New Justice Center series highlights policy priorities that build an economy that works for all
RALEIGH (October 11, 2016) — Raising the state minimum wage could benefit North Carolina businesses, help workers, and build an economy that works for all North Carolinians, according to a new brief from the NC Justice Center. Raising the minimum wage in North Carolina provides a critical antidote to the ongoing boom in low-wage work, a trend that has only accelerated since the end of the Great Recession.
“Jobs that pay a decent wage are largely vanishing, as low-wage service jobs replace the manufacturing positions that once provided generations of North Carolinians with vital pathways to the middle class,” said Allan Freyer, director of the Workers’ Rights Project at the Justice Center and author of the brief. “Our elected officials have the opportunity to join a growing list of states that recognize the current national minimum wage simply doesn’t pay enough to make ends meet.”
The brief is part of a new series from the NC Justice Center, “How to Build an Economy that Works for All,” which aims to establish policy priorities and proposals that policymakers can advance and North Carolinians can support throughout the election season and the start of the legislative session in January.
The series’ first brief examines the state’s current minimum wage of $7.25 — which simply isn’t enough for families to make ends meet. At the current wage, a full-time minimum-wage worker earns approximately $15,080 per year, approximately $1,000 less than the federal poverty level for 2016 for a family of one adult and one child and more than $18,000 less than what it truly takes to get by according to the Living Income Standard (which determines that a family with one adult and one child needs $33,700 per year to afford the basics).
Important findings from the brief:
- The value of the minimum wage has eroded by nearly one-third over the past 40 years. While food, healthcare, and housing costs continue to increase, the purchasing power of the minimum wage has decreased dramatically.
- Raising the minimum wage to $10 an hour would increase paychecks for North Carolina’s workers by $2 billion a year, increasing consumer spending at local businesses, boosting business sales, business profits, and creating more than 5,000 new jobs.
- More than 90 percent of those benefitting from a minimum wage increase to $12 are workers older than 20 years of age, and more than half work full-time. Three-quarters of a million children in the state would experience increased security thanks to their parents’ higher wages.
- Raising the minimum wage also helps small businesses reduce payroll costs by reducing employee absenteeism and turnover while simultaneously boosting productivity.Economists have long recognized that better-paid workers are more efficient, more effective, and more productive.
“Raising the state’s minimum wage will boost businesses and the state’s economy without hurting overall employment,” Freyer said. “It creates more customers, more sales, and bigger profits.”
Policy Recommendation: North Carolina should raise the state’s minimum wage to a level that allows workers and their families to make ends meet and then index it to inflation to ensure that its purchasing power does not erode over time. However, the brief recommends, policymakers should look to states that have scheduled a phase-in of their minimum wage increases over time—for example, a $1 an hour increase every year through 2020—and provide different phase-in schedules for rural and urban areas, as it may take time for the positive spill-over effects in increased sales and productivity to compensate for the up-front increase in labor costs.
“Given tonight’s gubernatorial debate, now is the time to examine the pressing issues that matter to North Carolinians,” said Rick Glazier, Executive Director of the NC Justice Center. “North Carolina’s policymakers have the opportunity to promote public policy choices that expand opportunity by addressing economic hardship, ensuring every community can thrive and in so doing build an economy that works for all.”
The policy series will run through at least Election Day in November, covering issues such as teacher pay, Medicaid expansion, the state Earned Income Tax Credit, and more.