The minimum wage buys less than it used to

Noelle Swan
Spare Change News

At 24 years old, Michaud is not backpacking abroad, sharing an apartment with friends, or beginning to build a professional resume.

He is working 30 hours a week selling stuffed animals for $9 per hour in order to help his mother, a certified nursing assistant, support his three younger siblings. As it is, he says that his family lives from paycheck to paycheck. College has been out of reach for him and likely will be for his siblings.

And Michaud makes more than minimum wage.

The minimum wage in Massachusetts is currently $8 an hour. According to labor groups and several legislators, this rate, set back in 2008, is a far cry from a fair wage. Proposed legislation sponsored by Senator Marc R. Pacheco (D) of Taunton and Representative Antonio F.D. Cabral (D) of New Bedford would change that by incrementally increasing the minimum wage first to $9.50 per hour this July and then to $10 by July 2013.

Such an increase would be welcome news to not only the 127,000 Massachusetts wage earners currently earning the bare minimum wage, but also to nearly 200,000 additional low wage workers, like Michaud, earning less that $10 per hour.

“It’s becoming increasingly difficult to survive even with a decent middle class wage, forget about minimum wage,” says Senator Pacheco, who first introduced the bill to the Senate in January 2011. “We live in one of the highest-cost states in the country. We are seeing an increase in the wage gap in the state, and this is an attempt to control that gap.”

The cost of living in Massachusetts is higher than many other states. CNBC’s annual analysis of America’s Top States for Doing Business reported Massachusetts as having the tenth-highest cost of living.

However, the cost of doing business is equally high.

Raising the minimum wage could increase that burden, says Jon Hurst, long-time president of the Retailers Association of Massachusetts. “We need to think carefully in order not to put local employers and therefore local employment at a disadvantage in Massachusetts.”

Mandatory health care coverage and required overtime pay for Sundays already add state specific costs to doing business in Massachusetts.

Hurst worries that an increase in minimum wage will either force small business owners to reduce the hours of their employees or increase costs at a time when local businesses are struggling to figure out how to compete with low-cost online shopping alternatives.

Michael Kanter owns Cambridge Naturals, a natural product retailer in Cambridge’s Porter Square. He says he already pays all of his 15 employees at or above $10 an hour and attributes his low staff turnover to offering what he considers a respectable wage.

His business can support that rate of pay, though he recognizes there may be some that cannot without cuts in staffing or increasing prices.

Kanter sees a valid struggle on both sides. On the one hand, “people can’t afford to live at that rate of pay” ($8 an hour). On the other hand, “on a small business level you sometimes feel like you are getting beat up.”

Still, Kanter advocates for an increase in the minimum wage. “We have to figure out how to bring retailers along because we have to make it so that people can afford to live in society.”

Some argue that raising the minimum wage could be mutually beneficial to both employer and employee.

When low-income workers’ wages increase, so does their spending, which in turn boosts the local economy, according to a report published by the Economic Policy Institute, a non-profit, non-partisan think tank examining economic policy that impacts low and middle-income workers.

Representative Cabral — who co-sponsors the version of the bill currently being weighed in the House of Representatives — believes increasing the minimum wage could improve the economy in other ways as well.

Many earning minimum wage, especially single parents with two or more children, need supplemental assistance from the state’s many social service programs. In recent years, the state has been struggling to provide needed support to the increasing number of residents that qualify for assistive services.

“If someone works, they should be paid a wage that enables them to afford putting food on their table without having to apply for public assistance,” said Cabral.

For many single parents and dual earner families, that is not the case. Teetering on the poverty line makes it difficult to take steps to secure a better future for their children.

“When we talk about people making $8-10 per hour, higher education is not on the horizon because they don’t have the ability to make ends meet just with the basic needs of groceries, gas, getting to and from work, putting food on the table, and taking care of their children,” says Jason Stephany, spokesperson for MASSUniting, a local community and labor advocacy organization.

Stephany advocates for any increase in minimum wage, calling it long overdue. He adds that he hopes the legislature will also pass a second component of the legislation, which would require continued and automatic adjustments of minimum wage based on the Consumer Price Index, a measurement of cost of living increase issued by the Bureau of Labor Statistics.

Senator Pacheco says that he pushed for an automatic increase during legislative discussions leading up to the past three minimum wage increases, but each time, that portion of the bill is weeded out before being signed into law.

A failure to adjust minimum wage with inflation has been a consistent problem since the late 1960s, says Noah Berger, director of the Massachusetts Budget and Policy Center, a non-partisan organization that produces policy research, analysis, and recommendations as they relate to low- and middle-income workers.

“Over the last couple decades, incomes at the high end of the spectrum have gone up pretty dramatically, and middle incomes have gone up a little bit. Minimum wage has actually gone down,” Berger says.

MassBudget published a report earlier this month indicating in today’s dollars, a minimum wage earner in 1968 actually earned $5000 a year more than a minimum wage earner today.

Both Senator Pacheco and Representative Cabral say that they will continue to strive to bring the minimum wage back in line with inflation. If the Legislature fails to pass the bill this session, they say they will reintroduce it first thing next session.

NOELLE SWAN is a freelance reporter.