Friday 13 December 2013

US in gridlock over minimum wage

Many workers do not earn enough to survive but higher hiring costs may mean fewer jobs
By Jeremy Au Yong, The Straits Times, 12 Dec 2013

ABOUT 70 people are in line inside the Department of Human Services office at 1pm on a freezing Monday, many with children and toddlers in tow.

Mr Will Sanchez, 28, a construction worker, has been in line since 6.30am with his two-year- old son Troy trying to apply for medical coverage for the low-income. Though he came two hours before the office opened and has been waiting for five hours, there are still 30 people ahead of him.

"It's always like this. People always complain that it's really slow here but we don't have a choice," he said.

The crowd inside, applying for a range of services from food stamps to unemployment insurance, is a measure of the problem currently plaguing large swathes of the United States: A growing number of working adults do not earn enough to support themselves and their families.

That problem is the centrepiece of an ongoing battle to raise the minimum wage - now US$7.25 (S$9.05) an hour, or about US$900 a month after taxes - across the US.

A move to boost the rate to US$10.10 an hour has been stuck in Congress for months with Democrats pushing for it but Republicans firmly against the move.

The fight sharpened over the past week with fast-food workers going on strike at hundreds of outlets nationwide and a similar number picketing Walmart stores on Black Friday.

At least 21 of the 50 states have also recently passed some form of legislation increasing the minimum wage with even more being done at the county level.

One of the most eyebrow-raising moves came in the suburb of SeaTac, near Seattle. The bulk of the residents there work at the nearby Seattle Airport, and they voted to increase minimum wage to US$15 an hour, more than double the federal level.

Yet, it also encapsulated how divided opinion is on the issue. There were 12,108 voters registered to cast ballots but the winning margin ultimately turned out to be just 77 votes.

The bone of contention here is no different to other minimum wage debates all over the world: Does an increase in the cost of hiring lead to a loss of jobs?

The workers clearly believe big businesses making fat profits can pay workers a living wage without a loss to competitiveness.

A statement from the non-governmental organisation, Good Jobs Nation, which started a petition to President Barack Obama for an increase in wages for federal employees, said: "Walmart and McDonald's have led the way in creating a low-wage economy that is hurting all American families.

"As the middle class disappears and income inequality rises, low-wage jobs are increasingly the only ones available - and our whole economy suffers."

Mr Obama does seem sympathetic to the cause and only last week described closing the income gap as the "defining challenge of our time".

Opponents say that a push to increase minimum wage is focusing on the wrong problem.

Dr Keith Hall, a former commissioner of the Bureau of Labour Statistics who is now an academic at the George Mason University, told The Straits Times that attention needs to be paid to long-term solutions to helping the low-income. This includes creating better jobs and more economic growth.

"We're not getting very good job growth. We are short maybe 10 million jobs from where we were before the recession. We are still a long way from a healthy labour market," he said.

Until that happens, he worries that raising minimum wage by 30 to 40 per cent will actually hurt the needed job growth. He said most studies look at only small increases in minimum wage.

"This time, they are going for a lot. We're talking about nine million people who will have their wage cost go up by 30 to 40 per cent.

"The concern about that is: will employers still be able and willing to hire these people?"

For Mr Sanchez, the risk of losing his job is scarier. "It's nice to get paid a lot but first thing you need is to get paid," he said.

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