About a quarter of a million Minnesota workers had cause to celebrate earlier this week, as the state’s minimum wage increased. However, millions of workers in Minnesotans and other states are still stuck in low wage jobs that do not adequately compensate them for the essential work they do. While Minnesota workers are doing modestly better than workers in most other states, the Star of the North is not immune to this pernicious trend of inadequate and stagnant wages.
A new report from the Economic Policy Institute (EPI) and Oxfam America entitled Few Rewards: An Agenda to Give America’s Working Poor a Raise examines the plight of workers who earn wages from $10 to $15 an hour. The report notes that, “Even at $15, a worker with a family is only slightly above the poverty line ($24,300 for a family of four).” The report is based on 2014 American Community Survey data provided by the Minnesota Population Center at the University of Minnesota.
The current federal minimum wage has been frozen at $7.25 for the last seven years. With the decline in the purchasing power of the dollar over time due to inflation, a frozen minimum wage translates into shrinking earnings for many workers. According to the EPI/Oxfam report,
“Today the value of the wage is about 25 percent lower than its peak in 1968 (adjusted for inflation), despite continued increases in worker productivity.”
The federal minimum wage for tipped workers has been stuck at $2.13 an hour since 1991.
Prior to August 2014, Minnesota was one of only a few states with a minimum wage even lower than the federal minimum. Thanks to legislation enacted during the 2014 session, the minimum wage was increased to $8.00 per hour for large employers (i.e., businesses with annual gross volume of sales made or business done of $500,000 or more) and $6.50 per hour for small employers, effective August 1, 2014. The 2014 law included two annual adjustments to Minnesota’s minimum wage; the second of these annual adjustments, which went into effect August 1, increased the minimum to $9.50 per hour for large employers and $7.75 for small employers. Beginning January 1, 2018, these minimums will be adjusted annually based on the rate of inflation.
However, Minnesota’s minimum wage does not apply to “exempt employees,” which includes bona fide executive, administrative, or professional workers, babysitters, employees subject to the provisions of the U.S. Department of Transportation (drivers, drivers’ helpers, mechanics, and loaders), and various other employees. In addition, lower hourly minimums apply to youth workers (under age 18) and selected “trainees.” Finally, after 2017, governors—acting through the Commissioner of Labor & Industry—have broad discretion to suspend the annual minimum wage inflation adjustment if they feel that there is potential for a significant downturn in the state’s economy.
Even at $9.50 per hour (the new Minnesota minimum wage for large employers), wages are not sufficient to lift most households out of poverty. In Minnesota, 38.8 percent of all workers—nearly one million people statewide—make less than $15 per hour; over half of these workers—over 500,000 people—make less than $10 per hour, based on Minnesota-specific data from the EPI/Oxfam report. Furthermore, just over two million Minnesotans reside in families supported by a low wage worker making less than $15 per hour and over 1.1 million reside in families supported by a worker making less than $10 per hour. (The total statewide population is approximately 5.4 million.) Slightly more than a quarter of Minnesotans residing in low wage households are children.
Approximately 291,000 Minnesotans residing in these low-wage working households live in poverty; in fact, slightly over half of all Minnesotans living in poverty reside in these low-wage households. Another 555,000 Minnesotans who reside in low-wage household live “near poverty,” defined as 200 percent of the poverty level. In total, one in five of the 4.2 million Minnesotans who reside in a working family live in or near poverty.
Other findings gleaned from the EPI/Oxfam report include:
- Women are disproportionately represented among low wage workers. In Minnesota, 43.0 percent of women workers make $15 per hour or less, compared to 34.5 percent of men.
- People of color are also disproportionately represented. In Minnesota, 42.7 percent of Asian American workers, 55.8 percent of black workers, and 65.3 percent of Hispanic workers make $15 per hour or less, compared to 35.6 percent of white workers.
- Contrary to popular misconceptions, the overwhelming majority of low wage workers are not young. In Minnesota, less than a third of all workers making $15 per hour or less are under age 25 and over half are in the prime earning years of 25 to 54.
- Paid sick leave is becoming increasingly rare in today’s economy; 43.3 percent of all private sector workers in Minnesota lack access to a single day of paid sick leave.
- “The US is the most unequal large rich country in the world.” In this regard, Minnesota resembles the rest of the nation, with an average income among the top five percent ($355,177) that is over 24 times greater than the average income among the bottom 20 percent ($14,750).
The Oxfam/EPI report puts forth a fourfold agenda to address the problem of sub-standard wages: (1) raise the federal minimum wage, (2) provide workers with access to earned sick leave, (3) protect workers’ overtime pay, and (4) expand the Earned Income Tax Credit, which targets tax relief to low-income working families. Yet another approach to resolving the problem of inadequate wages is to strengthen the ability of labor to organize and collectively bargain for better wages and benefits.
Minnesota’s 2014 minimum wage law was a step in the right direction in terms of easing the economic plight of low wage workers in the state, but even at the current rate of $9.50 per hour for large employers, it is insufficient to lift many working households out of poverty. Increasing wages for low wage workers will benefit not only workers at or below the current minimum wage, but will also push the wages higher for those above the minimum as wage scales in all job markets are pushed upward. Increasing the minimum wage is not just “a nice thing to do for poor people,” but is an essential step toward restoring a prosperous economy in which workers can afford to purchase the goods and services they produce.