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KELLY: All work and no pay

The Virginia legislature should raise the minimum wage

As the Virginia House of Delegates opens for a new legislative session this year, it does so in the face of exceedingly disparate income inequality within the state. Virginia currently ranks among the states with the highest levels of income inequality and its bottom 20 percent experienced no growth in household income from the late 1990s to mid-2000s. With this in mind, on Jan. 5 Del. Joe Morrissey, D-Henrico, introduced a bill that proposed to raise the minimum wage in the state from $7.25 to $8.50. His proposal comes in light of a recent uptick in the national movement for greater income equality. The minimum wage debate resurfaced with heightened seriousness on the national level when President Obama indicated his commitment to make raising the federal minimum wage a key issue in the upcoming year.

Be it on the federal or state level, the minimum wage debate invariably centers on Democrats arguing that a wage increase will result in economic growth by shifting money from companies to low-income households while Republicans often counter that such an increase would result in job cuts. Now, I’ll be the first to admit that raising the minimum wage is not the sole solution to income inequality. But it’s a start. A recent survey by Bankrate.com has indicated that 76 percent of Americans are living paycheck-to-paycheck. This suggests that the majority of money earned through increased wages will be recycled back into the economy, not saved. But raising the minimum wage could also prove to be a crucial step toward providing citizens with increased income that could be saved, thereby providing additional financial security for costs that often require saved money, such as medical expenditures. It seems evident that a minimum wage increase may result in marginal improvement in economic growth.

Arguments against the minimum wage often employ slippery-slope logic. For instance, some may argue that if raising the minimum wage $1.50 or $2.00 is a good idea, why not raise the minimum wage to $50 or even to $1,000 an hour? The simple, perhaps obvious, answer is that it is not economically feasible for the person working the drive-through to be earning $40,000 per week. Another argument against raising the minimum wage holds that minimum wage jobs are not supposed to be long-term jobs but rather temporary, start-up positions. It may be easy for economists to make such an argument, but the reality is that many Americans are stuck in a position without marketable skills that can place them above a minimum wage job. Admittedly, this quandary is symptomatic of an ailing economy and education system, yet raising the minimum wage is one of the small steps that the state can take to help employees break free from their current economic entrapment.

The more common argument from the right against minimum wage hikes—that they will result in job cuts—does carry some merit. At some level, making companies and small businesses pay low-wage workers more may lead to less hiring and more automation of tasks in order to save money. However, a study done by economists Alan Krueger and David Card in New Jersey reaches a different conclusion. Their study observed how raising the minimum wage affects employment in the fast food industry. Although traditional economists often argue that minimum wage hikes will result in job cuts, this study found the opposite: an increase in employment. Even when Krueger and Card compared their results with employment in Pennsylvania, they found that New Jersey firms grew relative to their Pennsylvania equivalents. This study remains a subject of contention among economists, as you might expect.

Economics is a difficult (not to mention dismal) science, and when results like those of the Krueger and Card study occur, they indicate that the predictive accuracy of economics as a whole should be taken with a grain of salt. It seems that the common argument from the right, that minimum wage hikes lead to job cuts, is not quite as resounding as it appears. The state needs to take action to address the fact that its minimum-wage earning citizens are being paid at a rate that falls well below what is usually referred to as a “living wage.” One year’s earnings at the minimum wage currently total to $15,080—such low earnings, barely above the poverty line, make acquiring enough food and water a daily struggle. Many sources place the yearly earnings required for economic security (for a single worker) at approximately $30,000. Many minimum wage workers are not simply struggling to achieve economic well-being, they are fighting for survival.

It is reasonable to support an increase in the state’s minimum wage, especially since recent polls indicate that a majority of Virginians favors a similar increase in the federal minimum wage. Though raising the minimum wage is not a wholesale solution to income inequality, it will provide the low-wage earners of Virginia with increased bargaining power in the economy, which they will need if they are to ensure a better future for their families.

Conor Kelly is an Opinion columnist for The Cavalier Daily. His columns run Tuesdays.


Published January 13, 2014 in FP test, Opinion

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