The American Way of Poverty: How the Other Half Still Lives (45 page)

The lesson from Chicago: Large corporations
do
respond to public protests about working conditions. But for such an intervention in the labor market as a living wage law aimed at big box stores to really work, it would have to be done at least at the state level, and ideally at the federal one. In this context, bigger is indisputably better: The larger the area covered by the law, the harder it is for companies simply to up the stakes and move their business elsewhere in response.

How would consumers be impacted by these laws? In December 2007, researchers at the University of California at Berkeley’s Center for Labor Research and Education calculated that Walmart would need to increase prices by less than 1 percent in order to fully cover the cost of the higher wages. “Low-income Walmart workers would see a raise of $1,020 to $4,640 per year,” the authors wrote, “while the average Walmart shopper would spend an additional $9.70 per year.”
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When, after years of struggle, tomato pickers in Immokalee, Florida, won a one-cent increase for every pound of tomatoes they picked, the
New York Times
reported that it would take their average wages up from roughly $10,000 per year to $17,000.
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That’s enough to make a huge difference in the lives of some of America’s lowest-paid workers. The cost to the fast food restaurants such as Burger King and Taco Bell who fought against the pay increase? Well, Burger King estimated it would cost the company a quarter of a million dollars annually. Spread out over the 2.4 billion burgers the chain sells globally each year, and that works out to an additional 0.01 cent per burger for consumers. That’s right: If you ate a hundred Burger King meals each year, your additional costs would total all of one cent.

Whichever way you spin it, either $10 a year more on one’s Walmart purchases or one cent a year more on fast food hamburger purchases, it hardly seems an unreasonable amount to ask consumers to invest in for the broader social good.

For Ai-jen Poo of the National Domestic Workers Alliance (NDWA), finding ways to boost the earnings power of the working poor was long overdue. The NDWA counted among its target audience some of the hardest-working and lowest-paid employees in America: people who swept up other people’s dirt, cleaned up their messes, washed their bodies when they were sick, and dressed them when they were old. Frequently, they worked ridiculously long hours that, in practice if not in theory, put them far below the legal minimum wage. Like Maria, the home help in Albuquerque whom we encountered earlier in the book, they were often either undocumented or newly arrived, speaking only a paucity of English, unaware of their legal rights and scared to protest their workplace conditions. And yet as the American population aged and its healthcare needs increased, this was, most analysts agreed, likely to continue to be one of the fastest-growing sectors of the economy.

Faced with this reality, Poo’s group, and trade unions such as the Service Employees International Union (SEIU) and the American Federation of State, County, and Municipal Employees (AFSCME), had begun organizing domestic workers. By 2012, Poo had helped launch the Caring Across Generations campaign, designed to convert millions of low-paying, off-the-books, home help jobs into work that was organized and legitimately above-board, paid a living wage, and offered decent benefits. Through giving tax credits to employers and tweaking Medicare so that it would fund more home-care arrangements, the campaign hoped to create two million “industrial-strength” jobs. What did they mean by that? Essentially, jobs with the same
prestige, high pay, and solid benefits as those in the car factories, electronics plants, defense production facilities, and other workplaces that defined the heyday of American industrial production in the decades after World War II.

Not that getting there would be easy. Among other challenges would be that of finding ways to increase childcare subsidies for the working poor during tough economic times rather than cutting them, which had been the default position in recent years as states raided childcare funds to prop up other areas of their stressed general funds. That was of particular importance for home-care workers, who put in long and irregular hours, which often reduced to a minimum the time they could spend with their own children. So, too, the campaign would have to convince scared, frequently undocumented workers that they had more to gain than lose by emerging out of the shadows. And they would have to persuade the government to use existing, but too frequently unenforced, labor laws to crack down on employers who had grown used to paying low wages, off the books, for an array of domestic services.

Absent living wage ordinances and related pay increases for vulnerable workers in the fields, in home healthcare, and the like—or acting in tandem with such reforms—legislators could also put state and federal tax codes to work on the side of the poor. In the same way the Affordable Care Act uses tax law to penalize employers who don’t provide health insurance to their workers, so the codes could be tweaked to impose penalties on those who don’t give their workers a modicum of economic security through paying them a decent wage. As an employer, do you really want to pay your workers so badly that they fall back on state benefits? Fine. But know there are tax consequences to your decision. In San Francisco, a living wage ordinance put a variant of this in place years before the expansion of healthcare kicked in. There, companies were given a choice: They
could either pay a higher-level wage, or they could pay a slightly lower wage, in which case they were mandated to provide health insurance for their workers.

At the same time, Congress should immediately increase the federal minimum wage, building in inflation-indexed increases annually, in much the same way that Social Security does. Such a move would not only shore up income levels for bottom-tier workers but would also have a magnifier effect up the next rungs of the economic ladder, as companies seeking to lure workers by paying better-than-minimum-wage rates increase the wages they offer so as to remain attractive to potential employees.

Without such a reform, the minimum wage, like welfare benefits such as TANF, will continue to be set legislatively. We know the consequences of this, and they aren’t pretty. Held hostage to political fortune, for years at a stretch the value of the minimum wage, kept constant by legislative inaction, is eroded by inflation. This happened from the mid-1990s through to the mid-2000s. It’s happened again during the post-2008 period. As a result, an increasing number of the country’s working poor end up either having to be subsidized by the state or falling ever deeper into poverty.

Raise the minimum wage too high, and one stifles employment. Raise it responsibly, however, and many economists believe few jobs are lost as a result. “My view,” said Jesse Rothstein, “is the minimum wage does not reduce employment. It would cut off the effect that I’m worried about.”

In October 2010, economists with the Political Economy Research Institute (PERI) at the University of Massachusetts at Amherst released a report calling for a significant increase of the minimum wage as well as expansions of the EITC. They argued for a new federal minimum wage of $12.30 per hour and backed their number up with a set of detailed calculations and studies of previous local minimum wage hikes that showed the overall effects on business operating costs of such an increase, even in industries that were extremely labor intensive, to be extremely small and manageable to cover—either through
slightly reduced profits or through marginal hikes in the prices of goods sold. As with the Immokalee tomato workers, the poorest of the poor could be provided a measure of economic dignity at a cost that most consumers would not notice.

The new baseline, the PERI team argued, would be below the “tipping point” at which significant numbers of businesses would start laying workers off. As evidence, they quoted from analyses of previous increases. When Florida raised its minimum wage by 19 percent, total costs to businesses statewide, as a percentage of sales, increased by only 0.04 percent. When Arizona raised its minimum wage by 31 percent, fast food operating costs as a percentage of total sales increased by only 1.73 percent. Even if all of that were to be passed along to consumers, a Big Mac would only increase in price by a couple cents. When Santa Monica increased its minimum wage by a whopping 85 percent, hotels—the most labor-intensive industry in the city—saw their labor costs increase by just over 8 percent.

The reason? In most industries, nonlabor costs, such as the buying and maintenance of machinery, energy bills, and real-estate expenses, outweigh payroll costs. Even in industries in which payroll is more dominant, a majority of workers already earn significantly above the minimum wage, meaning that only a small percentage of additional costs are foisted on companies by raising the floor. And, finally, in low-wage industries where more workers are paid at bargain-basement rates, the authors calculated, generally even in those situations many workers were paid somewhere in between the old and new minimum wages, meaning relatively small wage increases for the majority of employers, combined with larger increases for a minority, would bring the company into compliance with the new federal minimums.
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Finally, the EITC could be revamped so that it doesn’t penalize dual-income households. At the moment, because families lose access to the credit when their
total
income goes above a certain level, it has the somewhat perverse effect of encouraging many secondary earners, primarily women, to opt out of the workforce. But if each earner was evaluated individually and able to access the EITC based on his or her income alone rather than the combined income of all household earners, it would encourage several million more people to work, and would, Rothstein estimated, help lift millions more families not just out of immediate poverty but into long-term economic security.

All of this sounds technical, and in some ways it is. But the bottom line is pretty straightforward:
If
the tax system is used to channel money to poor individuals and families, and
if
at the same time laws protecting and boosting low-end wages and incomes are enacted, an awful lot of Americans could be pulled out of poverty, at minimal cost to the broader society, and an awful lot of dollars could be circulated through communities that are currently either stagnant or in decline.

IF IT WAS GOOD ENOUGH FOR THE NEW DEAL . . .

What to do, though, when the jobs aren’t there in the first place?

For communities where a large proportion of the private-sector jobs have ceased to exist, public works programs ought to be implemented to keep workers employed. Despite the volume of the voices raised in opposition to such investments, there’s actually considerable public support for the idea. In 2011, a Gallup Poll found that 72 percent of those surveyed supported expanding such public works as school repair programs, and three-quarters wanted to make available more public funds to hire teachers, police officers, and firefighters.
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In September 2012, another survey found that more than half of Americans wanted to increase spending on public infrastructure projects as a way of kick-starting the still-sluggish economy.
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