Position – Minimum Wage and “Right to Work” Laws

Members of Women’s Voices voted to approve a position paper on minimum wage and “right to work” laws. August 2013

Here is what we believe:

Changes in government economic policies are needed to stop the erosion of the middle class and to provide all citizens the opportunity to work and to earn a living wage that allows them to meet basic needs for food, housing, education, and health care. For several decades government policies have disproportionately benefited the wealthy and powerful while reducing middle-class families’ income. This year, fast-food workers’ demonstrations and President Obama’s call for a raise in the federal minimum hourly wage from $7.25 to about $9.00 indexed to inflation have highlighted the income disparity between the highest paid Americans and the rest. Two policy changes in particular can begin to correct this disparity and help all Americans: raising the minimum wage and protecting workers’ right to organize and bargain collectively.

While these are not the only corrections that are needed, we believe current events require that they be addressed now. Minimum wage and collective bargaining issues are linked and have concomitant implications. Low wages contribute to a widening income gap, which not only hurts individuals unable to reach or remain in the middle class but also strains federal, state, and local budgets. Beyond these concerns, economists caution that income inequality threatens the nation’s economic growth and leads to economic crises (Democratic staff of U.S. House Committee on Education and the Workforce).

Support for Raising the Minimum Wage

Our support for raising the minimum wage is based on the following facts:

In the late 1960s the purchasing power of the minimum wage was about $10.50 an hour in 2013 dollars. Congress has not acted to tie the minimum wage to inflation, so workers’ buying power has declined 25% in recent decades.
At $7.25 an hour, a person working 8 hours a day, 40 hours a week, 52 weeks a year makes $15,080 before taxes, 19% below the poverty line for a family of three. Misconceptions about low-wage workers, especially about their age and responsibilities, shape some arguments against raising the minimum wage. The following facts are often not acknowledged: Only 9.3% of low-wage workers are teenagers. More than 90.7% are age 20 or older (Economists in Support of a $10.50 Minimum Wage). More than 20% are the sole breadwinner for their family (Minimum-wage.org). Many workers complain they are held in part-time jobs that disqualify them for benefits. For example, in 2011 Wal-Mart announced it would no longer offer health insurance to employees who work fewer than 24 hours a week (Stainburn).
The recovery from the Great Recession of about 2007-2012 has not reduced economic inequality. The majority of jobs created since 2010 pay only $13.83 an hour or less (National Employment Law Study in Dreier). And since 2009, the incomes of the wealthiest 1% of Americans rose 11.2% while the incomes of the rest shrank by 0.4% (Dreier). In the past two decades, the richest 1% of Americans saw their incomes increase 57.5 %, compared to 5.8% for the bottom 99% (Dreier). In 2012 total wages fell to 43.5% of GDP (from 49% in 2001) while corporate profits rose to 11.1%, compared with an average of 8% during the previous economic expansion (Isidore). A 2013 study reports that in 2012, CEO pay was 202.3 times more than typical worker pay, “far higher than it was in the 1960s, 1970s, 1980s, or 1990s” (Mishel and Sabadish).
Raising the minimum wage is unlikely to lead to business bankruptcy and job loss. Most of the workers who would be affected by an increased minimum wage work in the retail and hospitality industries, jobs that cannot be shipped overseas. Moreover, studies of cities that have passed laws raising the minimum wage refute claims of dire consequences. For example, in 2003 San Francisco raised its minimum wage despite predictions of restaurant bankruptcies. In 2007 University of California economists found that the city’s restaurant growth exceeded that in neighboring East Bay cities and in 2012 the city’s unemployment rate of 6.5% was well below the state average (Dreier).
More than 100 economists disagree with the premise that businesses will not hire workers at higher wages: “[T]he weight of evidence from the extensive professional literature has, for decades, consistently found that no significant effects on employment opportunities result when the minimum wage rises in reasonable increments. This is because the increases in overall business costs resulting from a minimum wage increase are modest” (Economists in Support of a $10.50 U.S. Minimum Wage).
Low wages represent a hidden cost to all Americans. Workers who do not make enough to cover basic living costs rely on public assistance programs that are paid for by all taxpayers. A recent study estimates that a single 300-employee Wal-Mart Supercenter in Wisconsin costs taxpayers between $904,000 and $1,744,590 a year (Democratic staff of U.S. House Committee on Education and the Workforce). In essence, companies that hold wages down receive government subsidization that is not immediately apparent to taxpayers.
When wages are so low that Americans cannot spend enough to sustain businesses, lack of consumer demand poses a significant threat to business success. Lowering wages has the indirect effect of undermining consumer spending: every $1 million in wage cuts results in $850,000 less spending (Lafer, 2011). Wal-Mart’s recently reported sales losses appear to confirm this.

Opposition to Right-to-Work Laws

Because a decline in workers’ bargaining power (in January 2013 the Bureau of Labor Statistics reported that only 6.6% of private sector workers belong to labor unions) has occurred in tandem with the huge income disparities described above, Women’s Voices opposes right-to-work laws, based on the following evidence:

Right-to-work laws weaken unions, and thus reduce opportunities for workers to bargain for wages that support growth of the middle class. These laws bar unions from requiring employees to join unions in order to receive union representation, while allowing nonmembers to receive the benefits that unions obtain for their dues-paying members. Allowing nonmember “free riders” leads to a decline in union density.
Businesses do not flock to right-to-work states, as is often claimed. No definitive evidence supports these claims. Many economic factors affect businesses’ location choices (e.g., infrastructure, energy costs, transportation, availability of a skilled workforce, cheap labor in foreign countries (Lafer, 2011). There is evidence that although right-to-work states may have environments more attractive to businesses, workers’ wages are low, meaning that business owners stand to gain but the states’ economies do not improve (Stevans).
Weakening unions likely leads to lower wages. A 2011 Economic Policy Institute study found, after controlling for a large variety of variables, that wages in right-to-work states are 3.2% lower on average than in non-right-to-work states (Gould and Shierholz). In 2012, the Congressional Research Service, citing data from the Bureau of Labor Statistics, reported that the average wage in a right-to-work state was $42,465, compared with $49,495 in other states (Dimonda et al.).
Weakening unions affects all of a state’s workers, not only those covered by unions. Right-to-work states have lower rates of employer-sponsored health insurance and pensions. Economic Policy Institute researchers found that in states where unions are strong, compensation of all workers is higher because nonunion employers face pressure to match union standards (Gould and Shierholz).

We Must Speak Out

All members of society benefit when everyone in the workforce has the opportunity to prosper. When a whole section of the population is struggling, it weakens all of us. To keep our nation strong, we need a strong economy supported by a healthy workforce. But the battle for workers’ rights will be difficult, despite evidence that most Americans support raising the minimum wage (Dreier). Dr. Peter Dreier, a distinguished professor of politics at Occidental College, warns that business lobbying groups have spent large amounts in campaign contributions and lobbying, including funding misleading studies by conservative economists.

To ensure that all citizens have a fair say in workplace issues, we urge Women’s Voices members to take an active role in educating voters and politicians as the Missouri legislature considers right-to-work bills. These bills resemble model legislation distributed by the American Legislative Exchange Council (ALEC), a conservative lobbying group that receives most of its funding from corporations and trade associations, as well as from billionaire brothers Charles and David Koch. Because of its wealth, we are concerned that ALEC has undue influence in Missouri.

We also urge our members to speak out to Wal-Mart. Despite decreasing demand for products, Wal-Mart, the nation’s largest retailer, with a workforce of 1.4 million Americans, continues to operate in a manner that keeps wages low. A 2005 New York University study found that Wal-Mart employees earn an average of 28% less than those of other large retail companies (Democratic staff of U.S. House Committee on Education and the Workforce). In addition, Wal-Mart’s business model includes a well-documented pattern of obstructing union organizing (Democratic staff of U.S. House Committee on Education and the Workforce). Because of its size, Wal-Mart could follow the example of Costco and other companies and become a model for paying wages that would spur economic growth and job creation.

“If we want the fruits of economic growth to benefit the vast majority, we will have to adopt a different set of guideposts for setting economic policy, as the ones in place over the last several decades have served those with most income, wealth, and political power.” -Lawrence Mishel, president, Economic Policy Institute

Sources

Ed Crego, George Munoz, Frank Islam, “Minimum Wage, Maximum Dissent,” www.huffingtonpost.com, June 17, 2013.

“Connecting Dots,” Editorial, St. Louis Post-Dispatch, August 25, 2013.

Democratic staff of the U.S. House Committee on Education and the Workforce, “Low-Wage Drag on Our Economy: Wal-Mart’s low wages and their effect on taxpayers and economic growth,” May 2013.

Alessandra Dimonda et al., “Myths and Facts about ‘Right-to-Work’ Laws,” MediaMatters for America, December 12, 2012. Peter Dreier, “Raising the Minimum Wage is Good for Business (But the Corporate Lobby Doesn’t Think So),” www.huffingtonpost.com, February 23, 2013.

Economists in Support of a $10.50 U.S. Minimum Wage, July 2013, http://backtofullemployment.org/2013/06/21/economists-in-support-of-a-10-50-u-s-minimum-wage/

Elise Gould and Heidi Shierholz, “The Compensation Penalty of “Right-to-Work Laws,” Economic Policy Institute, February 17, 2011.

Steven Greenhouse, “Our Economic Pickle,” The New York Times, www.nytimes.com, January 12, 2013.

Chris Isidore, “Corporate profits hit record as wages get squeezed,” CNN Money, December 4, 2012.

Gordon Lafer, “‘Right to work’: The wrong answer for Michigan’s economy,” Economic Policy Institute, September 15, 2011.

Gordon Lafer, “Right to Work: A Failed Policy: A New Hampshire update,” Economic Policy Institute, February 7, 2012.

Minimum-wage.org, “Raising the Minimum Wage: Pros and Cons.”

Lawrence Mishel, “Declining value of the federal minimum wage is a major factor driving inequality,” Economic Policy Institute, www.epi.org, February 21, 2013.

Lawrence Mishel and Natalie Sabadish, “CEO Pay in 2012 Was Extraordinarily High Relative to Typical Workers and Other High Earners,” Economic Public Policy Institute, June 26, 2013.

Nicole Pasulka, “Right-to-Work Laws, Explained,” Mother Jones, www.motherjones.com, March 16, 2012.

Brad Plumer, “What do ‘right-to-work’ laws do to a state’s economy?” The Washington Post, www.washingtonpost.com, December 10, 2012.

Samantha Stainburn, “Wal-Mart won’t offer health insurance to some part-time workers,” GlobalPost, October 21, 2012.

Lonnie Stevans, The Effect of Endogenous Right-to-Work Laws on Business and Economic Conditions in the United States: A Multivariate Approach,” Review of Law & Economics, vol.5, issue 1, 2009.