By Paul Cillo
posted
Jan 10, 2013
While stagnant wages and sluggish job growth continue to cloud
the post-recession recovery, there's a bright spot for Vermont:
approximately 11,000 of the state's lowest-paid workers got a raise
on January 1, as the state's minimum wage increased by 14 cents to
$8.60.
Thanks to a law signed by Governor Jim Douglas in 2005, the
state's minimum wage automatically adjusts every year to keep pace
with the rising cost of living - this key policy reform, known as
"indexing," has already been adopted by nine other states as well.
As a result, the wages paid to those Vermonters who wake up each
morning to do the hard work of cleaning office buildings, serving
food, and providing care for the elderly will not gradually erode
each year as the cost of basic expenses like food, gasoline, and
utilities continues to rise.
As the country debates how best to create jobs and accelerate
the economic recovery, our elected officials in Washington could
learn from the example that Vermont has set in addressing the
urgent problems of America's low-wage economy. After more than
three years since the official end of the Great Recession, average
wages are actually declining in real terms, even as workers
throughout the U.S. put in longer hours to help make ends meet. As
a result, workers with less disposable income are holding back on
spending, depriving local businesses of the sales revenue they need
to expand their operations. In a country where consumer spending
makes up 70 percent of the total economy, stagnant wages spell
limited growth and a continued weak recovery.
By contrast, the modestly higher wages received by low-paid
workers in Vermont this year will go right back into the economy,
generating economic growth as these workers put food on their
tables and raise their families. According to an analysis from the
nonpartisan Economic Policy Institute, Vermont's minimum wage
increase this year will boost the average affected worker's pay by
$240 per year, generating over $1.4 million in new consumer
spending.
While the value of higher wages for Vermont's low-paid workers
remains clear, those who oppose any increase in the minimum wage
still claim that higher wages will only slow job growth or burden
local businesses. These concerns find no support from the facts:
Indeed, businesses that pay fair wages to their employees
ultimately benefit from reduced turnover and higher worker
productivity, as their employees are spared from the struggle of
balancing multiple jobs in order to make ends meet.
In fact, the real strain on economic growth in today's economy
stems from the decision made by many national fast food chains and
big box retailers to inflate their profits by paying rock-bottom
wages, siphoning money out of local communities and impoverishing
the customer base needed to sustain economic growth.
And yet, while this year's 14 cent minimum wage increase will
mean a lot to workers that are struggling just to get by, the truth
is that Vermont's minimum wage remains well below the level needed
to ensure that full-time work provides a path out of poverty.
Contrary to myth, over 71 percent of workers benefiting from
Vermont's minimum wage increase this year are adults over the age
of twenty. Sixty-five percent of these workers are putting in more
than 20 hours per week, and 42 percent have at least some college
education. When large numbers of skilled adult workers find
themselves relying on the minimum wage to make ends meet, then a
national response is required in order to preserve the American
Dream of upward economic mobility.
Congress has only acted three times in the last thirty years to
raise the federal minimum wage. It's time for a new level of
leadership. It's time for Congress to learn from Vermont's example
by raising and indexing the minimum wage.
Paul Cillo is President of Public Assets
Institute a nonpartisan nonprofit in Montpelier that promotes sound
budget, tax, and economic policies that benefit all
Vermonters.
