Minimum wage target too low
There appears to be a good chance the Legislature will increase the minimum wage this session, but so far it has set its sights too low. The Legislature needs to look beyond the $10.10 an hour that President Obama and Gov. Peter Shumlin have proposed and think in terms of what a Vermont family needs to live on.
Full-time work ought to support a decent standard of living. People who work 40 hours a week, year round, ought to have at least enough income to support their families and meet their basic needs.
The Economic Policy Institute in Washington, D.C., and the Vermont Legislatureís Joint Fiscal Office calculate that a basic family budget for a single parent with one child is close to $50,000 a year. For a family of two working parents with two children, itís $70,000 to $75,000.
Vermont canít raise the minimum wage to $25 or $30 or $35 an hour, and it probably canít even guarantee a livable income for a full-time working mother with just a single child. But by raising the minimum wage to $11.50 or $12 an hour and expanding the stateís tax credit for low-income, working families, Vermont could begin to close the huge gap between the cost of a decent standard of living and what most low-wage workers have to live on.
Combining an increase in the minimum wage with an increase in the Earned Income Tax Credit (EITC) for low-wage workers was the subject of a paper by Jeannette Wicks-Lim, an economist at the Political Economy Research Institute (PERI) at the University of Massachusetts and an expert on the minimum wage. She discussed her research with a Vermont Senate committee last week. She also refuted a commonly heard claim that raising the minimum wage hurts the economy and costs jobs. Wicks-Lim told the committee that research had found little or no negative effect from raising the floor on wages.
Her testimony was reinforced by Phil Merrick, owner of August First Bakery and Cafť in Burlington. As a business owner, he said he supported a higher minimum wage because it was the right thing to do and would help the economy by putting more money in the pockets of people who would spend it immediatelyóand in Vermont. The cost of the minimum wage proposed by the governor would be inconsequential to his customers, Merrick said. And he thinks the wage increase should be higher than the governor recommended.
Vermont, like the rest of the country, has seen a growing gap between rich and poor. Raising the minimum wage alone isnít going to close that income gap. There are many other steps that need to be taken. But raising the minimum wage can help, especially if itís coupled with an increase in the EITC that gets full-time workers closer to a livable income. And those changes need to be part of a broader commitment among policy makers to reduce income inequality in Vermont.
Jack Hoffman is a policy analyst for Public Assets Institute (www.publicassets.org), a nonpartisan, nonprofit organization based in Montpelier.