PI Original Ellyn Fortino Thursday January 9th, 2014, 1:56pm

Minimum Wage Lights Up Guv's Race, Study Shows Increase Could Bring 5 Million Out Of Poverty (UPDATED)

About 4.6 million Americans could emerge from poverty if the federal minimum wage was bumped up to $10.10 an hour, a recent study by a University of Massachusetts-Amherst economist shows. Progress Illinois takes a look at the national study as well as the minimum wage battle that has recently cropped up in the race for Illinois governor. 

Do not display thumbnail

As workers across the nation have increasingly made their voices heard in the call for an increase in the minimum wage, the issue has taken center stage in the Illinois governor's race this week. Millionaire venture capitalist and Republican candidate Bruce Rauner recently stated that he would like to see the minimum wage decreased to the federal level, while his GOP counterparts say they do not see a need for an increase.

But the findings of a new study show that an increase might indeed be a necessity considering the direct impact it could have on reducing poverty. According to the report by a University of Massachusetts-Amherst economist, some 4.6 million Americans could emerge from poverty if the federal minimum wage was bumped up to $10.10 an hour.

A minimum wage increase from the current $7.25 to $10.10 would reduce the poverty rate among non-elderly Americans by 1.7 percentage points, economist Arindrajit Dube asserts. Accounting for longer-term effects, the proposed minimum wage hike would help lift some 6.8 million non-elderly Americans out of poverty.

"For the average family near the 10th percentile in 2013, this translates into an annual increase of $1,700," Dube wrote. "Therefore, the increase in the federal minimum wage currently under consideration can play a modest but important role in reducing poverty and raising family incomes at the bottom."<--break->

In the study, Dube explained that the poverty rate among non-elderly Americans jumped 3.4 percentage points during the Great Recession, and the higher wage, if approved, could cut that number in half, if not more.

He did note, however, that focusing on other targeted policies, including cash transfers, the Supplemental Nutrition Assistance Program (SNAP) and "programs that raise the employment rate for highly disadvantaged groups," could be even more effective at reducing poverty than a minimum wage increase.

The federal proposal analyzed in Dube's study is the Fair Minimum Wage Act of 2013, S. 460 and H.R. 1010. U.S. Sen. Tom Harkin (D-Iowa) and U.S. Rep. George Miller (D-California) jointly introduced the bill back in early March.

If passed, the bill would raise the current federal minimum wage of $7.25 to $10.10 in three $0.95 increments over two years' time. The legislation also calls for future minimum wage increases to be tied to inflation. Additionally, the base wage for tipped workers, which is currently $2.13 an hour, would be 70 percent of the overall minimum wage.

The federal minimum wage has not seen an increase since 2009, while the tipped minimum wage has been frozen for more than two decades. Twenty-one states, including Illinois, currently have minimum wages exceeding the federal $7.25 requirement.

Other studies have also provided similar findings about how the Fair Minimum Wage Act could help battle poverty. In June, Restaurant Opportunities Centers United issued a report showing that the $10.10 proposal would lift nearly six million workers out of poverty, impacting more than half of the 10.4 million individuals who were classified as the “working poor” in 2011.

The Harkin-Miller bill was introduced just weeks after President Barack Obama's 2013 State of the Union address, during which he called for a $9 an hour federal minimum wage by 2015, an idea popular among most Americans. For example, a November Gallup poll showed that more than three-quarters of Americans support a $9 an hour federal minimum wage.

Also in November, the New York Times reported that Obama is in favor of the $10.10 minimum wage hike. The proposal, however, has been defeated once in the House. By a 233 to 184 vote, with all Republican House lawmakers voting 'no', the lower chamber shot down an amendment back in mid-March from U.S. Rep. Miller to the SKILLS Act that would have raised the minimum wage to $10.10.

House Speaker John Boehner (R-OH, 8) and other critics of a higher wage argue that the move would make it more difficult for smaller businesses to hire employees.

The Economic Policy Institute, however, found that U.S. economic activity would increase by about $22 billion, with some 85,000 new jobs being created, just during the phase-in period of the proposed increase to $10.10.

Here in Illinois, more than 1.1 million workers would be either directly or indirectly affected if the federal minimum wage were increased to $10.10 an hour over the next two years, according to the Economic Policy Institute report. Most of the impacted workers in Illinois, or 34.7 percent, would be between the ages of 20 and 29. Contrary to popular belief, just 13.8 percent of teen workers in the state would see a wage increase if such a law were passed. At the national level, Americans younger than 20 also make up the smallest slice of the pie at 12.5 percent. The average American worker who would be impacted by a higher minimum wage is 35 years-old, according to the report.

Now that Congress returns to work this week, the White House is set to make the minimum wage increase a focus of its 2014 agenda, among other issues. The question now is whether Republicans will come around to the idea.

Minimum Wage Debate Heats Up In Illinois

Although Illinois' minimum wage is higher than the federal government's, Gov. Pat Quinn, a Democrat, is in favor of raising it to $10 an hour. He initially called for  a $10 hourly minimum wage during his 2013 State of the State address and has been promoting the idea as part of his 2014 re-election campaign. "No one in Illinois should work 40 hours a week and live in poverty," the governor has stated.

However, his Republican opponent Rauner said in remarks last month during a gathering with business leaders in the Quad Cities that he would "advocate moving the Illinois minimum wage back to the national minimum wage."

"I think we’ve got to be competitive here in Illinois,” he said. "It’s critical we’re competitive. We’re hurting our economy above the national [level]. We’ve got to move back to the national.”

The comments have sparked a fury of responses from community and labor groups in Illinois. Chicago Teachers Union President Karen Lewis, for example, challenged Rauner via Twitter "to live on $7.25 for 90 days, without government assistance, access to his overflowing bank accounts and the financial support of his family and friends."

Katelyn Johnson, executive director of the community group Action Now, also took Rauner's policy proposal to task in a statement, which read in part:

At a time of rampant economic hardship and income inequality, it is completely irresponsible for any candidate for office to take a callous stance against lifting the minimum wage for low-income families who are struggling--and often failing--to meet their families' basic needs for food, housing, clothing and medical care

It is especially shocking that a billionaire candidate, like Bruce Rauner, would actually suggest that those minimum wage workers, and their families whom they support, should earn less and be forced to live on $15,000 per year, instead of $17,000.

Rauner attempted to set the record straight later on Wednesday, telling the Chicago Sun-Times that he didn't mean to allude that he was for bumping down the state's hourly minimum wage by $1.

“I never said that. I said we should tie the minimum wage in Illinois to the national minimum wage. I didn’t use numbers. I didn’t use $7.25. I didn’t say any of that,” Rauner told the newspaper. “I said I want Illinois competitive with other states."

“In that context, I was flippant and short in that forum in the Quad Cities. I should’ve said, and this is the important point, I support increasing the federal minimum wage. I didn’t say that in that forum. It was a mistake. It’s the context of me tying the Illinois minimum wage to the national minimum wage.”

All three of Rauner's Republican opponents in the March 18 primary, including Republican state Treasurer Dan Rutherford, State Sen. Bill Brady, (R-Bloomington) and State Sen. Kirk Dillard (R-Hinsdale), are against raising Illinois' minimum wage, but none of them have said they want the current wage rolled back. 

Brady said in a statement Wednesday that he supports "a moratorium on increases in the Illinois minimum wage until the federal rate has caught up with ours."

Meanwhile, State Rep. Art Turner (D-Chicago) recently introduced a bill, HB 3718, in October that would raise Illinois' minimum wage from $8.25 to $10.65 by July 2016. The bill, pending in the House Rules Committee, currently has 14 co-sponsors, including State Rep. Barbara Flynn Currie, majority leader of the Illinois House.

According to Raise Illinois, a grassroots coalition fighting for a state minimum wage increase, more than 100,000 Illinoisans are currently working full-time, yet they still live in poverty.

"The United States its starting to look like a Third World country because the rich are so rich and the poor are so poor in comparison," Aileen Kelleher, a spokeswoman for Raise Illinois, told Progress Illinois. "CEOs make a few hundred times more than their employees, and that type of inequality, it doesn't help our economy. It doesn't help our schools. It doesn't help violence and crime. It really is just destroying our communities. Raising the minimum wage connects to so many facets of American life."

In addition to helping workers, hiking the state's minimum wage to $10.65 could also provide a $2.5 billion boon to Illinois' economy, the group says.

"It only makes sense to raise the minimum wage to not only keep families out of poverty but to reduce violence, to increase educational outcomes [and] bring vitality back into our neighborhoods," Kelleher added.

Other bills to raise the state's minimum wage haven't gained much traction in previous legislative sessions, so it remains to be seen whether the idea will take off in Springfield this time around.

UPDATE 1 (3:35 p.m.): A new video shows where Rauner really stands on the issue of increasing the minimum wage. Click through for the latest.

Comments

Log in or register to post comments