raised the local wage mandate for all workers. [10]

For more information on studies of the impact of minimum wage laws see, “Local Minimum Wage Laws: Impacts on Workers, Families and Businesses” as prepared by economists from UC Berkeley for the Seattle Income Inequality Committee.

 

Footnotes

 [1] Tritch, Teresa. “F.D.R. Makes the Case for the Minimum Wage.” March 7,2014. The New York Times. http://takingnote.blogs.nytimes.com/2014/03/07/f-d-r-makes-the-case-for-the-minimum-wage/?_php=true&_type=blogs&_r=0

[2] This number is calculated assuming a 40 hour work week for all 52 weeks of the year. (UC Davis Center for Poverty Research, http://poverty.ucdavis.edu/faq/what-are-annual-earnings-full-time-minimum-wage-worker)

[3] Poverty thresholds are the dollar amounts that the Census Bureau uses to determine poverty status. In 2012 the poverty threshold for a single individual under the age of 65 was $11,702 and for a family of four with two children under the age of 18 the threshold was $22,881. The poverty threshold is calculated by the size of the family and the ages of their members (UC Davis Center for Poverty Research, “What are the poverty thresholds today?” http://poverty.ucdavis.edu/faq/what-are-poverty-thresholds-today).

[4] Pearce, Diana Dr. Center for Women’s Welfare, University of Washington. “Living Wage Forum” sponsored by the League of Women Voters. April 3, 2014.

[5] Henry, Bob and Allyson Fredericksen. 2013 Job Gap Study: America’s Changing Economy. Alliance for a Just Society. December 2013. http://thejobgap.org/national-report/.

[6] Gertner, Jon. “What is a Living Wage?” The New York Times. January 15, 2006.  http://www.nytimes. com/2006/ 01/15/magazine/15wage.html?pagewanted=all

[7] The use of “living wage” is misleading since it refers to the fact that these laws establish that the a wage that is higher than the state or federal minimum wage is paid. However, as the Self-Sufficiency Standard reveals, it is debatable whether these wages are in fact “livable.”

[8] In 2002 Bellingham implemented a living wage ordinance that all service contractors and subcontractors should be paid a “living wage” no less than $10.00 per hour if health benefits are included and $11.50 if not included. (Bellingham Ordinance No. 2002-11-080, November 2002, http://www.mrsc.org/ords/b45o2002-11-080.pdf).

[9] In 2013 SeaTac voters approved a ballot initiative, Proposition 1, for 6,300 workers in and around the airport to see their wages raised to $15/hour. In addition to a minimum wage increase, Proposition 1 also includes annual raises attached to inflation, paid sick leave, tip protection and encourages employers to offer full-time employment to current employees before hiring more part-time workers. The measure affects about 70 airport related businesses that include airline service contractors, car-rental agencies with more than 25 employees, retail businesses with more than 10 employees, and hotels with more than 100 rooms. (SeaTac Proposition 1, November 2013,   http://www.ci.seatac.wa.us/ Modules/ShowDocument.aspx?documentid=8233).

[10] Reich, Michael, Ken Jacobs, Annette Bernhardt. “Local Minimum Wage Laws: Impacts on Workers, Families and Businesses.” UC Berkley. March 2014. Report prepared for Seattle Income Inequality Advisory Committee. http://www.irle.berkeley.edu/workingpapers/104-14.pdf.