By Washington Gov. Christine Gregoire and Oregon Gov. John Kitzhaber, from Politico
On New Year’s Day, our states accomplished something that Congress has achieved only erratically over the past 40 years: raising the minimum wage.
By now, minimum wage increases have become a routine practice in our home states, thanks to a key policy reform known as indexing, which establishes automatic annual adjustments to the minimum wage to keep pace with the rising cost of living each year. Washington led the nation in adopting indexing in 1998, and Oregon followed suit in 2002. In each state, the adoption of indexing resulted from ballot initiatives that passed with roughly two-thirds of public support.
Red and blue states alike have now begun indexing their minimum wage rates: On Jan. 1, our home states were joined by Arizona, Colorado, Florida, Missouri, Montana, Ohio and Vermont in raising the minimum wage to keep pace with the cost of living. These raises are modest in size — between 10 and 15 cents in each state — but we adopt these raises with a level of regularity that Congress has not managed to achieve in decades. With the addition of a 35-cents minimum wage increase signed by Rhode Island Gov. Lincoln Chafee last June, a total of 10 states throughout the country boosted wages for low-paid workers on New Year’s Day.
Low-wage occupations have dominated job growth in the post-recession recovery, exacerbating the steady disappearance of middle-class jobs from the U.S. economy over the past several decades. In response, states across the country have taken action to protect America’s promise of middle-class upward mobility. Eighteen states already have raised their minimum wages above the federal level — and, on Jan. 1, Missouri became the 19th. Raising the minimum wage gives a much-needed lift to workers who are struggling to make ends meet, while generating precisely the kind of consumer spending that businesses need to expand operations and begin hiring again.
According to the nonpartisan Economic Policy Institute, the modest minimum wage increases taking effect in 10 states this January will boost pay for nearly 1 million workers throughout the country and generate more than $183 million in new consumer spending. As fiscal concerns continue to stall congressional action to accelerate the recovery, raising the minimum wage remains an effective tool for offering relief to working families and for generating economic growth in a budget-neutral manner. Based on our experience, we offer three proposals to help build an American economy that works for everyone.
First, Congress needs to raise the federal minimum wage. At $7.25 per hour, or roughly $15,000 per year for full-time work, the minimum wage no longer provides a path out of poverty and remains decades out of date. If the minimum wage had simply kept pace with the rising cost of living since the late 1960s, it would be more than $10.55 today.
Second, Congress needs to raise the sub-minimum wage for tipped workers, which has been stuck at $2.13 per hour since 1991. Tipped workers are almost twice as likely as are all other workers to fall beneath the federal poverty level. Our states have set the minimum wage for tipped workers equal to the full value of the minimum wage for all workers, eliminating the disparity in pay levels altogether.
Third, Congress should learn from the example of our home states and index the minimum wage to rise automatically each year with the consumer price index. Indexing the minimum wage will prevent the purchasing power of the minimum wage from gradually eroding as a result of the rising cost of living. The small, automatic cost-of-living adjustments that our states have adopted also give businesses greater predictability over their payrolls each year by breaking the cycle of political gridlock over the minimum wage.
The first signs of progress on the federal level have already emerged. In July, Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) introduced the Fair Minimum Wage Act of 2012, which would raise the federal minimum wage to $9.80 by 2014, raise the tipped minimum wage to 70 percent of the full minimum wage, and index both to automatically rise with the cost of living.
In the meantime, expect more states to take matters into their own hands and join the growing movement to raise wages for low-paid workers. Proposals to raise and index the minimum wage are currently under consideration in New York, New Jersey, Illinois and California, with additional campaigns planned in Connecticut, Maryland, New Mexico and other states. By joining us in raising the floor on pay, these states will stand taller — hopefully serving as a beacon for Congress to follow in rebuilding an economy that works for all of us.