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The impact of a $15 minimum wage

Posted on February 5, 2019

Approximately 37.5 percent of all workers (745,000) and 86.6 of workers living below the poverty line (159,000) in Louisiana would get a pay raise if the federal minimum wage were raised to $15 an hour by 2024, according to a new report from the Economic Policy Institute. Louisiana has the worst pay gap in the country between men and women, and it’s worse for women of color. The report shows that an increase would address this issue, with 45.8 percent (452,000) of all women workers and 58.2 percent of black and hispanic women workers (193,000) in the state receiving a raise. Below are some key takeaways from the report:

  • Gradually raising the minimum wage to $15 by 2024 would directly lift the wages of 28.1 million workers. The average directly affected worker who works all year would receive a $4,000 increase in annual wage income—equal to a raise of 20.9 percent. Another 11.6 million workers would benefit from a spillover effect as employers raise wages of workers making more than $15 in order to attract and retain employees.
  • All told, raising the minimum wage to $15 by 2024 would directly or indirectly lift wages for 39.7 million workers, 26.6 percent of the wage-earning workforce.
  • Over the phase-in period of the increases, the rising wage floor would generate $120 billion in additional wages, which would ripple out to the families of these workers and their communities. Because lower-paid workers spend much of their extra earnings, this injection of wages would help stimulate the economy and spur greater business activity and job growth.
  • The workers who would receive a pay increase are overwhelmingly adult workers, most of whom work full time in regular jobs, often to support a family.
  • The average age of affected workers is 35 years old. A larger share of workers ages 55 and older would receive a raise (14.6 percent) than teens (9.3 percent). More than half of all affected workers are prime-age workers between the ages of 25 and 54.
  • Although men make up a larger share of the overall U.S. workforce, the majority of workers who would be affected by a raise to the minimum wage (57.9 percent) are women.
  • The minimum wage increase would disproportionately raise wages for people of color—for example, black workers make up 11.8 percent of the workforce but 16.9 percent of affected workers. This disproportionate impact means large shares of black and Hispanic workers would be affected: 38.1 percent of black workers and 33.4 percent of Hispanic workers would get a raise.
  • Of workers who would receive a raise, 60.0 percent work full time, 44.0 percent have some college experience, and more than a quarter (28.3 percent) have children.
  • Nearly four out of every 10 single parents who work (38.9 percent) would receive higher pay, including 43.0 percent of working single mothers. In all, 5.4 million single parents would benefit, accounting for 13.5 percent of those who would be affected by raising the minimum wage to $15 by 2024.
  • The workers with families who would benefit are typically the primary breadwinner for their family, earning an average of 51.9 percent of their family’s total income.
  • The Raise the Wage Act would disproportionately help those in poverty or close to it. Two-thirds (67.3 percent) of the working poor in America would receive a pay increase if the minimum wage were raised to $15 by 2024.
  • A federal minimum wage increase to $15 in 2024 would raise wages for the parents of 14.4 million children across the United States, nearly one-fifth (19.6) percent of all U.S. children.

 

Gov. John Bel Edwards has proposed a state minimum wage increase of $1.25 over to years to $8.50 an hour. In March, LBP’s Jeanie Donovan (now policy director at the Louisiana Department of Health) examined the impact for workers if the state minimum wage was set to the amount the governor is proposing and the impact if the Legislature repealed the state law that prohibits localities from setting their own minimum wage.

 

LABI urges new changes to ITEP
Louisiana’s largest business lobby is upset that local governments are making use of the new discretion granted to them by Gov. John Bel Edwards to evaluate property tax breaks to manufacturers. The Louisiana Association of Business and Industry supported the changes Gov. John Bel Edwards made to the Industrial Tax Exemption Program when they were implemented last year, but now calls it a “broken” system. LABI President Stephen Waguespack spoke to the Press Club of Baton Rouge on Monday and outlined the new changes he would like made to the generous exemption program. Shortly after, LABI released a report outlining why the organization supports the property-tax exemption program:

Waguespack said he supports local input, but argued the program should be changed again to give companies seeking tax breaks a “single point of contact” in each parish because the process has turned into “local chaos” in some places. He said local officials also should be able to grant more lucrative exemptions than the 80 percent currently allowed, but also said they should not be able to reduce the amount below an 80 percent “floor.” Waguespack stopped short of saying exactly what that single point of contact should look like, saying locals should be able to determine that. “We’re willing to work with anyone on this to get that local input in a way that takes away some of the chaos we’re seeing,” he said.

The reaction to the East Baton Rouge Parish school board’s decision to reject Exxon Mobil’s ITEP request is far reaching and has made it all the way to the New York Times.

(Full disclosure: LBP Director Jan Moller is a member of the Board of Commerce and Industry, which oversees ITEP)

 

Stability is a good start, but more growth is needed
After more than a decade of cuts, funding for higher education has remained stable for the past two years. Stable funding is good, but as the Advocate editorial board explains, what the state really needs is growth in funding for our colleges and universities. However, this may prove elusive:

Louisiana’s future remains dependent on a robust educational system that starts at birth and continues through higher education. But all that, including more than college funding, is an expensive proposition for a state government where special interests protect an antiquated tax code and changes backed by Edwards and reform-oriented business groups have been sidelined in the Legislature, again and again. When it comes to cuts, higher education and health care remain dependent on the political winds, and revenue increases to get Louisiana spending up from the emaciated levels of the Jindal years are often bitterly criticized — and typically no solutions are offered.

 

Less talking, more doing
A state panel recommended in January that the Legislature should allocate about $86 million in next year’s budget to ensure that most young children from low-income families have the support they need. The Early Childhood Care and Education Commission said the funding would increase access, quality and affordability of early childhood education “to significantly bolster children’s readiness for kindergarten.” The Nola.com/Times Picayune editorial board applauds the new plan to fund preschool and child care services, but urges lawmakers to actually implement the it:

Educators and other advocates for Louisiana children have pushed the Legislature for years to increase funding for preschool. A coalition of more than 45 business, advocacy and community groups called Ready Louisiana — which includes the Committee of 100 for Economic Development, League of Women Voters, Louisiana Budget Project and Stand for Children — are dedicated to getting resources for preschool. Legislators talk about the importance of preschool, but they haven’t committed the state’s money to it.

 

Number of the Day
36 – Average age of a worker earning minimum wage in Louisiana. (Source: Economic Policy Institute)

 

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