PAI: The cost of inaction

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PAI: The cost of inaction

Wed, 10/04/2017 - 2:05pm -- Anonymous

by Paul Cillo, Public Assets Institute Since July, the Minimum Wage Study Committee has spent a lot of time discussing the possible effects of raising the minimum wage. Their time might be better spent discussing the effects of not raising it. In our 2016 State of Working Vermont report, Public Assets found that nearly 20,000 working families with children were not earning enough to meet their basic needs, including two-thirds of single parents. Even in families with two working adults more than a third were struggling to make ends meet.

At the core of any effort to raise the minimum wage is the goal of putting more money in low-wage workers’ pockets. While there are complicating factors that policymakers have to consider (benefit cliffs, timing, economic effects) the ultimate question has to be: Will this help make Vermont families better off?

The answer is yes.

Every two years, the Legislative Joint Fiscal Office analyzes the amount different family types require to meet their basic needs. They estimate the wages each earner would need in order to cover that family’s costs. The official Vermont livable wage is the average of the urban and rural amounts for an individual living in a two-adult household with no kids. In 2016, the livable wage was $13.03 per hour.

In 2016, the Vermont minimum wage was $9.60. As the table indicates, no one earning the minimum wage last year was meeting their basic needs without additional support. Even a single person in shared housing without children working full time could not make ends meet on the current minimum wage. And while the minimum wage will go to $10.50 in 2018 and grow with inflation after that, it won’t get closer to covering basic needs, which also grow with inflation.

The minimum wage is overdue for an increase as wages for most workers have been stagnant since 2000 despite economic growth. And the minimum wage is not getting closer to the livable wage; it’s been less than 75 percent of a livable wage since the Joint Fiscal Office started calculating the livable wage more than a decade ago. These are reasons enough to raise the minimum wage.

While it’s not the only policy change needed to ensure that every Vermonter can afford their basic needs, a significant increase in the minimum wage would definitely be better than doing nothing for the tens of thousands of Vermonters now struggling to pay for food, housing, and other essentials.