Minimum Wage Study Torpedoes another Right Wing Talking Point

Jul 25 2012 Published by under Featured News

The current federal minimum wage of $7.25 per hour will yield a full-time worker the grand total of $15,080 per year and he rarely receives insurance coverage, retirement or other benefits beyond the FICA, Medicare, and unemployment taxes the employer is required to pay. The employee, most likely in that 50% of the population that conservatives insist “pay no taxes”, must also pay FICA and Medicare taxes, netting $14,228 per year at the current reduced payroll tax rates.

The Federal Minimum Wage Law (FLSA) applies to enterprises with an annual minimum gross sales/business volume of $500,000 and to smaller firms where employees are engaged in interstate commerce or in the production of goods for commerce. Minimum wages are higher in 17 states but in only six does it exceed $8 and the highest wage, $9.04 in Washington State, equates to $18,803 per year, $264 above the poverty level for a family of three.

But raising this wage – which won’t cover the rent on a two bedroom apartment in any U.S. state – always provokes a primal scream from the right defending small businesses. You know, the rare and fabled “Job Creators.”

A study released by the National Employment Law Project (NELP), however, shows that it is big corporations not small businesses that benefit from low-wage workers. “Big Business, Corporate Profits, and the Minimum Wage,” singles out McDonald’s, Wal-Mart, and Yum! Brands as among the large and profitable companies which employ 66 percent of low-wage workers.

Christine Owens, executive director of NELP said “While those businesses have emerged from the recession with strong profits, their lowest-paid workers are still struggling to make ends meet. It’s deeply worrisome that the very businesses that can most afford to pay fair wages and boost consumer demand are also driving the stagnant wage growth that is holding the economy back.”

And in fact it is more than holding the country back. It is costing state and federal governments millions to subsidize the employees of these profitable businesses. The stories of Wal-Mart employees on food stamps smack of urban legend, but they are not. A 2009 study by the Ohio Department of Jobs and Family Service found that 15,000 Wal-Mart employees were receiving Medicaid. The nation’s largest civilian employer was not the only welfare queen. In June of that year Ohio paid $28.5 million for Medicaid, $1.4 million for food stamps, and $10.9 million for Welfare for employees of the state’s 50 largest employers. Workers with salaries at or near the poverty line are also eligible for subsidized housing, reduced school lunches, and home heating assistance.

So while some their workers struggle to survive on subsistence wages and taxpayers make it somewhat more possible for them to feed their kids and keep a roof over their heads, (contrary to the right wing meme about part-time teenage workers, the Department of Labor reports that three quarters of minimum wage earners are 20 years or older), what are these companies and their stockholders enjoying? Wal-Mart, with 2.2 million employees, showed a gross profit of $111.2 billion last quarter, up 10.10% from a year earlier. Micky D, which employs 420,000 persons had a gross profit of $10.69 billion (remember, these are quarterly numbers), and YUM Brands, the proprietor of KFC, Taco Bell, and Pizza Hut, banked $3.48 billion profit, up 4.70 percent while many of its 60,580 employees collected minimum wage.

NELP said of the 50 low-wage employers it examined, 92 percent were profitable in 2011 and 78 percent had been so for the past three years. Revenues are higher than before the recession for 75 percent and profits are higher for 63 percent. In 2011 the 50 companies employed a total of nearly 8 million workers.

These profits were reported in the quarter in which NELP says the average weekly paychecks fell by 1.7 percent and that the minimum wage, which has not been raised in three years, is worth 30 percent less than it was in 1968. Had it kept pace with the cost of living since 1968 the minimum wage would be $10.55 – and would still leave a family of four below the poverty line.

At the same time NELP says the average CEO pay in these low-wage companies was $9.4 million and the 50 largest ones returned a stunning $174.8 billion to their shareholders over the past five fiscal years – in many cases thousands of dollars per employee per year.

Owens said of these profitable companies, “Paying slightly higher wages will do them no harm, but will have a direct benefit for the economy because low-wage earners would immediately spend those wages on basic needs for their families.” Not to mention, the recipients of dividends pay taxes at 15 percent compared to the 25 percent or more these employees would pay were they earning a living wage.

And it is getting worse. In 2011, 52.1 percent of low-wage workers worked in five sectors: Food Services, Accommodation, Retail, Administrative Services, and Arts, Entertainment, and 7 out of the top 10 sectors expected to grow the fastest over the next decade are low-wage industries.

A bill introduced by Senator Harkin (D-IA) and Representative George Miller (D-CA) would raise the federal minimum wage to $9.80 by 2014 and adjust it yearly to keep up with the rising cost of living. The Economic Policy Institute estimates this would increase wages for nearly 30 million Americans, 1/5 of the work force, because the minimum wage is a tide that does indeed lift all boats. It would also generate more than $25 billion in new consumer spending and ultimately more than 100,000 new full-time jobs.

“We know that 70 percent of the economy is driven by consumer demand, and that right now wages and spending are flat, and retail sales have declined,” said Owens. “Growing profits and rich CEO pay benefits some Americans, but if we want to build a strong and sustainable economic recovery for all, we need to put more money in the pockets of those workers who line the foundation of the economy. A modest pay hike for them will generate the added spending businesses need to create more jobs and more opportunities for all Americans.”

Coincidentally July 24 was National Raise the Minimum Wage Day but so far no balloons. However somewhere I’m sure there was a conservative explaining how lowering it would lead to the creation of more jobs. To paraphrase Bill Maher, so would slavery.

Image: Occupy Phoenix

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