August 31, 2006 NINE YEARS OF NEGLECT:And let's be clear about something else here as well. If there are no jobs available, then it really doesn't matter what the pay is, now does it? And finally, I've heard business owners whining for decades about how an increase in the minimum wage will "hurt their profits." Yeah? Well when CEO's like Scott Lee, Jr., of Wal-Mart, rakes in roughly the same amount of money every two weeks that his average employee earns in a lifetime, they ought to be looking at slashing senior salaries as a way to offset the "profit loss." Don't toss it onto the nearly broken backs of those who struggle every day to keep your business up and running. . . (From Robert Reich's blog - the nation's 22nd Secretary of Labor and a professor at the University of California at Berkeley.)NINE YEARS OF NEGLECT: Federal Minimum Wage Remains Unchanged for Ninth Straight Year, Falls to Lowest Level in More than Half a Century By Jared Bernstein and Isaac Shapiro[1]
The federal minimum wage has remained at $5.15 an hour since September 1, 1997. So as of September 1, 2006, the minimum wage will have remained the same for nine years, while the costs of medical care, gasoline, and other necessities have grown considerably. Further, the minimum wage has fallen exceptionally far below the wages of other workers, including the nation’s CEOs.
This lack of Congressional action is approaching an unprecedented stretch. Since the inception of the minimum wage, there has been only one other period in which the minimum wage has remained unchanged for more than nine years. The minimum wage remained the same for the nine-year-and-t
hree-month period from January 1981 until April 1990.
While since September 1997 the minimum wage has remained at $5.15 an hour, the cost-of-living has risen by 26 percent. After adjusting for inflation, the value of the minimum wage is at its lowest level since 1955.
The minimum wage now equals just 31 percent of the average wage for private sector, nonsupervisory workers. This is the lowest share since at least the end of World War II.
This December 1st will mark nine years and three months since the last increase. Thus, unless Congress acts quickly, so that a federal minimum wage increase is actually put into place before then, on December 2nd the federal minimum wage will have remained at the same level for the longest period since it was established.
Adjustments to the Wage Floor
The federal minimum wage has never included a feature by which it automatically increases each year to ensure that it maintains its purchasing power. As a result, Congress has to act to provide such adjustments.
These adjustments have not always occurred in a timely fashion. Nonetheless, from 1938 to 1981, they did occur with enough regularity that the minimum wage generally either rose in purchasing power or remained relatively stable in real value.
Then from January 1981 to April 1990 the value of the minimum wage was frozen at $3.35 an hour, the longest period without an adjustment in the wage floor. As a result, the minimum wage eroded markedly in value.
Two series of minimum wage increases took effect in the 1990s, the first of which was signed into law by the senior President Bush. These served to restore some of the lost value of the minimum wage. But the last of that series of increases took effect in September 1997, when the federal minimum was raised to its current level of $5.15 an hour.
Minimum Wage has Remained the Same While the Cost of Living Has Risen
One standard for assessing the value of the minimum wage is to track its buying power; that is, to adjust its value to take into account changes in the cost of living. Each year that Congress fails to raise the wage floor and that the cost-of-living rises, the purchasing power of the minimum wage erodes. Thus, the fact that the minimum wage has remained the same for nine years means that its real value has declined considerably over this period.
The real value of the minimum wage peaked in 1968, when it was equivalent to a wage of $7.73 an hour.[2] During the 1970s, the wage floor averaged $6.92 an hour in today’s dollars.
Since September 1, 1997, the overall inflation rate has increased by 26 percent. The costs of certain necessities have risen even more sharply. A gallon of gas costs more than twice as much as it did nine years ago; the cost of medical care increased by 43 percent. (See Table 1.)
Table 1: Changes in Cost-of-living and the Minimum Wage Since September 1997
Overall inflation
26%
Food
23%
Housing
29%
Medical care
43%
Child care and nursery school
52%
Educational books and supplies
61%
Gasoline, unleaded regular
134%
Minimum wage
0%
Source: Bureau of Labor Statistics
Once an adjustment for inflation is taken into account, the purchasing power of the minimum wage has now declined to its lowest level since 1955. (See Figure 1 and Table 2.)
Minimum Wage has Fallen Far Below the Wages of Other Workers
The federal minimum wage has also often been set with the wage level of other workers in mind. This approach reflects the principle that minimum-wage workers should share in economic gains and should not fall too far behind other workers
During the 1950s and the 1960s, the minimum wage averaged 50 percent — or half — the average wage of workers in nonsupervisory positions.
The minimum wage has now fallen to 31 percent — or less than one-third — of the average hourly wage for nonsupervisory workers of $16.76 in July. This is the lowest share in the history of this data series, which begins in 1947. (See Figure 2 and Table 2.)[3]
Research has shown that the fall in the relative value of the minimum wage has contributed to the persistent increase in wage inequality since the latter 1970s.[4]
The minimum wage has also remained stagnant while the pay of chief executive officers has risen sharply. As a result, the gap between the pay of CEOs and the minimum wage has grown dramatically. For example, in 1978, even before the gap began to grow quickly, the average CEO was still paid 78 times as much as a full-time year-round worker earning the minimum wage. By 2005, the average CEO was paid 821 times as much as a minimum wage earner; this is the widest discrepancy on record. As an earlier report from the Economic Policy Institute observed: “An average CEO earns more before lunchtime on the very first day of work in the year than a minimum wage worker earns all year.”[5]
Changes in the Minimum Wage and Changes to the Estate Tax
In reaction to this sharp erosion in the value of the minimum wage, action to raise the minimum wage in Congress has finally begun to stir. In an awkward twist, however, the House adopted legislation that links a dramatic reduction in the estate tax with an increase in the minimum wage. This linkage has been rejected once by the Senate, but the approach may be voted on again by the Senate in September.
The two proposals should not be linked, however. Since 1997 Congress already has been quite generous to the relatively modest number of wealthy estates subject to taxation. High-income households, moreover, seem to be faring reasonably well during this recovery while low-income households are not. Recent Census data reveal, for example, that the average real income of the top five percent of households rose 3.1 percent last year, while that of the bottom fifth of households was up only 0.6 percent.
Specifically, while the minimum wage has remained stagnant since 1997, Congress has enacted legislation that has reduced estate tax burdens in eight of the past nine years.[6] Of further note, in the bill that recently passed the House, the minimum wage increase would benefit 5.6 million workers, while the estate tax reduction would primarily benefit 8,200 very wealthy estates.[7]
TABLE 2
The Value of the Minimum Wage, 1947-2006
Year
Nominal
Adjusted for Inflation (using CPI-rs)
As a share of average private nonsupervisory wage
1947
$ 0.40
3.05
35%
1948
0.40
2.82
33%
1949
0.40
2.86
31%
1950
0.75
5.29
56%
1951
0.75
4.90
52%
1952
0.75
4.82
49%
1953
0.75
4.77
47%
1954
0.75
4.74
45%
1955
0.75
4.75
44%
1956*
0.96
6.00
53%
1957
1.00
6.05
53%
1958
1.00
5.88
51%
1959
1.00
5.84
50%
1960
1.00
5.74
48%
1961*
1.05
5.97
49%
1962
1.15
6.47
52%
1963*
1.18
6.56
52%
1964
1.25
6.85
49%
1965
1.25
6.75
48%
1966
1.25
6.56
46%
1967*
1.39
7.08
49%
1968*
1.58
7.73
52%
1969
1.60
7.50
50%
1970
1.60
7.16
47%
1971
1.60
6.86
44%
1972
1.60
6.65
41%
1973
1.60
6.26
39%
1974*
1.87
6.66
42%
1975
2.10
6.90
44%
1976
2.30
7.15
45%
1977
2.30
6.72
42%
1978
2.65
7.42
45%
1979
2.90
7.43
46%
1980
3.10
7.15
45%
1981
3.35
7.06
45%
1982
3.35
6.67
43%
1983
3.35
6.40
41%
1984
3.35
6.16
40%
1985
3.35
5.96
38%
1986
3.35
5.85
38%
1987
3.35
5.66
37%
1988
3.35
5.46
36%
1989
3.35
5.23
34%
1990*
3.69
5.49
36%
1991*
4.14
5.95
39%
1992
4.25
5.96
39%
1993
4.25
5.81
39%
1994
4.25
5.69
38%
1995
4.25
5.56
37%
1996*
4.38
5.57
36%
1997*
4.88
6.09
39%
1998
5.15
6.33
40%
1999
5.15
6.20
38%
2000
5.15
6.00
37%
2001
5.15
5.84
35%
2002
5.15
5.75
34%
2003
5.15
5.62
34%
2004
5.15
5.47
33%
2005
5.15
5.29
32%
2006
5.15
5.15
31%
* Minimum wage changed during the course of the year; value reflects weighted average for the year.
Source: Authors calculations based on data from the U.S. Department of Labor.
Thursday, February 01, 2007
Bush on CEO Pay, and the Truth about CEO Pay
President Bush yesterday told corporations they should hold their CEOs more accountable by tying pay to performance. Good sound bite, but meaningless piffle. Pay-for-performance is what got us to CEO compensation that’s today 350 times that of the average worker. The problem of CEO pay doesn’t really have anything to do with whether stockholders are getting their money’s worth. Stock prices of most big American companies have soared over the last twenty-five years – at just about the same rate as CEO pay. Between 1980 and 2003, the average value of America’s largest five hundred companies rose by a factor of six, adjusted for inflation. Average CEO pay in those companies also rose roughly sixfold. Bill Clinton came to office vowing to put limits on excessive CEO pay (when the ratio of CEO pay to that of average workers was far lower). He said it was unfair that average workers were earning so little while CEOs were earning so much. What happened to Clinton’s proposal? It morphed into an innocuous Treasury Department requirement that, in order to deduct anything more than a million dollars of their CEO pay from their corporate taxes, companies had to tie CEO pay to performance. What happened then? An explosion in stock options. Sure, there are CEOs who get lots of money even when their share prices drop, and lots of CEOs have earned princely sums simply because the stock market as a whole has risen regardless of whether their own firms beat the average increase. But the fact is, shareholders don’t really care. Investors are doing just fine, thank you. Barring outright fraud, investors can take care of themselves. They’ll bail out of companies that aren’t performing. The real scandal of CEO pay is that it has become so far removed from the pay of average workers. And average workers aren’t doing so well. Median wages are still below where they were in 2000, adjusted for inflation. Every two weeks, Scott Lee, Jr., the CEO of Wal-Mart, rakes in roughly the same amount of money that his average employee earns in a lifetime. We should stop worrying about linking CEO pay to company performance, and start worrying about linking CEO pay more closely to the pay of average workers. How? One simple starting place: Restore progressivity to the personal income tax.
Group urges living wage debate
Report illustrates basic needs for families
William Miles, 46, always worked. And, that's part of the problem.
Since he was 17, Miles has driven forklifts, worked on rooftops and in sports concessions, been injured a few times with only sporadic insurance coverage and developed emphysema.
With no diploma or time to get the training for less physical work, he is struggling to provide for himself.
"If a man that works ain't got a decent wage, he is definitely going to wind up on the street," said Miles, who for the first time in his life is homeless. "I don't think it's getting any cheaper to live."
A report out this month illustrates the rising cost of transportation,
Its authors want to prompt conversation about the ethics of paying less than what they term a "living wage" and the burden borne by taxpayers when not enough people earn one.
In its 2007 Nashville Living Wage Estimate, Middle Tennessee Jobs with Justice found a family of two working adults and two children needs to earn a gross minimum of $43,076 to provide for its basic needs.
That figure, which amounts to two adults earning about $10.35 an hour, isn't what Miles and at least 575,000 of the 1.6 million Tennesseans employed in 2007 were able to find.
Unions fund nonprofit
"One of the most famous phrases in the movement is a job should keep you out of poverty, not keep you in it," said Melissa Snarr, co-author of the study and an assistant professor of ethics and society at Vanderbilt University's divinity school.
"Really, what we are talking about here is whether we want work to include justice … or for lots of people who work to have to get by with something like food stamps."
Middle Tennessee Jobs with Justice is a nonprofit that advocates for worker rights.
Some of its funding comes from area unions.
Last year, the organization spearheaded a campaign to pressure Vanderbilt, Nashville's largest private employer, to pay its 20,000 workers at least $10.18 an hour.
The university ultimately agreed to raise its wage floor for 600 union employees from $7.55 an hour to $10, annual raises over the life of a three-year deal and the opportunity for additional seniority and performance pay.
In 177 cities, living wage campaigns have targeted colleges, hospitals, schools and local governments that cannot offshore or outsource all their jobs.
In New York, Baltimore and other cities, governments have agreed to pay their workers a wage indexed to annually adjusted, local cost-of-living data. In Durham, N.C., and San Diego school districts, universities and government also require companies doing business with them and those that receive tax abatements to do the same.
Many business groups say paying workers based on the cost of living rather than market forces would hurt their ability to turn profits and ultimately reduce the number of jobs available.
"In a marketplace economy, the market sets wages…," said David Penn, director of Middle Tennessee State University's Center for Business and Economic Research. "In the long run, you need to be working in an occupation in short supply that requires a lot of training and education. That's how you get more pay."
Campaigns get attention
Living wage campaigns have gained attention because corporate profits and productivity have risen while wages for all but a few remained flat or fell when adjusted for inflation, Penn said.
In Tennessee, some of the industries that provide the most jobs and those adding them do not require workers with extensive training.
Last year, just under 36 percent of the Tennessee's workforce earned less than $10 an hour. In 2002, just under 17 percent of workers did so.
For Beth Brockmann, 61, low wages and desperate choices are a part of life.
Brockmann, a full-time administrative assistant at Vanderbilt University, earns $8.43 an hour, after taxes and meager retirement savings. She has worked as a medical receptionist or administrative assistant in other research settings for more than 30 years. In January, Brockman marked a full year of living in the Knight's Inn Motel for $170 a week.
"There is just no way to save a penny…,," Brockmann said. "No way at all to come up with the, I don't know, $1,200, $1,500 I would need to put a deposit on a studio somewhere."
Janell Ross can be reached at 726-5982 or jross1@tennesse
