The WaPo presents an important and moving piece today about the plight of low-wage workers, and the anxieties generated by their precarious living standards. The piece features a single man without kids (JS), and my colleague Chuck Marr very effectively amplifies the piece and draws two important policy implications from it, to which I add a third:
–The US tax system actually deepens the poverty of working poor and near-poor persons like JS. While the Earned Income Credit more than offsets other taxes of low-income working families with children, the benefit for childless adults is minimal, a maximum of about $500 a year as opposed to about $5,000 for a low-income worker with two kids. No question, the low-income parent needs more income than those without kids, by as the WaPo story makes vividly clear—along with even a passing familiarity of what it takes to get by today—the solo adult EITC is too low and should be raised (NYC is engaged in an important pilot program that tests just such an increase).
–A higher minimum wage would help, and there’s an important wrinkle here as well that didn’t come out in the piece. Readers who know that the national minimum wage is $7.25 an hour may wonder why JS earns $5.25. The answer is the “tip exception” to the min wage: if you’re a tipped worker, your base wage can be as far below the minimum as $2.13 (!), but if your tips don’t get you up to $7.25 your employer must make up the difference.
Today’s subminimum is a pitiful 30% of the minimum wage, which itself is too low. In coming weeks, I expect the Miller/Harkin minimum wage bill to be introduced in the Senate. This proposal takes the minimum up to $10.10 in three annual increments of $0.95 and then indexes it to inflation. It also raises the subminimum up to 70% of the minimum. No, it’s not going anywhere, but these things have to have a long runway in our benighted times.
–Full employment must be on this list. A key finding of our new book is that the benefits of lower unemployment disproportionately help the least well off, both in terms of higher hourly wages and more hours of work.
The WaPo story is a microcosm of America’s larger low-wage-work problem that John Schmitt underscores here. We’ve got a larger share of low-wage work than other advanced economies, and our low-wage workers earn less, get fewer non-wage benefits, and are less likely to benefit from either collective bargaining or government support. The steps above can help do something about that.