Grassroots push leads to negotiated minimum wage hike in Michigan

The dust has cleared on a brouhaha surrounding a proposed minimum wage hike in Michigan.

The good guys (mostly) won – thanks to grassroots organizing, massive public pressure and some skilled negotiating behind closed doors. It was an incomplete victory, but it was a victory all the same – most low-wage workers in Michigan are getting a 25 percent pay increase over the next four years to $9.25.

The story starts at Raise Michigan, a grassroots organization that put together a petition drive in February to put a proposal before the legislature to amend the minimum wage to raise the wage. If the legislature didn’t pass it, it would go before voters in November.  It’s a similar gambit that anti-choice organizations used to circumvent Gov. Rick Snyder’s veto of legislation that excluded abortion coverage from Michigan’s health insurance exchange last summer.

The idea was to raise the wage for most workers from $7.40 to $10.10 an hour over three years from, 2015 to 2017, and then index future increases to inflation. As importantly, the petition would also raise the minimum of tipped workers from the current unconscionable $2.65 an hour by 85 cents a year until it reached parity with the rest of the work force. 

Of course, the usual suspects in business and the restaurant industry cried bloody murder about how giving low wage workers a raise to non-poverty income levels would wreck the economy.  But the legislature’s Republican majority was in a pickle – if they defeated the measure in the ledge, then it would go on the ballot – where minimum wage increases tend to fare quite well.

In response, Senate majority leader Randy Richardville (the dude who drove me to blog in the first place) reasoned that if the minimum wage law was repealed, then technically an initiative amending the law would be out of order.

Follow me below the fold for how that particular evil gambit actually turned into a productive set of negotiations and a legislative victory.

Raise the minimum wage to reduce the Medicaid gap

Aaron Carroll of at The Incidental Economist (a must-read blog for those with interest in health care policy) has a really thoughtful post up on the people who fall into the Medicaid gap in states that aren't choosing to expand Medicaid at the Academy Health Blog. These people are in a bind; they're too rich to be covered under most of these states' existing Medicaid plans, but they fall below the poverty line, and aren't eligible for subsidies on the health exchanges. In describing this population, Carrroll writes a paragraph that really got me thinking:

It’s worth considering, though, that the majority of people in the coverage gap are working poor who, ironically, make too little to be helped out by the government. If they made just a bit more, they might qualify for insurance that is so subsidized that it is almost free. But because of the coverage gap, the people with the fewest resources get less help (none)  than those who have a bit more money. (Italics mine)

If only the working poor made just a bit more money, we could lift hundreds of thousands of them above the poverty line and get them eligible for subsidies that would massively cut their monthly premiums and limit their out-of-pocket expenses. Hmm... what could we possibly do to get the working poor some more income?

Oh I don't know, it's crazy, but maybe we could just raise the minimum wage.

Some minimum wage comparisons Or "Yes, we can most certainly afford to raise the minimum wage"

So it appears one of the next big issues that's coming to a head is a debate over raising the national minimum wage. New Jersey raised its minimum wage and linked it to inflation during the last election, while the town of SecTac in Washington State raised its minimum wage to $15 an hour. Washington D.C. and two neighboring counties just voted to raise their wage to $11.50 an hour over the next several years, while California has voted to jump its minimum to $10 over two years.

Texas Republican Joe Barton, naturally, wants to go the other way.

Right now, the current minimum wage of $7.25 is worth about what it was in 1950 in inflation-adjusted dollars. I show the fluctuation of the minimum wage's value in this fairly well-known chart (figure I) that I reproduced with data from the Bureau of Labor Statistics.

What should we raise it to? Thinking about it's relationship to the poverty line is a good place to start, (though the limitations of the poverty line makes it a bad place to finish.) 

The poverty line for a single parent raising one child is $15,510 for 2013 and for a family of three (a single parent with two children) it's $19,530. For a full-time job at minimum wage to earn enough to lift a family of two above the poverty line, it would have to pay $7.76 an hour-- a raise of about 7 percent from the current wage. To lift a family of three with one worker out of poverty, it would need to be $9.77 -- a raise of about 35 percent.

Of course, that's assuming a full-time job. Many minimum wage jobs in fast-food and retail require lots of flexibility and limited hours (hey, if we gave workers over 28 hours a week, they'd be full time and we'd have to provide health benefits and we couldn't have that!). So let's assume a 25-hour work week, which is more typical at a minimum-wage service job. Keeping a single-parent family of two above the poverty line now requires $12.41 and hour, while a family of three requires $15.63; increases of 71 and 115 percent, respectively.

For historical context,  the minimum wage peaked at a value of $10.74 in 2012 dollars in 1968, which would be a raise of about 48 percent. If the wage had kept up with gains in worker productivity, we'd be looking at a minimum wage of $17.65 an hour, which is an increase of 143 percent. 

I stack all these possible wage gains in Figure II below:

We can debate how high the minimum wage should be, but America needs a raise, and their bosses can afford it. Based on the figures above, D.C's $11.50 over the next three years is easily justifiable, and fast food workers arguing for $15 an hour have a good case to make. Indexing to inflation is a must and future increases arguably should also account for productivity gains above the rate of inflation.