“Good jobs are disappearing while the wealthiest 1% are taking an unprecedented share of the national income. Nobody should have to struggle on poverty wages just to satisfy big corporations’ endless thirst for profits. Fast food and low wage workers are rising up demanding a $15/hour minimum wage. Let’s unite in the Fight for $15 and win an historic victory for working people!” – Kshama Sawant
- In 2012, the real median household income was 8.3% lower than it was in 2007, according to U.S. Census Bureau figures.
- Low-wage jobs accounted for only 21% of recession losses, while 58% of new jobs created between 2010 and 2012 were low-wage, according to the National Employment Law Project.
- A record 46.5 million people were living in poverty in the U.S. in 2013 according to the Census Bureau.
- Despite high unemployment and the weakest recovery since World War II, the stock market and corporate profits reached record highs in 2013.
- According to one study, 95% of the gains of the economic recovery have gone to the richest 1%.
- If the minimum wage had kept up with productivity gains since 1968, it would be $21.72.
Puget Sound SAGE Report: Why the Tip Credit is Really a Tip Penalty
Women make up a majority of tipped workers in Washington State and the Seattle region
- Women make up 67% of all workers in tipped occupations in Washington State, compared to 46% of the employed population
- Women make up 60% of all tipped workers in Seattle, and 70% of all tipped workers who live in poverty.
- Allowing tips to count towards a wage increase, would effectively exclude tipped workers from many of the benefits of an increase to the minimum wage, and would only make the gender pay gap worse.
Most tipped workers are servers at casual restaurants, who are much more likely to live in poverty than workers overall
- Tipped workers in Seattle are twice as likely to live in poverty compared to the rest of the employed population. 13% of tipped workers in Seattle live in poverty, compared to 6% of all workers.
Washington State Law states that tips cannot be counted as wages
- No other city in the seven states with no subminimum wages has introduced a subminimum wage for tipped workers. In 2014, three additional states and the District of Colombia have legislation and ballot initiatives moving to eliminate their subminimum wage as well; the introduction of a tip credit in Seattle would set a regressive precedent for the nation just as many other states are moving in a progressive direction.
Tip-credit appears to have no impact on restaurant success in other states
- Over the next ten years, restaurant employment is projected to grow by over 10% in Washington State, compared to just 9.1% in states that allow tips to count towards the minimum wage.
- Restaurant sales per capita and employment growth in tipped occupations is higher in states without a tipped minimum wage.
Tip credit or total compensation models encourage wage theft
- In states with tip-credit, if the employee does not make minimum wage through their tips, the employer is legally required to make up the difference. This law is often broken and rarely enforced.
- One study of 4,300 low wage workers found that, 26% of low wage workers were not even paid the legally required minimum wage. Allowing tips or benefits to count towards the minimum wage creates unenforceable loopholes to the minimum wage law.
Data obtained from Restaurant Opportunities Centers United and the National Employment Law Project
NELP Report: The “Training Wage” Loophole
When low-wage employers are unable to block a minimum wage increase, they frequently propose adoption of a 90-day, sub-minimum “training wage” for teenage workers. They generally argue that such a reduced wage for teens is necessary either to avoid putting teens out of work, or to cushion the impact on employers of a higher minimum wage. But review of the economic evidence shows that neither rationale holds up to scrutiny. Rigorous Research Shows That Raising the Minimum Wage Does Not Cost Teens Jobs
• The state-of-the-art research on the impact of the minimum wage on teens, “Do Minimum Wages Really Reduce Teen Employment?,” was published by economists at the Universities of California and Massachusetts in 2011 in the Journal Industrial Relations. It carefully examined the impact of all U.S. minimum wage increases between 1990 and 2009 on teen workers – including minimum wage increases implemented during times of high unemployment such as the national recessions of 1990-1991, 2001 and 2007-2009. The study found that the even during downturns in the business cycle and in regions with high unemployment the impact of minimum wage increases on employment is the same: negligible.
• As Bloomberg News wrote in summarizing the study, “[This study is part of]a wave of new economic research is disproving those arguments about job losses and youth employment. Previous studies tended not to control for regional economic trends that were already affecting employment levels, such as a manufacturing-dependent state that was shedding jobs. The new research looks at micro-level employment patterns for a more accurate employment picture. The studies find minimum-wage increases even provide an economic boost, albeit a small one, as strapped workers immediately spend their raises.”
Teen Employment Levels Have Been Declining for Decades – Regardless of Whether the Minimum Wage Is Increased — for Reasons Completely Unrelated to the Minimum Wage
• Teen employment levels have been falling for decades, including a dramatic decline since 2000.
- There are multiple reasons for this decline, including the fact that today more teens are full-time students than in the past, and that those teens seeking work face increasing competition from adult workers over 55, many of whom cannot afford to retire and are turning to low-wage jobs more than ever. For a detailed analysis of these trends, see NELP, What Is Causing Record High Teen Unemployment? (2011).
For Most Employers a Teen “Training Wage” Would Not Substantially Cushion the Impact of the Minimum Wage
• Teens represent a very small portion of low-wage workers – just 16% of New Yorkers earning less than $8.75. Moreover, the median age of low-wage workers has been increasing and is now 35, reflecting the fact that more adults are spending their careers in low-wage jobs.
• This means that a 90-day, sub-minimum training wage for teens would result in very little savings for most low-wage employers. It Is Chiefly Fast Food and Big Retail Chains with High-Turnover Staffing Models Would Benefit from a Teen “Training Wage”
• The employers who would benefit substantially from a 90-day, teen subminimum wage are those low-wage employers that have chosen a high-turnover staffing model. This is chiefly fast food and chain retail employers, which have disproportionately high rates of employee turnover, ranging up to 200 percent on an annual basis. This means that fast-food and chain retail employers often replace their entire staff once every six months on average.
• A 90-day sub-minimum teen “training wage” would allow fast food and chain retail to pay their employees less than the minimum wage for roughly half of their average short, six-month job tenures – a very substantial savings.
• Such a loophole is unfair and unwarranted since the fast-food and major retail chains are seeing record corporate profits, and can readily afford to pay a higher minimum wage – especially one as modest as $8.75.
Frequently Asked Questions
Right-wing commentators say raising the minimum wage would wreak havoc on the economy with job losses, rampant inflation, and crises for small businesses. Let’s examine some of the myths and important questions surrounding raising the minimum-wage.
Aren’t most minimum-wage workers just teenagers earning pocket money?
Three-quarters of minimum-wage workers are age 20 or older. More than 25% are parents, and a majority of them are the primary or only providers for their household.
Most low-wage workers are not able to advance to better-paying jobs. Entry-level positions in the fast-food industry offer few prospects for promotion or advancement, despite the often-advanced “mobility myth.”
Nearly two-thirds of low wage workers are women.
Shouldn’t workers who want to earn more get an education and a better job?
In fact, more education today results in more student debt, but not more opportunities for today’s graduates.
Minimum-wage workers are better-educated today than ever before, but they are paid less than they were thirty years ago. The share of workers at or below the federal minimum wage who had some college education increased from 19.5% to 33.3% between 1979 and 2011.
Low-wage jobs comprised about 35% of jobs lost in 2008 and 2009, yet they accounted for 76% of net job growth in 2010.
Won’t increasing the minimum wage be a “job killer”?
Let’s remember it was the blatant greed and criminality of Wall Street and Corporate America that crashed the economy in 2008 – not low wage workers demanding exorbitant pay raises. It is the policies of big business that have been the “job killers.”
The economy is reeling with over 20 million people unemployed or underemployed, a low-wage mostly non-union workforce, and staggering consumer and student debt.
Paying $15/hour to tens of millions of workers will increase the amount they and their families can spend on goods and services, which would provide a huge boost to the economy. Money spent by workers has a far bigger impact on economic growth rate than handouts to the top 1%, who sit on much of that money. And studies done on recent minimum wage increases show that they did not, for the most part, adversely affect employment.
It is true, however, that if the working class is consistently successful in winning wage increases, corporations will try and retaliate in other ways. They may threaten to mechanize production to cut jobs, move their stores, or lay off workers. For instance, Walmart has threatened to pull out from plans to build outlet stores to punish Washington D.C. for its proposed new $12.50/hour minimum wage.
However, most low-wage workers have jobs that cannot easily be outsourced. Fast-food cooks and servers, hotel workers, child care providers, health care workers, parking lot attendants – all do their work on site. Most jobs that can be outsourced to low-wage free trade zones already have been.
Despite this, corporations will try to cut jobs where they can. The alternative to the nationwide and global race to the bottom is for workers to fight for better conditions everywhere.
Can businesses afford to pay $15/hour?
Starbucks, McDonald’s, Subway, Pizza Hut, and a majority of other big corporations are raking in mega-profits. CEO salaries and bonuses are at record highs. The CEO of YUM! Brands (KFC, Pizza Hut, Taco Bell) made $20.5 million last year. The average worker in one of the stores made $7.50/hour. Estimates show that Walmart’s CEO is paid more per hour than the average Walmart worker is paid in a whole year.
Every worker deserves a living wage – no one should have to live in poverty if they work a full-time job (or jobs). We live in the richest country in world history; there is no doubt our society as a whole has the resources to easily provide every worker a decent standard of living.
While most big corporations that employ a low-wage workforce are highly profitable, there are some small businesses that cannot afford an increase in the minimum wage to $15. Yet workers at these business should make a living wage just like everyone else. The government, which currently spends billions on handouts and tax breaks for giant multinational corporations such as Boeing and Goldman Sachs, could cut off the welfare to big business and instead provide necessary subsidies to small businesses to allow them to pay their workers at least $15/hour.
Won’t an increase in minimum wage cause inflation?
When the minimum wage was first instituted, and every time it has since been raised, there have been dire predictions that it would cause an immediate and steep increase in prices. In reality, these apocalyptic predictions have never been borne out.
A 1999 study found that a $1 increase in minimum wage to McDonald’s workers would add only 2 cents to the cost of a hamburger. If Walmart passed the entire costs of the new $12.50/hour minimum wage in Washington D.C. to consumers, the cost to the average Walmart shopper is estimated to increase by 1.1% per shopping trip.
But why should that be necessary? Instead, the increased costs of paying their workers should come from reducing their already extravagant profits.
Why Seattle? Doesn’t Washington State already have the highest minimum-wage in the country? Isn’t $15/hour a big jump?
It is true that Washington state currently has the highest minimum wage in the country. What this demonstrates, however, is not a lavishness of wages here, but rather the abysmal standard of living faced by tens of millions of hard-working people nationwide. A full-time job at Washington’s minimum wage fetches about $18,000/year, far less than necessary to meet basic expenses.
A more useful benchmark is a living wage. The Alliance for a Just Society defines living-wage jobs for Washington state, assuming full-time hours, as $16.13/hour or $33,544 annually for a single adult. Those figures would rise to $28.71/hour or $59,715 a year for a household of one adult and one child, and $29.42/hour or $61,188 a year for a family of four with one adult working. Keep in mind, many low-wage workers are unable to get full-time employment.