The following is a 500-word policy proposal I wrote for a national scholarship application:
POLICY PROPOSAL
To: Sen. Thomas M. McGee Senate Chair, Joint Committee on Labor and Workforce Development
Rep. Michael J. Rodrigues
House Chair, Joint Committee on Labor and Workforce Development
From: ——
Problem Statement
Income inequality has grown more in Massachusetts than in forty-seven other states over the past two decades (1). Earnings for the highest income families in Massachusetts have grown almost five times as fast as those for low-income families (2). Higher levels of economic inequality are associated with increased levels of crime, poor health, high mortality rates, poor schools, and poor housing (3).
One of the main reasons behind the increasing income inequality in Massachusetts is that the inflation-adjusted value of the state minimum wage is now well below that of prior decades. The Massachusetts minimum wage was at its inflation-adjusted peak in 1968, when the nominal rate was $1.60/hr., or $9.23 in today’s dollars. The real value of the minimum wage has since deteriorated by 27 percent (4).
The Legislature’s most recent bill to increase the minimum wage to $8.00/hr. by 2008 is inadequate for two reasons: first, the inflation-adjusted $8.00 rate will be worth $7.66/hr., which is the amount that minimum-wage workers were earning in 2001; secondly, the bill fails to protect the real purchasing power of the minimum wage by providing for inflation indexing.
Proposed Solution
To restore the real purchasing power that the minimum wage has lost over the past decades-and to protect that purchasing power against future inflation-the minimum wage must be increased and indexed. Specifically, a nominal increase to $9.65/hr., effective January 1, 2009, is necessary to ensure that minimum wage workers earn the same in real terms that their counterparts received in 1968. Beginning January 1, 2009, and annually thereafter, the minimum wage will be adjusted for inflation by a calculation using the CPI-U for the prior year (5).
A policy that raises the minimum wage and protects its real value will improve earnings for low-wage workers, help reduce poverty rates, and strengthen the state economy. The real earnings of low-wage workers have steadily progressed since 1995, when the Commonwealth began raising the minimum wage (6). Up to 404,000 Massachusetts workers, or 13.8 percent of the total workforce, will benefit when the minimum wage is raised (7). Since the Legislature’s action to increase the minimum wage in 2000, the Massachusetts poverty rate has fallen from 10.8 percent to 9.5 percent in 2003 (8). When low-wage workers have more funds for education and job training for higher-skilled jobs, the state will attract more businesses. More money will circulate in the state economy, and more tax revenue will be collected, which will help alleviate our communities’ current fiscal crisis.
Major Obstacles/Implementation Challenges
The greatest obstacle in advancing this proposal may be the lack of political will on Beacon Hill. The Legislature is unlikely to take up the divisive minimum wage issue again in the current session. Legislators will become complacent because, at $8/hr., the state minimum wage will become the highest in the country.
The Massachusetts Chamber of Commerce will lobby the Legislature intensively against any measure that proposes an increase in the minimum wage or inflation indexing. Business organizations argue that any increase will cost the state jobs and make Massachusetts uncompetitive (9).
Signature: —— Date: 1/16/07
References, Footnotes, and Exhibits
1. Berger, Noah. “New directions in closing income gap.” Boston Globe, February 16, 2006.
2. Individuals in the top 20 percent of the income tax bracket saw their average annual income rise from $81,522 to $144,412, an increase of 77 percent, while those in the bottom 20 percent watched their average income rise just 16 percent, from $16,938 to $19,690 per year.
Massachusetts Budget and Policy Center. 2006. “The Growing Gap: Income Inequality in Massachusetts. Boston, MA: Massachusetts Budget and Policy Center. http://www.massbudge… (accessed January 12, 2007).
3. Massachusetts Budget and Policy Center. 2004. “Keeping It Real: The Effects of Increasing and Indexing the Massachusetts Minimum Wage.” http://www.massbudge… (accessed January 12, 2007).
4. Ibid.
5. Ibid.
6. Ibid.
7. Ibid.
8. U.S. Census Bureau, “State and County QuickFacts: Massachusetts,” http://quickfacts.ce… (accessed January 16, 2007).
9. Most research studies will refute this argument: a recent study by the Fiscal Policy Institute of New York, for instance, shows that higher minimum wages have not harmed economic growth or the competitiveness of small businesses. The study found that for the ten states that had minimum wages above the federal level, “indicators of economic performance were consistently better than for the other 40 states where the federal minimum wage of $5.15 an hour prevailed.” Moreover, small businesses demonstrated faster job growth in the higher minimum wage states as a group.
Massachusetts Budget and Policy Center. 2006. “Facts and Claims on Raising the Massachusetts Minimum Wage.” http://www.massbudge… (accessed January 16, 2007).
