Living on the Edge of a Permanent Fiscal Cliff: Minimum Wage Workers See Few Gains

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Analysis Law and Policy

Living on the Edge of a Permanent Fiscal Cliff: Minimum Wage Workers See Few Gains

Sheila Bapat

While the "fiscal cliff" dominated the news ad nauseum, ten states quietly increased their minimum wage, effective January 1. A whopping 59 percent of all minimum wage earners are women.

Tax cuts for middle class workers may help many American families’ bottom line, but jobs that pay better help, too. And while “fiscal cliff” battles dominated the news over the New Years holiday, ten states throughout the country quietly increased the minimum wage for their state’s workers, effective January 1.

Salon reported on New Years Eve that ten states increased their minimum wage on Tuesday. Some states increased their minimum wages just a smidge, anywhere from 10 cents to 35 cents per hour. Most of these states increase their minimum wage automatically each year to keep up with the cost of living. But Rhode Island hadn’t bumped up its minimum wage in five years—the state finally passed a law this year increasing the state’s minimum wage from $7.75 from $7.40 this year. Washington State increased its minimum wage to $9.19 per hour—the highest minimum wage of all states and nearly two dollars higher than the federal minimum wage. In San Francisco, the city with the highest cost of living, the minimum wage is $10.55. (In states or cities where the minimum wage differs from the federal minimum wage, workers are entitled to the higher of the two.)

Who are the nearly one million American minimum wage earners who will benefit from these increases? The Economic Policy Institute tells us that 59 percent are women. Most of those women are over the age of 20. And according to the National Employment Law Project (NELP), workers in service occupations, including those who toil in the domestic sphere, are most affected by pay-scales for minimum wage jobs: “Fast-growing low-wage jobs like home care are disproportionately held by female and older workers.”

We know women tend to earn less than men in general, but NELP has further damning data about who are among the lowest earning Americans and what this means for women’s economic status overall. According to NELP’s “Fast Facts” there is 64 percent chance that any given woman earns a minimum wage. By contrast, there is mere 4 percent chance that any given woman is a Fortune 500 CEO.

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Despite these minimum wage increases in ten states, many workers are still toiling in low-wage jobs: about 20 states’ minimum wages match the federal minimum wage, which is $7.25 per hour. Had the minimum wage kept pace with inflation over the last forty years, it would currently hover around $10.58 per hour.

Even more troubling: the federal minimum wage for tip earners (waiters and waitresses, nail salon workers, etc) is a mere $2.13 per hour. Women represent nearly two-thirds of workers in these fields.

According to a 1995 report from the National Bureau of Economic Research, the failure of the minimum wage to keep pace with inflation over the years has played a substantial role in deepening wage inequality for women. The National Women’s Law Center (NWLC) corroborated this finding in November 2012, stating that 7 of the 10 states with the narrowest wage gaps have minimum wages above the federal minimum wage. By contrast, most states with starkest wage gaps tend to have a minimum wage below $7.25 per hour. And, increasing the federal minimum wage to $9.80 “would boost annual earnings by over $5,100, enough to pull a family of three out of poverty.”

What are the chances of increasing the federal minimum wage across the board? Given the frustrating performance with regard to the “fiscal cliff”—a concocted concept that just makes Americans feel there is a crisis and is arguably resulting in bad policy—it is unclear what the next four years can accomplish with respect to transforming the economy in a way that benefits low wage and women workers. Will Obama advocate for a minimum wage increase? Given that Congress has only raised the federal minimum wage three times in 30 years and Republicans enjoy saying no to Obama, would they even pass an increase? Thus far President Obama has not stated a minimum wage increase is as an explicit priority for his second term, though advocates at NELP, NWLC and other economic justice groups are likely to push for it.