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Episode
#1912
Minimum Wage
Lewis: Mitchell Lewis, host
Schmidt: Sorian Schmidt, Legislative Director, North Carolina
Justice and Community Development Center
Cordato: Dr. Roy Cordato, Vice President for Research and
resident scholar, John Locke Foundation
Lewis:
Most
of the men and women working hard for minimum pay in North
Carolina are the primary providers for their households, yet
the current minimum wage barely allows them to pay for basic
food, shelter, and transportation. Is it time to increase
minimum wage pay, or would an increase make things harder
on low income workers? We’ll hear both sides of the
issue — next, on Black Issues Forum.
Voiceover:
This program was made possible by contributions to UNC-TV
from viewers lie you. Thank you.
Lewis:
Welcome to Black Issues Forum. I’m Mitchell
Lewis. In May of 2003, the North Carolina Justice and Community
Development Center published a striking report entitle, “Working
Hard is Still Not Enough,” a report that claimed nearly
two-thirds of North Carolina families with children failed
to earn a living income. A similar report released by the
Justice Center two years prior stated sixty-percent of blacks
and more that seventy percent of Latinos are making less than
a living wage. Clearly, the question of being able to make
a living is as critical for all North Carolinians as it is
for the State’s African American community. With minimum
wage having remained at five dollars and fifteen cents per
hour for the past six years, the question arises, “Is
it time for an increase?” Or are there alternative solutions
to what appears to be a growing poverty problem. We have with
us two experts on the issue. Our first guest authored both
reports by the Justice Center, Sorian Schmidt. She’s
the Legislative Director at the North Carolina Justice and
Community Development Center. We also have the author of a
counter-document entitled, “More Than Bare Bones”
that challenges some of the findings in the Justice Center’s
report, Dr. Roy Cordato. He’s the Vice President for
Research and resident scholar at the John Locke Foundation.
And to both of you, welcome to Black Issues Forum.
Schmidt:
Thank you.
Cordato:
Thanks.
Lewis:
Miss Schmidt, I’ll start off with you. What is considered
a “living wage” based on Federal standards, and
how is North Carolina faring as far as that standard is concerned?
Schmidt:
Well, historically, what has been used to determine whether
people have enough to live is the Federal Poverty Level, which
is about eighteen-thousand dollars a year for a family of
four, for example. And it’s the same amount in every
State, in every county of the State. There’s no differences
for geography, and there’s also no differences for the
ages of kids, or different needs of the family. So, this is
what’s been used historically. What we have found is
that just from personal experience, most of your watchers
know that it costs more to live in the Triangle than it does
in a lot of the rural areas of the State, or it’s different
on the East than it is in the West, etcetera. And, so, we
sort of took a look at this and tried to determine how much
it really costs for people to live here and, basically, what
we found on average is that people needed more than double
the Federal Poverty Level to live in North Carolina, and it
varies from about a hundred eighty percent to over double
depending on which county of the State you’re in.
Lewis:
Now, in the report that you co-authored, you said that
sixty percent of North Carolina families with children are
not earning enough to cover basic needs, and that equates
to nearly six hundred thousand families in the State. Now,
how does this impact other areas of family life?
Schmidt:
Well, of course, it was a really shocking finding to us to
look at sort of a bare bones budget and determine what a family
need, and, then, see that so many of them were not earning
that based on census data. And what this really means for
the families is that they’re having to struggle to just
meet the basic needs of their children, such as food, clothing,
housing, and for many families, what we’ve seen in the
worst case scenarios is an increase of families looking for
emergency food assistance, emergency shelter, going to churches
for help. But, at the same time, we also see families doing
whatever they can on their own. It may mean they have to move
a lot, and the children can’t stay in the same school
for a whole school year. It may mean they’re doubling
up with other family members, or they’re just doing
without, and family members aren’t eating all the time,
or health care isn’t being covered at all.
Lewis:
Now, Dr. Cordato, in your report, “More Than Bare
Bones,” now, you believe that the data in Mrs. Schmidt’s
report is somewhat exaggerated. Why do you feel that way?
Cordato:
Well, actually, what I think — what they did was
they based their report on the Economic Policy Institute’s
report, which I looked at quite carefully, and I think it’s
unfortunate. I think they were misguided by using the methodology
of Economic Policy Institute’s report, because what
they do is they pick measurements. It’s quite clear
that they pick the measurements that would give them the results
that they wanted to get before they started the study. Let
me give you — and they’re all very exaggerated.
Let me give you one example: housing cost. The Economic Policy
Institute and the Justice Center picked something called “Fair
Market Rental Value.” Well, that is a HUD category,
and it sounds, you know, appropriate. Well, when you look
at it, it really isn’t. HUD’s Fair Market Value
is the rental price of decent, safe and sanitary two-bedroom
housing, which is what they use — two-bedroom housing
— at the fortieth percentile. Well, what that means
is that forty percent of the decent, safe and sanitary housing
two-bedroom apartments cost less than the amount that they’ve
chosen as what they describe as the “bare bones minimum.”
Forty percent of the housing costs less than that. In addition,
they only look at two-bedroom apartments. It’s amazing
to me to think that a single mom and a baby couldn’t
live in a one-bedroom house. I lived with my parents until
I was three-years-old in a one-bedroom, three-room apartment.
It’s the kind of thing that people on low budgets do
to get by. And that’s just one. They do the exact same
thing with respect to food, and I can go over the methodology,
but it could take a while. They do the same thing with Medicare
— Medicaid , for example. They way underestimate the
number of people in this State on Medicaid, which makes it
look like people are paying more out-of-pocket for health
care, and they have a category called “Miscellaneous”
where, for example — National Academy of Sciences in
their study, in their report, says that about sixteen percent
of food, clothing and shelter should be under this category
of Miscellaneous, and they make it over thirty percent, which
is double what the National Academy of Sciences suggests.
So, I believe that what the Economic Policy Institute did
was to, essentially, decide the kind of results they wanted
to get and then went and cherry-picked the definitions that
they wanted to use to get those results. And this is classic
advocacy research, as far as I’m concerned.
Schmidt:
Yes. I’d like to respond to that. First of all, we didn’t
use just what EPI, the group he’s talking about, used,
although they’re very well-respected nationally, and
I think their figures are very defensible, and really just
looked at what all the State’s had done in terms of
coming up with a living income standard. Second of all, the
goal here was really to look at what a family needs to support
themselves. I’m glad that Mr. Cordato agrees that families
need Medicaid and we should provide it for them so that they
can meet their health care needs, but the reality is that
welfare reform is about moving families off of those kinds
of programs, so that they could support themselves, and the
point of the standard — the living income standard that
we’ve created — is to talk about what does a family
really need to provide for their own health care, to do these
kinds of things. So, that’s what it is. In terms of
how we picked what data, needs — to come up with each
item. We looked at seven basic budget items. We have no item
for debt. We have no item for savings, although, clearly,
those are part of the current American budget, or should be,
especially, savings should be, and debt is a reality here.
You can’t buy a car without debt in most cases. For
that data, we just looked at what are the nationally recognized
standards that come out on a regular basis, so that we could
update the living income standard regularly, such as the HUD
Fair Markets which are determined by the U.S. government or
other U.S. government statistics, or State data that’s
done by the State government to determine what average child
care markets are. So, this wasn’t a case where we were
cherry-picking at all. What we were really doing is looking
at what is the most widely accepted data for each of these
costs, and it’s really an underestimate, if anything,
because it does not have debt in it. It does not have entertainment
costs in it. It does not have savings in it and a lot of things
that American families do need to do today to live.
Lewis:
Dr. Cordato, where do you believe that the research should
have been done as far as this report is concerned.
Cordato:
Well, I think that one of the things that could be done
is to start to look at — first of all, pick reasonable
standards. In other words, I think it’s quite appropriate
to look at how much people need to spend on housing, but to
make an assumption, for example, that forty percent of the
lowest cost housing is not going to be part of your calculation
— why, I don’t know — doesn’t make
sense. To make the assumption that all families, regardless
of size, have to live in a two-bedroom house doesn’t
make sense. So, I think we need to get our handle on realistic
figures. I would have gone with for housing — I mean,
for food, I would have gone with the Government’s Thrifty
Plan, which is what they use to calculate low-cost, healthy
meals cooked at home, which, going with the measurement they
picked, probably exaggerated the annual cost of food probably
by about sixteen hundred dollars. So, I think the exercise
is a good one and makes sense. National Academy of Sciences,
which is somewhat more respected that the Economic Policy
Institute, which is a highly ideological organization. National
Academy of Sciences has come up with a way, an alternative
measure, of poverty, and the Justice Center didn’t choose
to go with the National Academy of Sciences. I don’t
know why.
Lewis:
Let’s move on to another topic here. Now, Miss Schmidt,
your report calculated that workers need to earn at least,
on a State average, ten dollars and sixty cents an hour. With
the minimum wage still at five fifteen an hour, which is also
equal to the Federal minimum wage, do you think that law should
be established to bring wages up to what you consider as a
living wage?
Schmidt:
Well, again, as I said, our real goal was to look at what
does a family really need to make it and not to just say,
“Minimum wage has to be at this level.” If you
increase minimum wage from five fifteen to ten sixty in a
relatively short period of time so that families, more families
could earn enough, you would wreak economic havoc, and this
would have a result of some job loss and, perhaps, inflation
that could be problematic. What we’re really looking
at is — we can argue, I think, the numbers all we want,
but the reality is whether you think it’s ten sixty
an hour or nine an hour, families just aren’t earning
it., and we know a lot of families are working. Parents are
working full time and still can’t meet all the needs
and pay all the bills just for basic stuff, and, so, the question,
then, is if we have this ten sixty number, and we can break
it down by real basic need categories, then we can say, “Where
can we help families bridge the gap between what they’re
earning and what they need?” And we can also look for
what jobs — and help families — counseling, for
examples, in what jobs should they be preparing themselves
for, so that they do earn enough to support their family.
And I think that that’s the real goal here of the living
income standard. It’s not to be the be-all and end-all
of the dollars and cents, but to give us a better number than
National Poverty Level, and so that people can have a realistic
view of what they need, and so policy makers can know where
are the big expense areas for families. And, regardless of
what numbers you use, the real big expenses are child care
for families with young children, and housing, and that’s
where people need the most help.
Lewis:
Now, Dr. Cordato, you say that living wage laws will actually
hurt the poor. How will that do that?
Cordato:
Well, it’s just not me, by the way. It’s interesting.
Most studies say the exact same thing. But let me give you,
sort of, the economic theory here. You can’t make a
worker’s output product worth more simply by passing
a law that says an employer has to pay them more. The fact
of the matter is, an employer will not pay anyone more than
his productive output is worth to him, so if you pass a law
— let’s say that you have to pay someone ten dollars
an hour — what that means — and, by the way, ten
dollars an hour is just the wage. If you figure the cost of
employing that person to an employer, that’s probably
about thirteen dollars, giving social security, other benefits,
so it’s costing the employer thirteen dollars an hour
to hire that person. So, what does that mean? That means that
anyone whose productive output is not valued at thirteen dollars
or more by the employer is not going to get hired. He’s
going to be cut out of the labor market, and what that does
is that that takes off the bottom rung of the economic ladder
for all low-skilled workers or for many, many low-skilled
workers. This hurts the most low-skilled and least among us
in society: people with the poorest education, teenagers,
and people with very little or no work experience. So, you
just can’t make people worth more by passing a law that
says they have to be paid more, and this will throw people
out of work.
Lewis:
Now, you touched on education. How has education impacted,
as far as the wages are concerned?
Cordato:
Well, this is the right question. The real question we
should be asking is not what the minimum wage should be. The
question should be, “What can we do to make people worth
more, to make the value of their productive output worth more?”
Because that is what’s going to ultimately bring them
out of poverty, and this really goes back to an education
issue. Blacks and minorities are dramatically underserved
by the Government education system in this State and in other
States. Thirteen — over thirteen percent of blacks between
sixteen and twenty-four years old have dropped out of school
and have not gotten a GED or anything like that and they’re
trying — now, fix yourself an employer who says —
and you’re told, “You got to pay this kid, or
this person, this twenty-two-year-old with no high school
diploma — you have to pay him ten dollars an hour, or
it’s going to cost you, say, thirteen dollars an hour
to hire him.” It’s very unlikely that you’re
going to hire this person, because he has no skills that would
make him worth that amount. And I think to say that you have
to do that — because look at the choice. The choice
is that you have to hire him — the choice is that you
have to hire him at this amount or not at all, and many, many
employers will choose the not-at-all option, because the person
isn’t worth it. What we have to do is make people worth
more, and that has to be done through the education system,
and we can talk more about that if you want, but…
Schmidt:
I would like to respond to some of this. I think that Mr.
Cordato and I, clearly, disagree on this issue. The reality
is we’ve had a minimum wage in our country for decades,
and we raise it, Congress raises it periodically, and it does
not, in fact, throw people out of work, and it does not eliminate
low-skilled jobs. What we’re experiencing now is a major
shift in our economy, especially in North Carolina where we
are losing manufacturing jobs that paid better wages and benefits
and leave, and we’re replacing them with lots and lots
of retail and service jobs that tend to be lower skilled but
are also paying very little. And the question is, “Do
we want to subsidize companies coming into our State to create
these low-wage jobs and then have to still pay benefits to
these people working in them at the same time because they’re
not earning enough, and we know what they’re earning
will never be enough to meet their needs, their families’
needs. And you pay either up front, or you pay on the back
side, and you can pay with Government benefits or wages or
a combination, which is what we recommend. And I think that
Mr. Cordato is completely mistaken when he says that if you
required an employer to pay five fifty and hour instead of
five fifteen, they’re, suddenly, not going to hire people
without a high school education to be retain clerks in the
mall or to do other service jobs. It’s just not the
reality, and we aren’t, in fact, paying people, even
where the demand is, a decent wage. For example, we need many
child care workers at this stage in our economy, and we still
are paying them, even with experience, on average, less than
seven dollars an hour, and they can’t make it, and they
often don’t have benefits and very limited leave, and
they’re very often young parents themselves and can’t
even afford the day care that they’re providing to someone
else. So, I think it’s a misnomer and a misreading of
the current economy as it’s been working for decades,
to think that raising minimum wage is going to eliminate all
these jobs. It’s just not happened. Show me where it’s
happened. Show me when it’s happened. It just hasn’t.
Cordato:
Just look at the economic literature. I don’t have
to show you. The fact of the matter is they just did a —
two years ago, they did a survey of all the labor economists
in the American Economic Association — labor economists
happen to be the most liberal wing of economists — and
eighty percent of them said minimum wage laws throw low-skilled
workers out of work.
Schmidt:
But the data doesn’t support it.
Cordato:
That is absolutely…
Schmidt:
Over a hundred localities, a hundred localities have local
minimum wage laws, and they have not lost jobs, and there’s
a lot of data out there to support.
Cordato:
That’s absolutely not true. The fact is —
well, most of the literature, first of all shows that minimum
wage laws do nothing to bring people out of poverty. An excellent
study by two economists, Bader and Galloway, highly respected,
out of Ohio State, highly respected labor economists, show
— and they’ve looked at it every which way adjusted
for every variable you can think of — and it ‘s
shown that there is zero evidence that there is a positive
relationship between higher minimum wages and lower poverty
rates. And, in fact, what they’ve shown is that in some
instances, especially with blacks and low-skilled workers,
it puts certain classes of people more into poverty, and the
reason is — there are several reasons for that. One
is because there’s people who simply can’t find
work at higher minimum wage rates, and the other reason is
that minimum wages raise prices, but who do they raise prices
for? They raise prices for lower income people. The excellent
study out of Stanford University that looked at who benefits.
The most people who benefit from minimum wages are middle
and upper income families who have kids working on minimum
wage, who are getting a second income, and what happens is
they’re working in fields where the price is paid by
lower income people — the Wal Marts of the world, the
McDonalds of the world. And, so, what they found is that one
out of every four people in the lower income bracket, lower
twenty percent, benefit from the higher wage, but three out
of four lose, because this is, basically, a regressive tax.
It transfers money in terms of higher prices to the upper
and middle income families who are working the jobs.
Lewis:
It seemed like you wanted to respond.
Schmidt:
Well, I just think he can quote every, you know, economist
he wants on any report he wants. The reality is the last time
we raised minimum was ’96, ’97. We had the lowest
unemployment following that period and the lowest inflation
in decades, and it just doesn’t…
Cordato:
For minorities?
Schmidt:
Yes, even for minorities, and it just is not translating.
And also a lower poverty level. It’s just not translating
into what he’s saying, into reality.
Lewis:
And as we’re winding down here, I want to ask the
both of you, what do you see as recommendations to try and
ensure that low income families are able to provide for their
families? Miss Schmidt.
Schmidt:
Well, I think there are many recommendations. First of
all, we need to, as we can and it’s appropriate, raise
minimum wage in a gradual fashion. We also, then, need to
look at — the families need to earn more than minimum
wage, and a lot of primary wage earners for families are in
those jobs, and so we need to supplement them other ways.
Another thing really hurting —such as child care subsidies,
for example, or a health choice that covers children’s
health insurance in low-wage families. The parents at this
point are rarely covered in these families. Medicaid could
be expanded to do that, but there’s issues right now
in our State with funding it. Another thing that’s really
huge for families is that low-income families are paying a
larger portion of their income in taxes, and we need to make
our tax system fair so we’re not making them poorer.
Lewis:
Dr. Cordato?
Cordato:
Clearly, I think most of what the Justice Center proposes
is meant to not to bring people out of poverty. It’s
really to maintain them in poverty or about transferring wealth
from some people to other people. I think — two things
we have to do. One is we have to get minorities a better education,
and I see that happening, unfortunately through things that
are opposed by many people who argue that their views are
in the interests of these folks. For example, we need a lot
more charter schools in this State. A hundred charter schools
— nothing. We should double that. Vouchers. You know,
it’s interesting. Fifty years ago, in the South, the
establishment stood in the schoolhouse door to keep black
and minorities out. Now, they’re standing in the schoolhouse
door to keep black and minorities in a system that’s
failing them. They’re not giving them vouchers. They’re
not giving people tax credits. They’re not giving —
they’re not expanding charter schools to get them out
of this system that’s failing them.
Lewis:
I have to interrupt you here. We are out of time, and
this is a very spirited conversation that will go on for quite
a while, and I’d like to thank both of you for being
here — Miss Sorian Schmidt and Dr. Roy Cordato for coming
out and adding clarification to this pressing issue of minimum
and living wages. To review a copy of the reports authored
by our guests or obtain a transcript of the program, you can
visit us online at www.unctv.org/bif.
You can also call us with your comments or questions at 919-549-7167.
Please join us each and every Friday night at nine-thirty
for more on the people and issues that concern you most. For
Black Issues Forum, I’m Mitchell Lewis. Good
night.
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