This session, state legislators are considering raising the minimum wage to $9.50 for large businesses (those businesses with over $500,000 in annual gross revenue), which was a recommendation of the 2010 bi-partisan Legislative Commission to End Poverty.
Currently, the House and Senate are debating whether to index for inflation the proposed minimum wage increase.
The Minnesota Catholic Conference supports an increase in the minimum wage among other policies such as tax credits and childcare assistance recommended by the commission that are designed to foster family economic security and restore work as a ladder out of poverty for many Minnesotans.
The economics of the minimum wage have been hotly debated. Therefore, it is worth revisiting how MCC arrived at its support for an increase in the minimum wage.
Ladder out of poverty
In 2004, 35 ecumenical and interfaith leaders in Minnesota, including the state’s Catholic bishops, came together and published “A Common Foundation: Shared Principles for Work on Overcoming Poverty.”
“A Common Foundation” eventually led to the creation by state lawmakers of the Legislative Commission to End Poverty. The commission conducted its business through hearings, research, interviews, multiple listening tours and fact-gathering sessions.
It found that increasing the minimum wage could, on its own, lower the poverty rate by at least a half of a percentage point, and increase the wages of approximately 479,000 Minnesota workers (LCEP, p. 33).
A minimum wage increase combined with tax credits, child care assistance and education spending could cut the poverty rate by as much as 3 percent (LCEP, p. 21).
A measured increase in the minimum wage is desirable from an economic standpoint and is supported by other statistics as well.
The purchasing power of the minimum wage is 30 percent lower than it was in 1968. As policy analyst Bill Galston has discussed repeatedly in the Wall Street Journal, gains in productivity over the last 30 years have not been matched by wage increases, which have remained stagnant, meaning the benefits of economic growth are not being widely shared.
One concern with raising the minimum wage is that it will affect small businesses and cost jobs. But the effect on small businesses may be overstated.
According to the National Employment Law Project (www.raisetheminimumwage.com), the majority (66 percent) of low-wage workers are not employed by small businesses, but instead by large corporations with more than 100 employees.
And what of the big businesses? Will they be able to handle an increase in the minimum wage without shedding jobs? The data say yes.
According to the National Employment Law Project, the 50 largest employers of low-wage workers have mostly recovered from the recession and are in strong financial positions: 92 percent were profitable last year; 78 percent have been profitable for the last three years; 75 percent have higher revenues now than before the recession; 73 percent have higher cash holdings; and 63 percent have higher operating margins (a measure of profitability).
One piece of the puzzle
All of this data supports the bishops’ judgment that raising the minimum wage (to a certain point) is a good policy for Minnesota.
Support for a higher minimum wage, however, is a prudential judgment, not an infallible one, and reasonable people of goodwill can disagree on the merits of the policy.
A minimum wage is not necessarily an unmitigated blessing for workers, businesses or the economy as a whole. As noted earlier, a wage floor that is too high will likely eliminate jobs. And a minimum wage that does not take into account the difference between large and small businesses and their ability to absorb additional labor costs could hurt the very people it is designed to help.
Further, a “minimum” wage is not mandated by the Gospel. That being said, paying a “just” wage is a Gospel requirement (Catechism of the Catholic Church, 2434). Public policy, however, is incapable of mandating “just” or “living” wages across the labor market because not every deficiency in human affairs has a legislative solution. The just wage comes about primarily through the solidarity and cooperation shown between labor and capital.
But sometimes the market is not able to adequately distribute the resources necessary for the human growth of all its citizens (Compendium of the Social Doctrine of the Church, 353). Therefore, a government-mandated “minimum” wage is one way in which the political community can help workers participate in the fruits of the economy and foster just wages.
The Church has almost always led the way in being an advocate for the poor and the worker. Pope Francis has highlighted the importance of the Church’s work in the community and in the legislatures to combat “an economy of exclusion.”
A minimum wage is not a perfect solution, nor is it the only solution for combating poverty and fostering economic opportunity. But it is one policy that looks more prudent and pressing every day.
Adkins is executive director of the Minnesota Catholic Conference.