Boosting DC’s Minimum Wage Has Broad Support

The Numbers

A starting wage of $12.50 minus benefits for employees of DC big-box retailers proved to be controversial among our city’s elected officials. But even some of the legislation's strongest critics agreed with supporters on one key point: that DC’s minimum wage is too low and needs to be raised.

On the same day the DC Council failed to overturn Mayor Gray’s veto of the Large Retailer Accountability Act, three bills were introduced–with broad support—to boost DC’s minimum wage to more than $10 an hour. And the next day, the mayor himself said that raising the minimum wage is one of his top priorities.

Raising the minimum wage – at both the local and federal level – has been demonstrated time and time again to increase take-home pay without resulting in job cuts that hurt low-wage workers. It is one of the most studied economic topics, and the vast weight of the research points to “little if any effect” on jobs.

Now is the time for DC residents to hold our elected leaders to their word, as the public debate shifts from the Large Retailer Accountability Act to what might be called a Keep Your Word on Raising the Minimum Wage Accountability Act.

RAISING THE WAGE HELPS DC FAMILIES AND OUR ECONOMY

Everyone knows how expensive DC has become. Whether you recently looked for an apartment and saw $2,700 rents for studios or found out your neighbor sold his tiny house for much more than the asking price, we are witness daily to DC’s rising housing costs.

It boggles the mind to think about how anyone can live in the District on the current minimum wage of $8.25 an hour. Yet many struggle to do just that. At $8.25 an hour, a parent with two kids working full-time earns well below the federal poverty line. Most of DC’s low-income households are in fact working, and many have one or more people with a full-time job. Others work part-time because they work in retail or other service industries where part-time work is the norm.

 DC has among the highest levels of income inequality – the gap between rich and poor – in the United States.  The lowest-earning fifth of DC households have an average income of just $9,100, while the richest five percent have an average income of $470,000.

Steps to raise wages are critical to helping low-income residents continue to call DC home. Analysis of a $10.10 wage—as proposed for the entire country by Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-CA)—shows that it would help 36,000 DC workers, according to the Economic Policy Institute. The estimated $58 million in increased wages would be spent at markets, clothing shops and hardware stores, helping District businesses large and small. The direct and indirect impacts would help an estimated 16,000 children. Almost all affected workers—95 percent—are 20 years or older.

This has many benefits, not only to the individual household, but the city as a whole because these residents will be less reliant on taxpayer-funded programs for health care, housing, and food assistance. That saves DC money, allowing us to shift those funds to other investments.

RAISING THE MINIMUM HELPS WORKERS WITHOUT JOB LOSS

Economists have studied the impact of minimum wage increases for decades. And what they have found is good news for low-wage workers: Raising the wage floor provides an income boost for low- and moderate-income households without leading businesses to cut jobs notably. This year, noted economist Paul Krugman wrote that: “U.S. experience offers many ‘natural experiments’ in which one state raises its minimum wage while others do not…the great preponderance of the evidence from these natural experiments points to little if any negative effect of minimum wage increases on employment.” 

Two economists, John Schmitt and David Rosnick, specifically examined the impact of city-level minimum wages in in a 2011 paper and similarly concluded that “citywide minimum wages can raise the earnings of low-wage workers, without a discernible impact on their employment.”

The economic research cannot prove why a minimum wage increase works this way, but they make educated guesses:  Some businesses with minimum wage jobs – such as retail – need to be in specific locations to reach customers and cannot move in response to wage hikes. Also, businesses adjust to higher labor costs in many ways, including efficiencies in other parts of their operations. Higher wages also result in lower worker turnover – perhaps because are happier and more committed – a tremendous benefit to a business. This “high-road” approach of paying workers more to get better workers is one that many employers take, most famously Costco.  The retailer has average hourly pay of over $20 an hour, and they are wildly successful.

THE DC ELECTED OFFICIALS ACCOUNTABILITY ACT

The vast majority of DC residents support efforts to raise low wages. A recent Hart Research poll found that seven of 10 residents supported the Large Retailer Accountability Act, and six of 10 would like to have seen a minimum wage increase plus a higher wage for large retailers. This suggests that a majority of all residents will back a stand-alone minimum wage hike.

The minimum wage in 1968, measured in today’s dollars, was $9.55 per hour. U.S. labor productivity has risen by 135 percent since then. If the minimum wage had kept up with productivity growth over this period, it would now be $18.67 per hour. 

Three of the four bills now being considered by the Council would raise the minimum wage to over $10 per hour over the next two to four years. That would bring DC’s wage floor to roughly the 1968 level – though without any adjustment for productivity improvements since then. Here’s a rundown of what has been introduced:

  • Councilmember Wells introduced a bill that would increase the minimum wage to $10.25 over two years and set future annual increases to the consumer price index. This bill also would increase the standard deduction in DC's income tax, helping reduce the high taxes paid by DC's low- and moderate-income families.
  • Councilmember Catania introduced a bill that would increase the minimum wage to $10.50 over three years, but it would not index to inflation after that. The bill would also amend the city's paid sick leave law to include tipped restaurant workers.
  • Councilmember Orange introduced a bill to increase the minimum wage to $12.50 an hour over the next four years and tie future increases to the consumer price index. The bill would also raise the minimum wage paid to tipped workers to 70 percent of the minimum wage. The minimum wage before tips for these workers currently is just $2.77 an hour in DC.
  • Councilmember Bowser introduced a bill to create a commission on DC’s minimum wage and report recommendations within nine months. 

Now is not a time to be distracted. There are many things our government can do to improve the lives of low-wage households in our city, including improving the educational resources and outcomes for their kids, providing good job training in growing sectors of our economy, and keeping housing affordable.

But having a city of residents who earn above the poverty level makes all these investments pay off even more. 

Silverman is the communications director and workforce policy analyst at the DC Fiscal Policy Institute.