State Initiatives to Lift the Working Poor

Many states are raising minimum wages and their own Earned Income Tax Credits

Recent wage gains and two consecutive months of falling prices, especially for gasoline, have raised real average hourly earnings, which should finish positive for 2006, as described here.

There will be attempts to claim credit for this good news for low-wage workers. If the president or any other federal official tries to take the credit, we should be skeptical. The real credit goes to a select group of state governments, whose efforts to raise minimum wages and earned income tax credits have made significant strides to raise low-income workers above the poverty line.

The president and Republican-led U.S. Congress had nothing to do with it.

According to this study by the Center for Budget and Policy Priorities,

Twenty-nine states (and several localities) have enacted minimum wages higher than $5.15 per hour. They range from as low as $5.25 for small businesses in Minnesota to as high as $7.63 in Washington, where the minimum wage is indexed for inflation. In 2006 alone, Arkansas, Arizona, California, Colorado, Delaware, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, North Carolina, Ohio, Pennsylvania, and Rhode Island have passed minimum wages or minimum wage increases; Connecticut, the District of Columbia, New Jersey, New York, Vermont, and Wisconsin are currently phasing in increases. By late in 2007, over half of the 29 will have minimum wages over $7.00 per hour.

The president and Congress have so far resisted an increase in minimum wage, claiming that it is a “job killer,” trouble for small businesses, and doesn’t really help the poor. This is nonsense. Again, according to the CBPP,

The minimum wage is sometimes depicted as a benefit mostly for second earners or teens in middle-income families, but this is not the case. The average minimum wage worker brings home 54 percent of his or her family’s weekly earnings.[3] If the minimum wage were to increase to $7.00 per hour, the poorest 40 percent of U.S. households would receive 60 percent of the benefit.[4]

The myth of the minimum wage, orthodontured, middle class, part time teen-age mall worker was recently invoked by the highly influential conservative pundit George Will, as described here. The minimum wage, i.e., having the government put a floor under wages, is problematic for some conservatives, like George Will, who seem to believe in the infallible wisdom of “market forces.” It’s a kind of religion.

The CBPP article goes on to site the merits of combining minimum wage increases with the earned income tax credit (EITC). Many states now have EITCs that go on top of the federal EITC. By approaching the problem of the working poor through the minimum wage and the EITC, the costs are shared by both the public and private sectors. This seems reasonable.

Politically, it is interesting to see which states have taken the biggest steps in raising earnings for the working poor. Note Table 1 in the CBPP report lists states that have recently raised both their minimum wages and EITCs. These states are Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, Oregon, Vermont, and Wisconsin – all “Blue States” won by Senator Kerry in 2004.

The evidence is clear, the Democrats are stronger advocates for making work pay -for all of us.

Cross-posted from Sustainable Middle Class Blog

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4 Responses to State Initiatives to Lift the Working Poor

  1. Good news for some states. Yes the Blue states do seem to have it figured out. I’m hoping the our new Democratic Congress will be able to usher this in across the board soon after they get started. It’s in the agenda – part of the plan (unless some folks still believe Dems don’t have one).

  2. Pingback: Credit Finance Loan » State Initiatives to Lift the Working Poor

  3. Ginny Cotts says:

    I often want to tell the trickle down advocates what every gardener knows: the best watering goes straight to the roots. Watering from the top is only useful when Mother Nature does it.

  4. Nick says:

    Contrary to George Will’s protests, the minimum wage is NOT a job killer. National Unemployment rates fell or remained constant after the MIn. Wage was created in 1938, and continued to fall after every wage increase madated by Congress since then. The one exception was in 1991-92, after the minimum wage was increased in 1990. Of course, unemployment increases happened then as a result of the 1990-91 recession NOT the minimum wage.
    As recently as the late 1970s and early 1980s, a person could work 40 hours a week 50 weeks a year working for the minimum wage and make enought to keep a family of three out of poverty. Since the latter 80s this has not been the case. So enact the Kerry proposal of 2003-04: raise the minimum wage and index it (and the EITC) to inflation.