About 104,000 minimum wage workers in Missouri will get a 15-cents-an-hour raise on Jan. 1 to $7.50, thanks to an inflation adjustment built into state law.
For employees in entry-level jobs it’s a small gain that won’t go far to stretch household budgets, but it’s still an improvement.
Across the state line in Kansas, the wage floor for covered employers and employees will stay at $7.25 an hour, the federal rate.
As the year 2013 winds down, the minimum wage is once again a hot topic. Congress has before it a bill, the Fair Minimum Wage Act of 2013, that would raise the national rate to $10.10 by 2015, with three increases of 95 cents each.
The bill, which could affect wages for about 30 million workers, has White House and Democratic support, but Republican opposition makes passage unlikely.
Meanwhile, the nation’s crazy quilt of minimum wages — including at least 21 states and some cities that have set minimums higher than the federal rate — will change patterns again in 2014.
Along with Missouri, state increases are scheduled next year in Arizona, California, Colorado, Connecticut, Florida, Montana, New Jersey, New York, Ohio, Oregon, Rhode Island, Vermont, Washington and Washington, D.C. The Massachusetts legislature is wrangling over an increase. Nevada will make a decision at midyear.
The spottiness means that low-wage workers have legal rights to hourly pay ranging from as low as $2.13 an hour for workers who earn most of their wages in tips to more than $9 an hour in other jobs, depending on location.
Advocates for higher minimums say it’s past time to make the wage floor do a better job of reflecting the cost of living. According to polls, most Americans say the current minimum, at whatever level, isn’t enough to provide a livable wage for a full-time worker who is trying to maintain a household.
Many minimum wage workers don’t get full-time hours, but if one was to work 40 hours a week, wages would amount to about $15,000 a year at $7.25 an hour.
Separate recent polls by Gallup and by The Washington Post/ABC News have found that two-thirds of Americans surveyed supporting a minimum wage increase, and Public Policy Polling survey found that a majority support for a $10 rate. Those preferences are being heard in some states.
“In the face of federal inaction, states are boosting the paychecks of the lowest-paid workers, promoting growth and consumer spending, and hopefully providing an example for Congress to follow,” said Christine Owens, executive director of the National Employment Law Project, which backs minimum wage growth.
But, while fast food workers, labor union members and social justice advocates have taken to the streets this year in rallies for higher wages, many Americans, including business groups, remain opposed to mandated increases in the wage floor. Opponents say the free market, not government, should decide what jobs are worth.
Missouri’s increase stems from a voter-approved initiative in 2006 that calls for annual rate adjustments reflecting cost-of-living increases. Like Missouri, 10 other states have indexed their minimums to annual inflation changes.
Unlike Missouri, the federal minimum wage is not indexed to inflation. Congress has to pass laws to change the rate. The last time legislation passed, it raised the rate from where it had been — $5.15 an hour — for 10 years. That law moved the federal floor to $5.85 in 2007, $6.55 in 2008, and $7.25 in 2009.
The federal rate, because it hasn’t had inflation adjustments built in, now has a real buying power that’s less than it had in 1968, economists calculate.
A Gallup poll in early November found strong support among Democrats (92 percent) and independents (71 percent) for tying the minimum wage to inflation, but 56 percent of Republicans said they would vote against an automatic link.
This year’s stronger push for wage increases, especially in the fast food industry, has reinvigorated longstanding debates about whether higher pay floors cause job loss.
On one side, the Employment Policies Institute and other business-oriented groups say that higher minimums would cause employers to cut staff to afford the bigger paychecks, perhaps replacing workers with automation. A substantial increase to $15 an hour would cause the loss of about 13,700 jobs in Missouri and Kansas, the institute predicts.
Writing in a recently published essay, Michael Saltsman, research director at that organization, said that roughly half of minimum wage workers are employed in small businesses where owners face “single-digit profit margins, extremely price-sensitive customers, and no room to absorb a substantial increase in the minimum wage without dramatically reducing the cost of service.”
On the other side, the Economic Policy Institute and other worker-oriented groups say that higher wages would flow back into the economy and be net wins for employers because the workers would spend more on goods and services. The institute supports the federal wage bill now in Congress.
It would “bring a minimum wage income back above the poverty line for a family of three,” wrote David Cooper, economic analyst at that research organization. And it “would then index the minimum wage so that it is automatically increased for inflation each year, thereby preserving its real value and protecting full-time minimum wage workers from falling into poverty.”
A group of mainstream economists surveyed by the University of Chicago’s Booth School of Business agreed earlier this year — by a 4-to-1 ratio — that raising the minimum wage and indexing it to inflation produce economic benefits that outweigh costs.