Government Influence on National Minimum Wage

As of July 24, 2007 the Fair Labor Standards Act (FLSA) has increased the federal minimum wage to $5.85/hr . This is a step in the right direction, but seeing that thirty states have had to raise their minimum wage over that, it obviously says that there is still much work to be done. In states that have a lower minimum wage or no minimum wage at all there is a higher poverty level than in the states that have raised the minimum wage. For example Georgia has an hourly wage of $5.15/hr, it also has a poverty level of 14.4% of the population under the federal poverty line
This shows how Georgia needs to raise their minimum wage to counter the cost of living wage there. In Missouri the minimum wage is $6.50/hr , and their poverty level is 11.5% , that’s a whole 2.9% less than Georgia! The rule of thumb is that if you raise a minimum wage anywhere companies won’t hire as many people and the unemployment rates with go up, but that’s not true. In Georgia the unemployment rate is 4.7% , but in Missouri it is 4.4% . It may only be .3% less, but at least it’s something. If this is something you wish to talk to your State legislator about here is a website where you can find your state legislator to get their contact information.
Another thing that could be done is that the federal government could make the state governments pay at least the federal minimum wage, and increase it as the federal one increases. For now the plan is for the federal minimum wage to go up seventy cents every year until the year 2009 when it will hit $7.25/hr. This would allow states who have wages about the federal minimum keep their wages, but the states which don’t must raise them. Also the federal government could cover more people with the FLSA. Currently, some people that are not covered by it are teachers, fishermen, newspaper delivery men, and many more. There are also a number of professions that are partially exempt also . All these professions could be put under the wing of the FLSA, and maybe more people will pick up jobs that require not as much training as a job that would pay well.

Personal Influence on National Minimum Wage

If you own a small business or a big business one thing you could do to alleviate the gap between what is being done and what needs to be done is to raise your wages. This is a gamble, however, because then you might need to lay off workers, but on the other hand, you might get more workers to turn out a bigger profit and expand your business. The odds are on you side, as mentioned in the previous article, Missouri’s unemployment rate is 4.4%, with a minimum wage of $6.50/hr, while Georgia’s unemployment rate is 4.7%, with a minimum wage of $5.15/hr. This shows that there is a greater chance of more workers coming than going out if you raised you wages.
Also you could write to your Congressmen. Currently only the District of Columbia, Hawaii, Massachusetts, Minnesota, and New York have bills that are currently dealing with the gap between the minimum wage and the living wages of their states. If you wish to have a voice in this matter contact your state legislators to inquire more about the minimum wage using the link provided in the previous articles. If you wish to go higher in the political system here is a site that can direct you to your congressmen and senators.
If this situation continues like this, unchecked, there could be horrible consequences. In Kansas, minimum wage is at $2.65/hr, the projected unemployment rate for 2008 is 4.8%. Right now it is at 4.5%. This shows how unemployment could go up and up until there is something like the Depression of the 1930’s. This would prove fatal to America’s economy, with it being in its fragile state right now. Also as inflation goes up the living wage will go up, and if there is a gap now between living wage and minimum wage, there will certainly be a big one then. Some states have foreseen this and prepared to raise the minimum wage, like in Kentucky with its minimum wage at $5.85/hr right now, but in 2008 they will raise it to $6.55/hr and in 2008 they will raise it to $7.25/hr. Some states, however, have not planned to raise their minimum wage, like the states mentioned in this and previous articles, Georgia and Kansas.

http://www.dol.gov/compliance/guide/minwage.htm#who
http://www.dol.gov/esa/minwage/america.htm#content
http://www.ncsl.org/programs/employ/livingwage2006.htm
http://www.fdic.gov/bank/analytical/stateprofile/Atlanta/Ga/ga.xml.html
http://www.acfb.org/advocacy_and_education/facts_and_links/GeorgiaPovertyHungerData.pdf
http://www.heartlandalliance.org/maip/documents/CensusFactSheet2007Missouri.pdf
http://www.dra.gov/media/article_detail.aspx?articleID=67
http://www.ncsl.org/public/leglinks_search.cfm

The Current Situation- National Level

(2)

(1)
This map shows each state's minimum wage compared to the Federal minimum wage of $5.85 an hour. As the map shows, most states are above the federal's wage, such as Hawaii and New York, some have the same and only a few have minimum wages below the federal minimum wage, such as Kansas. Like the situation in Hawaii, the minimum wage in all states, whether it is $7.25 or $5.85, cannot support a family of 2 or 3. According to the Economic Policy Institute(EPI), a minimum wage worker working 40 hours a week for every week of the year, would earn $10,712, which would put his/her family nearly 40% underneath the national poverty line, which is $17,170 for a family of three. This is a drastic problem in our nation which needs to be addressed very soon, because thousands of American families are suffering from this problem every day. For a family of two, living off a minimum wage, their salary will still be about $4000 behind the current poverty level, a slight improvement from a family of three, but still a problem that needs addressing(2). The graph above the map shows the current poverty lines for families of two and three, and the minimum wage line.
Before July 24 of this year, the last time the federal minimum wage was raised was in 1997, the longest stretch of not being raised since 1938 when minimum wage was first created. Also, minimum wage at this time has the lowest 'real' value in 50 years. Real value basically is the value of money with inflation factored in. Inflation can decrease the spending power of money or make prices of goods rise. By not continuing to raise the federal minimum wage, the government chooses to leave low-wage workers in the dust, because prices rise and the spending power of their money lowers, yet they are still stuck with the same wage. The government has been trying to help low-wage workers through others ways, not just by raising the minimum wage. They offer an earned income tax credit(EITC) which lets families with two or more children who earn a minimum wage salary a tax credit of $.40 to every dollar, which comes out to about $4000 a year. This definitely helps struggling families, yet in most cases it isn't enough(2).
There are many supporters of raising the national minimum wage to $7.25. EPI's studies show that by raising the national minimum wage from $5.85 to $7.25 an hour many low-wage earning families would live above the poverty line rather than below it. Congress at this time is considering a bill that would raise the national minimum wage to $7.25 an hour, which would raise it gradually until $7.25 sometime in 2009. Opposition against the national raise to minimum wage say that if we were to raise it, many businesses would lose profits because they would have to pay their workers a lot more, and then eventually lay-off some employees, thus raising the unemployment rate. Instead, some economists suggest a tax-incentive to businesses that will pay their employees a higher wage. By offering tax cuts to these businesses, workers are able to receive a higher paycheck and their employers receive tax cuts for paying them more (3).
The current situation of minimum wage in the United States is certainly looking dire. At this time, the federal minimum wage cannot support a family of two or more children, the exception to this are families that live in states that have a high minimum wage, such as Hawaii or Washington. The earned income tax credit(EITC) tried to somewhat solve the increasing difference between the minimum wage yearly salary and the poverty line(about $10,000 to $17,000 yearly)(2). Many economists fully support the raise of the national minimum wage, from $5.85 to $7.25 an hour by 2009, arguing that this would bring the majority of low-wage families out of poverty. Opposers of raising it argue that raising the minimum wage would cause many businesses to struggle and have to lay off employees, something that no one wants to see. The government needs to analyze and figure out the opportunity cost of each option and weigh which one will be the best of America's citizens and economy.

1. http://upload.wikimedia.org/wikipedia/commons/b/b5/State_min_wage2006_copy.jpg
2. http://www.epi.org/content.cfm/webfeatures_snapshots_20070131
3.http://www.epi.org/content.cfm/webfeatures_viewpoints_minwage_tax_incentives_testimony_01102007

** For further information, http://www.epinet.org/content.cfm/issueguides_minwage is a fantastic site with opposing viewpoints on minimum wage. An excellent tool for anyone who wants a better understanding of minimum wage.

Part 2

Continuation of Part 1.

Where there's a way...

This video shows how hard it is for minimum wage workers on the Texas A&M campus.

History of Minimum Wage

The issue of minimum wage in Hawaii has been present since the development of its first sugar plantations, but the relatively recent increases in cost of living have created the disparity between a living wage and the minimum. The economy of Hawaii left its subsistence origins once developed countries (such as the United States and Great Britain) began taking an interest in its resources and looked to develop lucrative economy based on this. The interests of these early business people and companies did not include those of the worker. Hawaii had ideal growing conditions for sugar, and foreign companies quickly capitalized in the form of setting up a sugar plantation system.

The first sugar plantation was founded in 1835 on Kauai and for the next century the industry would dominate the economy of Hawaii. (2) Foreign interests had already acquired most of the ideal cane field land and were already in the process of obtaining cheap labor. (2)Supported by a strong demand abroad, more and more sugar plantations were created to keep up with the demand. As a result, the plantation owners grew extremely powerful as much of the common population, especially the increasing numbers of immigrants (mostly from Asia), worked in some way for the sugar industry. (1) The minimal government power or influence on the industry allowed companies to maximize profits by providing as little as possible for the workers. Wages for Asian immigrant workers forced their living conditions to extremely low levels, barely supporting, it at all, the migrant families. (1) Up until the annexation of Hawaii in 1898, the growing number of workers was subjected to the Masters and Servants Act (1850), a law which bound laborers to their duties and lack of benefits until their contract was fulfilled. This law helped prevent the development of labor organizations. (1) Improvements to the low wages were generally won as a “the result of a series of sporadic strikes organized along racial lines.” (2) Though wages improved, no official unions were able to form until 1935 and the New Deal’s Wagner Act.

Though Hawaii became a US territory in 1898, the Big Five sugar companies (Castle & Cooke, Alexander & Baldwin, C. Brewer & Co., Amfac and Theo H. Davies & Co.) that had developed still held the power over Hawaii’s economy and therefore its wages. Roosevelt’s new deal instigated the minimum wage law (Federal Labor Standards Act) and protected the rights of workers to unionize. (3) This government upheaval allowed workers to demand higher wages and garner benefits from unions without fear of losing their jobs. The labor climate would improve but the minimum wage of the islands would drastically lag behind that of the west coast, which had similar costs of living. Statehood would bring another victory for laborers, as well as a curse. Hawaii now had to fully comply with FLSA and therefore the Hawaii minimum wage met up with the federal one. (3) However, jet travel to the state sharply increased and tourist, retail and construction industries would slowly replace sugar. (2) This also led to a sharp increase in population, much of which was attracted to the new industries. The demand for land, and commodities from the mainland among the higher population, spiked the cost of living. The state minimum wage surpassed that of the federal to compensate, but it has generally lagged behind the high costs of living, leading to the current issue.

1. Beechert, Edward. Working in Hawaii: A Labor History. 1985. University of Hawaii Press
2. Hawaii Labor History. http://clear.uhwo.hawaii.edu/Lhistory.html. University of Hawaii.
3. A Short History of the Minimum Wage. http://www.hawaii.gov/labor/rs/6-14-05update/MIN_WAGE.HTM

The Current Situation- Local Level

As of January 1, 2007 Hawaii's minimum wage was raised to $7.25 an hour, from its previous standpoint at $6.75 an hour. Now, some people would say that this would solve the poverty in Hawaii, but this is not the case. Although Hawaii is number eight of all states for highest minimum wage, the cost of living in Hawaii is so steep that the minimum wage won' t be able to support families. The living wage in Hawaii is set around $9.43. This means that in order for a family to live above the poverty line in Hawaii, a wage of $9.43 per hour must be paid. The majority of the working class has to deal with the $7.25 an hour, and the problems that come with such a small paycheck and such high living costs.
The problem that Hawaii's workers and families face is that minimum wage cannot support a family of four. It will for a while, but eventually the family will be forced into poverty. Because it cannot support a family, many mothers and fathers are taking two or three jobs a piece just to take care of their family and to provide a suitable future for their kids. Minimum wage cannot support a family, it's a simple as that.
One reason for the expensive living in Hawaii is the housing prices, most houses that cost a million dollars here would only cost about 200-500 thousand on the mainland. These ridiculous housing prices really hike up the cost of living in Hawaii, and in turn, cause many families to struggle greatly. Also, because all of our goods have to be imported in, the costs of all those goods has to be raised. That's why buying local produced goods is sometimes a better choice than buying imported goods from the mainland or elsewhere.
Government intervention has helped the problem of minimum and living wage. They have raised the minimum wage of Hawaii a lot over the past few years, most recently from $6.75 to $7.25 in last January. But that is not enough. The government has to realize that the cost of living in Hawaii is extremely high, and in turn, they need to raise the minimum wage to meet that cost of living. The downside of increasing the wage is that small, local businesses sometimes won't be able to pay their workers it, so they will have to downsize some employees or even shut down business. The cartoon above illustrates this problem. The local population can also help reduce the gap between minimum wage and the cost of living per hour. If people bought more local produced goods, we could help keep our local economy running at an optimal level, and also keep money circulated within our state. This would slightly reduce the costs of goods here, but only the goods that are made here. Also, more jobs would be created locally, thus helping the economy even more.
The minimum wage and cost of living gap affects almost everyone, however the people it affects the most are the minimum wage families with one, two, or even more children. These families struggle a lot because their minimum wage paychecks cannot pay all of the bills and costs of living. If the families have two or more kids, then the problem becomes even more magnified. These families are typically between the age of 25-45, the most difficult years for any family because of kids and the costs that come with them, especially college. Something needs to be done locally, if its not by the population of Hawaii, then it has to be by the government.
Cartoon from http://www.conservativecartoons.com/1996/minwage.gif

Minimum Wage- The Government Influence

There is a lot about the gap between what needs to be done, and what is being done. State Legislature has passed bills to raise minimum wage, like the Living Wage for Hawaii Bill written by Representative Roy Takumi. It requires businesses that are contracted by the government to pay their workers a living wage of $9.43 and hour. This a good step, but it only applies to businesses that are contracted by the government. Businesses like construction companies who pave roads and build buildings. This doesn’t cover the thousands of other jobs, like office clerks, cashiers, waiters and waitresses, nurses, maintenance workers, security guards, and other laborers that are not contracted by the government.
Another hot issue to the hotels is healthcare. With the rising cost of good healthcare the hotel companies are starting to offer healthcare benefits to their employees.
Even though these things are being addressed, there are large amounts that can still be done. The State Legislature has not done much about the high healthcare costs, but they have required employers to provide healthcare for an employee that works more than twenty hours a week. They could still do more; hospitals and lawyers could also do more. The reason they don’t is because they make money off of it, with the exception of the stat legislature, they don’t. Lawyers and hospitals make money off high healthcare costs. A way to counter this is to make no reward for lawsuits more than a fixed sum of money. Putting a value on human life is a whole new conversation however. Also hospitals could have a set number of tests they could do on a patient and anything over that will need to be paid for by the patient. These laws could also be enforced by the state or federal government.
Another cost that makes Hawaii a very costly place to live is the cost of housing. Hotels companies try and make affordable housing accessible to their employees, but this isn’t enough. Hotels are going to great lengths to make sure their employees have access to affordable housing offers. In an interview for the Honolulu Star Bulletin spokesman Cade Watanabe said, “Many of our members live paycheck to paycheck,”, “They need a living wage to be able to afford the rising cost of housing.” Hotels have started to add in housing benefits in their employee’s benefit packages. Since this state is an island it restricts the number of people who can live here and the amount of materials. This inflates prices of houses which makes it hard for people who live here and work for minimum wage, to pay for houses. This contributes to homelessness and other problems. It is shown in an article in The Wall Street Journal. Published on January 11, 2007 it says, "Roughly 6,000 people in the state are without permanent shelter, according to Hawaii's Homeless Programs Division. That's nearly double the number without homes in 1999." This could be solved by state legislature. They could make it more difficult to buy a house in Hawaii which would prevent people from coming in to Hawaii. They could also have Kama’aina rates and tax breaks for people that already live here or have lived here for a while.
One thing that is being done is that private companies are converting large areas of land into affordable housing. On Maui Amfac is developing 4,300 acers into affordable housing. To read more about this go to http://www.bizjournals.com/pacific/stories/2002/05/27/story1.htmlEverything that people need to be brought in by large container ships. This makes our gas, food, clothes, and other things as well very expensive. This can be seen on the website, http://www.alternative-hawaii.com/overpop.htm. This could be fixed by the state by giving subsides to Hawaiian farmers and promoting Hawaiian grown products. This would take away our reliance on the U.S. mainland for supplies. The Maui Land and Pineapple Company owns 25,000 acers of land on Maui. This is more than enough to take away some of our reliance on the Mainland.There could be tax breaks for people that buy home grown food, or even grow their own food at home. More emphasis could be put on solar energy and bio-diesel. These things are all possible, but there would have to be a lot of hard work and it might cost a lot of money for the tax payer.

Minimum Wage- Personal Influence

One thing a person could do to alleviate the living cost in Hawaii is to buy local products. This would boost the local economy and create more jobs, which mean more people spending money in Hawaii, which boosts the local economy even more.
People could also support charity organizations such as Aloha United Way. This would provide care for the homeless and could help them get back onto their feet. This would also help homeless people stay healthy, so it would make a little difference on the cost of healthcare.
Also people could buy healthcare. This would make hospitals stop having to cover the cost of treatment and then the cost of healthcare would go down. Also people could write to their representative and senators, state and federal.
If this situation continues on like this, unchecked, then there could be many problems for Hawaii. Homelessness would steadily grow(3,000 homeless in 1999 and now 6,000 in 2007) until it started to affect our tourist industry with the amount of trash and disturbances homelessness creates. This would create many other problems like unemployment, environmental problems, and higher taxes.
Also more people would be without healthcare, food, and education. This would result in more deaths, more drugs, and more homelessness. All this would affect the image of Hawaii and come back to the tourist industry, our number one money maker here in the island.
If you want to contact your local state legislator here is the link to the state legislature website. There is everything yo need to know about bills and senators. http://www.capitol.hawaii.gov/
http://starbulletin.com/2007/01/12/news/story02.html

http://www.ncsl.org/programs/employ/livingwage2007.htm

http://www.capitol.hawaii.gov/site1/docs/getstatus2.asp?billno=HB33

http://uhfamily.hawaii.edu/publications/brochures/EconomicWellBeing2007.pdf