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A [federal] fast pass to economic equity

Photo Credit: House Democrats

 

Throughout the course, “Economic Analysis for Law, Policy, and Planning,” we each chose topics to analyze through an economic (rather than a political) framework. The first assignment was a research paper, where I did a deep dive on the Earned Income Tax Credit; the second was a policy brief, where I compared the policy alternatives of the EITC and raising the minimum wage to $15; and the third was an Op-Ed, where I was able to offer a recommendation on the best policy option. Given the principles of economics and a broad cost-benefit analysis, I’ve recommended that the Raise the Wage Act is the better anti-poverty tool to achieve both equity and efficiency. Below are snippets from this semester-long research that demonstrate why the Fight for $15 is justified and a just way to go.

As Massachusetts voters have succeeded in collecting 137,551 signatures for a $15 minimum wage ballot measure, let us broaden our perspective to what’s happening at the national level. We can look to Senators Bernie Sanders and Patty Murray, who introduced the Raise the Wage Act—setting the federal minimum wage at $15 an hour, indexed to inflation. The floor would immediately be adjusted to $9.25 and then reach $15 by 2024, nearly double where it currently stands. Tens of millions of workers would feel relief, most of whom are breadwinners and bring in over 60 percent of their families’ income.

This would mean a living wage for 41 million workers who would see their wages increase by an average of $3,500 annually. The majority of those affected are adults between the ages of 25 and 54, 56 percent of whom are women, and 28 percent of whom have children. The policy also largely benefits people of color—40 percent of black and 34 percent of Latinx workers.

At the table has also been the Earned Income Tax Credit as a means to combat poverty (see “There are only two things certain in life: death and taxes”). This policy—with a $1.4 trillion price tag over ten years—is a lump sum of cash that eligible families have access to each year depending on their level of income, marital status, and number of children. In 2015, the average credit was around $3,200, or $265 per month in additional wages. But families don’t just need cash in April, they need that boost throughout the year. And low-income workers without children deserve a chance at economic justice, too.

It’s time for employers to step up. It is not the responsibility of fellow taxpayers or the federal government to supplement neglected wages unpaid by companies, and especially large corporations who are undoubtedly able to afford this increase. It must not be forgotten that, in turn, companies will see a return on their investment as individuals’ buying power increases and they’re able to contribute more to local economies. Likewise, the federal government would generate greater tax revenue and fewer families would need to rely on government assistance programs like Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), and Medicaid. Efficiency achieved.

All signs point to good economics. Though opponents may argue that prices will go up and a hiring freeze will ensue, the data shows that the impact on employment ranges from zero to two percent. What actually happens is quite the opposite. Workers who are earning above this minimum may realize higher wages as employers attempt to adjust wage differentials. Lower turnover and higher productivity also result, saving employers money on hiring and training new employees. And because of its progressive redistribution, families closer to the poverty line will benefit more than those with greater wealth, reducing income inequality.

It’s time that our Congressmen and women set a federal labor standard that accounts for the economic reality in which their constituents are tirelessly striving to prosper. The Raise the Wage Act is a fast pass to economic equity, and to realizing the integrity of hard-working Americans who prop up our economy and deserve payment as contributors, but above all, as human beings worth more.

Published On: November 29, 2017 |
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