The nation’s lowest income earners can soon expect a pay raise for the first time in years. In the meantime, they have been effectively taking a pay cut as inflation and rising consumer costs have reduced the value of the relatively stable minimum wage. As the newly minted Democratic Party Congress works to lead the charge to raise the minimum wage at the federal level, they will find that many states and localities have beaten them to the punch. The majority of residents in the United States now live in areas that require higher minimum wages than the federal government’s minimum wage.
Opponents of a higher minimum wage argue that the cost of such a proposal outweighs the benefit that low income families would receive. They point to studies such as Joseph J. Sabia’s “The Effect of Minimum Wage Increases on Retail and Small Business Employment” for the Employment Policy Institute that show that a “10 percent increase in the minimum wage is associated with a 0.9 to 1.1 percent decline in retail employment and a 0.8 to 1.2 percent reduction in small business employment.” However, these concerns have not deterred voters and politicians alike from calling for minimum wage increases throughout the nation.
Representative Jesse Jackson Jr. of Illinois told the HPR that “Local `livable wage' campaigns and the recent ballot initiatives help Democrats and Republicans to understand that the American people are serious about raising the minimum wage.” An example of one of these successful campaigns can be found in Santa Fe, New Mexico, home to the nation’s highest minimum wage. Passing the Living Wage Ordinance wasn’t an easy task and the first attempt in 2000 failed. However, Mayor David Coss told the HPR that through a “powerful coalition of labor groups, the faith community, some small businesses and the immigrant community,” the issue “became a really great movement,” and the resolution was inevitably passed by the City Council in 2003 with 7 votes in support, 1 opposed. The Santa Fe Living Wage Ordinance increased the minimum wage to $8.50 beginning in 2004, and $9.50 in 2006.
Of the arguments that moved Santa Fe toward passing the Minimum Wage Ordinance, Mayor Coss added that “when employers don’t pay a living wage, then the community as a whole subsidizes that need.” After the first year the living wage ordinance went into effect in Santa Fe, Temporary Assistance to Needy Families caseload declined 9%. “Most effective was the organizing of the community, and the education of the community. We framed the issue as a moral question, and the faith community spoke very powerfully about the dignity of work.” Mayor Coss concluded by stating that, “If anything, raising the minimum wage has helped the economy and helped working families,” which shows us that “economic development in Santa Fe, or anywhere, does not require poverty.”
Elsewhere, even more dramatic steps have been taken. Through Proposition L, San Francisco not only raised the minimum wage to $8.50 in 2004, but indexed it with the local Consumer Price Index to preserve its value. The current minimum wage, effective January 1, 2007, is worth $9.14 an hour. In an interview with the HPR, Aaron Peskin, president of the local Board of Supervisors, attributed the 2003 passage of Proposition L to San Francisco’s high cost of living, the static condition of the state minimum wage and “a national minimum wage so anemic as to be virtually meaningless.” Proposition L passed resoundingly in 2003 with 60% of the vote, in spite of fierce local opposition from organizations such as the San Francisco Chamber of Commerce.
Aaron Peskin told the HPR that, “Contrary to the fears of naysayers at the time, San Francisco’s economy has grown by leaps and bounds.” Peskin acknowledges that “this fact does not mean causation,” but emphasizes that the threatened “negative economic impacts have not been realized at all.” This finding has been corroborated by researchers at the UC Berkeley’s Institute of Industrial Relations, which found that the new policy did not affect employment growth in local businesses, but that fulltime employment increased and job tenure improved, health insurance coverage remained stable, and that the policy did not spur business closures. Unfortunately for those dining out, they did find that relative to other restaurants east of the San Francisco Bay, the price of menu items increased approximately 3% more.
As the movement to increase the federal minimum wage comes to fruition, it has ultimately been up to each individual state and locality to decide whether or not to enact higher minimum wage laws. But it is probably because so many states and localities have decided to enact higher minimum wages that politicians on the national level are finding it easier to support minimum wage increases. Representative Jackson also came to this conclusion when he told the HPR that "Most change in Washington comes when the grassroots gets active. In fact,” he added, “it's almost impossible to move anything through Congress until the grassroots gets active.”
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