What is it like to live on minimum wage in America? It’s never been fun, but it’s getting harder and harder as costs of living rise around the nation. The current federal minimum wage of $7.25 an hour, which hasn’t been raised in seven years, is the equivalent of making $15,080 a year for a full-time worker. Imagine supporting a family on that.
Since Congress is finally thinking about raising the general minimum wage to $10.10 an hour (as well as the minimum wage for tipped workers), the non-profit Oxfam put together some statistics and maps examining who would benefit from better wages.
This raise won't just help the typical high school kids many people picture working in minimum wage jobs. “Although definitions of ‘low-wage work' vary, it’s generally agreed that between one-quarter and one-third of all U.S. workers are in low-wage jobs. This is the highest proportion of low-wage jobs of any rich country in the world,” says Oxfam’s report.
Oxfam’s breakdown by Congressional district show that, on average, one in five workers would benefit from an increased minimum wage, or 25 million people--nearly 14 million of whom are women. The raise would lift 5 to 6 million people out of poverty, and the benefits would be shared relatively equally by workers living in districts represented by Democrats and Republicans alike, the group estimates.
The Southeast and Southwest include a larger number of districts with a high percentage of workers who would be affected. But the districts that would benefit most are in New York, the Midwest, and California. East Los Angeles (31.8%) and the rural south coastal district of Texas (29.9%) include the most workers who would see a boost. The districts with the lowest percentage of workers to benefit are in some of the highest income urban areas of the country, such as the East Side of Manhattan (but low-wage workers who do live there perhaps suffer the most). Interestingly, the metro areas of Los Angeles, San Francisco, and New York City have districts both in the top 10 and bottom 10. Opponents of the minimum wage increase say that cost of living may rise proportionally in the areas most affected by a wage boost.
The states with the highest percentages of low-wage workers are in the South, led by Arkansas and Mississippi, and including Oklahoma, West Virginia, Florida, South Carolina, and Kentucky. Several Western states also make the list, including South Dakota, Idaho, and Montana. None of these states has a law setting a minimum wage above $7.25.
Raising the minimum wage to keep pace with rising cost of living used to be a bipartisan issue, and increases have been passed 22 times since 1938 (In 2007, an increase passed the U.S. Senate with a 94-3 vote. An increase to tipped workers hasn’t been passed since 1991). But today Congress remains at an impasse, as many businesses in the retail and service sector lobby against being required to raise the pay of their workers. Research shows their complaints may not even be in their own best interests.
“Bad jobs cost companies a lot more than they realize, and they find themselves in a vicious cycle,” says Zeynep Ton, an adjunct associate professor at MIT Sloan School of Management and former professor at Harvard Business School. Poor employee retention and commitment, she says, contributes to operational problems and lower sales--a cycle shown by her studies to lead to lower sales and profits, and then a shrinking budget to pay employees fairly.
In contrast, Ton has studied businesses in low-wage retail sectors, such as Costco and the convenience chain QuikTrip, that have succeeded in taking the opposite approach, paying their employees better wages and investing in their development. She says this strategy has allowed them to retain employees that perform better at their jobs, while the companies return money to shareholders and outperform competitors on a wide range of financial metrics. Raising the federal minimum wage, Ton suggests, could nudge more employers to consider what she calls in her book a “good jobs strategy.”
Sherry Stewart Deutschmann, CEO of the Nashville, Tennessee, company LetterLogic, joined Oxfam in calling for a higher federal minimum wage, saying she is tired as a taxpayer of subsidizing other businesses that don’t pay their employees a wage they can live on without food stamps or other social welfare. Since starting the company from her basement as a single mom in 2002, she’s grown it to annual revenues of $30 million while paying employees $14 an hour and redirecting 10% of profits distributed evenly among employees every month. She says her strategy of putting her employees first, including helping them buy their first home and reimbursing tuition, is paying off in a sector where this is relatively rare.
“It really is an investment in our employees that pays off beautifully,” she said on a conference call hosted by Oxfam. “We have very low turnover, our training costs are lower, we have fewer mistakes and [provide] a higher quality to our customers.”