Put state policy focus on raising low wages

  • Article by: EDITORIAL BOARD , Star Tribune
  • Updated: May 23, 2014 - 6:14 PM

Minnesota report says more jobs alone won't help working poor.

Minnesota is the economic envy of the region, yet state median household income is down 9.5 percent since 2000. It’s a high-employment yet high-underemployment state where wages for low-skilled jobs have dropped more steeply than for other categories in the past decade. One in four Minnesotans now have incomes below 200 percent of the federal poverty line — the highest such proportion in 50 years.

Those are some of the findings of the Minnesota House’s Select Committee on Living Wage Jobs, which produced a report titled “Making Work Pay in Minnesota.” Not surprisingly from a committee so named, the report argues that Minnesota’s economy is producing too few “living-wage” jobs — that is, jobs that pay more than $14.03 hourly, enough so that if paid to each of two adult workers in a family of four, that family’s income would cover an estimated bare-bones family budget. In 2009, about 40 percent of Minnesota jobs paid wages below that level.

Surprising, at least to some Minnesotans, may be the well-researched report’s conclusion that economic growth alone won’t solve the problem. Neither, by itself, will a boost in Minnesotans’ educational attainment. More focus on better pay for low-wage jobs is in order.

Released the day before the 2014 Legislature adjourned, the report clearly was not intended to influence legislation this year. But it deserves the attention of the candidates who last week began filing for seats in the 2015 Legislature. It offers several dashes of postrecession reality that challenge conventional campaign rhetoric from both the left and the right. For example:

• “Jobs, jobs, jobs” won’t solve the wage problem. The number of jobs in Minnesota has been growing for more than four years. But the fastest growth has been in lesser-skilled, low-wage occupations, which are projected to employ one of three Minnesotans in 2020. For the people who fill clerical, food service, retail and caregiving roles, “only higher wages and/or public assistance will enable these workers to make living wages,” the report says.

• Most welfare recipients are employed. Of households in poverty, 69 percent have one or more members in the workforce, the report said. At least a third of those who are not working are disabled. What’s more, the vast majority — 80 percent — of Minnesotans on public assistance are working or were working sometime in the eight quarters before applying. Half of the 266,000 Minnesota adults receiving food stamps in December 2011 were employed. Casting low-wage workers as idle “takers,” as some politicians do, is an unwarranted smear.

• More college grads alone won’t help, but better tools for connecting employers’ needs with grads’ preparation might. Fully half of the state’s workers are estimated to be “underemployed,” working at jobs for which their educational attainment exceeds the work’s requirements, the report said. The phenomenon includes part-time workers who want to work full time; temporary workers who would prefer permanent jobs; recent college graduates who cannot find suitable work; displaced workers whose industries have outsourced, relocated or disappeared, and legions more who’ve settled for less than they’d hoped for.

“Simply expanding higher education will not fit workers’ skills to the jobs that become available,” the report said. “Job mismatch appears to be happening at all levels of qualification.” A mechanism for employment matchmaking could help ease underemployment for skilled workers. But the larger challenge for Minnesota lies with the lesser-skilled third of the workforce that, without intervention, appears to be headed for increasing poverty.

• State policy can help boost low wages. In fact, it just did. The increase in the state minimum wage enacted in April will take the wage floor to $9.50 by Aug. 1, 2016, boosting the incomes of an estimated 350,000 Minnesota workers. The minimum is slated to climb with inflation beginning in 2018, up to 2.5 percent per year.

Rep. Ryan Winkler, the House sponsor of the minimum-wage hike, chaired the select committee that produced the report, with consultation by economists Ann Markusen of the University of Minnesota and Karine Moe of Macalester College. He maintains that the minimum wage should be among several state and societal cues to employers to boost the value, and hence the pay, of low-wage workers.

Others include pressure for greater pay equity for women; more transparency about salaries (as just adopted in the Legislature’s Women’s Economic Security Act); more living-wage requirements written into state subsidy contracts with employers and local governments, and more local-level pressure on employers to do right by all of their workers.

Those ideas have been around for years and have met with predictably strong resistance from the state’s employers. But with the first phase of a three-phase minimum wage increase due to take effect this summer, a pilot project of sorts will unfold. Minnesotans will see what happens when low-wage people have more money in their pockets courtesy of earned income, not taxpayer assistance. If the results are positive for the state’s economy, employers might take notice — knowing that other Minnesotans surely will.

  • State that works

    “Minnesota’s labor force participation rates, at 71.2 percent, remain substantially above the national rate of 64 percent, and we rank 4th among all states.”

    “Making Work Pay in Minnesota,” report to the House Select Committee on Living Wage Jobs, May 15, 2014.

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