Author Discusses Getting Off Minimum-Wage Treadmill
FARAI CHIDEYA, host:
She first appeared on our air three months ago in a story by Rose Aguilar of member station KALW in Oakland, where I used to work. Jameelah still can't afford to finish school, but she's hoping to earn her real estate agent's license. Help is coming in part from several generous NEWS & NOTES listeners who heard about her plight and reached out.
And Jameelah's story isn't unusual, according to sociologist Katherine Newman. She wrote the book "Chutes and Ladders: Navigating the Low-Wage Labor Market."
It's based on the eight years she spent following low-wage workers in Harlem. Now Newman is a professor of sociology and public affairs at Princeton University. She found that folks who do escape the minimum wage treadmill had a few things in common.
Professor KATHERINE NEWMAN (Sociology, Public Affairs, Princeton University) One is that they were able to get more education during the time they were holding a minimum wage job because there was someone else in their family who could pay the bills.
So, for example, one young man who was a Haitian immigrant lived with his aunt and uncle who basically paid the rent and put food on the table. And he took all of his earnings and put them into an air-conditioning and refrigeration training program. When he finished it three years later, he was able to command a wage four times the minimum wage.
But he would only be able to do that when someone else was taking care of the bills, and that was the minority of the people I studied. Some people were high flyers because they found unionized jobs. So their skills didn't change that much, but their wages and benefits changed dramatically if they were able to land a unionized job - working for our transit system, working for our utilities, public regulated utilities.
The last route was really more of a family strategy than an individual improvement. If you're in a family in which you can recruit more workers, either because your teenagers get to be old enough to go to work or you marry or acquire a partner who's a worker, the household may see upward mobility even if the original worker is still at the minimum wage.
CHIDEYA: Now when you look at these paths of upward mobility, how do you frame what Congress has just done in raising the minimum wage? Will this provide people who were in the situation of the people you profiled with the ability to earn a better wage but constrict their future possibilities to move up, as people argue that jobs might be tightened because of the higher minimum wage? what will it do in your opinion?
Prof. NEWMAN: There's no question in my mind it will put more money in their pockets. Almost by definition it has to do that. I tend to side with my colleague at Princeton, Alan Krueger, who has done I think some of the best work on this subject. And he's pretty convinced that this will have no effect on job opportunity. The best available empirical evidence we have doesn't suggest any real impact, unless you see a wage increase that's really, really substantial and that's not what I - how would I characterize this one.
So I'm pretty well persuaded by the several careful studies I've look at, that usually compares states that share a common border where people could migrate easily or firms could migrate easily - and they just don't show any big differences in the labor markets, between states that raised their minimum wage and states that didn't. That said, we do need to think carefully about who really earns the minimum wage right now.
What raising the minimum wage does is, sort of, push employers to raise wages beyond those who are in the minimum wage category - because, basically, everybody moves up a little bit. And that will be important, because in many parts of the city - here in New York, for example, or in San Francisco or Los Angeles - people at the bottom are earning above the minimum wage now.
CHIDEYA: They are also paying expenses that are above the national average.
Prof. NEWMAN: Absolutely. So raising the minimum wage will help them if it pushes employers to raise everyone's wages at the bottom. But if they are already earning $7 an hour, the raise in the minimum wage will have a minimal effect on them. So it will have a big effect on people who are really at the minimum wage, but we need to look carefully at who that is right now.
CHIDEYA: Arguably, raising the minimum wage will have a direct and meaningful impact on a lot of people in this country. But, if there were money allocated to vocational programs towards education, towards other means of moving people out of this low-skill area would that have a more profound effect?
Prof. NEWMAN: I think the effects are very different. Vocational programs and education are absolutely critical but their pay-off is in the future. And so if you were asking me what I think the biggest difference in the long run options for people at the bottom end of the labor market, I would have to say that investing in education is absolutely crucial, but we would have to wait for five years to see much of a benefit. And we have let the minimum wage sink in value for such a long time that we really do need to attend, I think, sooner than that to the plight of people at the bottom of the labor market. To me the sharper debate, really, is between raising the minimum wage and increasing the benefits that flow into the Earned Income Tax Credit.
The Earned Income Tax Credit is a benefit we provide right now only to parents, that is people with children who are earning very low wages and it basically returns to them the taxes that they would otherwise pay. The EITC is a targeted benefit. It goes only to low-income workers who are heads of families.
The minimum wage would go to my son if he were working at McDonalds. And while he'd love to have it, he doesn't need it, nearly as much as people who are truly low-income. So the minimum wage is a - because it is a universal program it's what we think of as a blunt instrument. It affects exactly the people we most want to affect and a lot of other people that maybe aren't as needy.
However, it is politically very popular because it's universal. There's something in it for everyone. And as a result, it tends to be easier for Congress to pass and to some degree easier to sustain. So to me the big debate is between a targeted benefit that's very efficient in getting money to the people who are most in need in the labor market versus a politically sustainable benefit that's popular because it applies to everyone but goes to a lot of people who probably don't need it as much.
CHIDEYA: Well, Professor Newman, thank you so much.
Prof. NEWMAN: My pleasure.
CHIDEYA: Katherine Newman is professor of sociology and public affairs at Princeton University and author of the book "Chutes and Ladders: Navigating the Low-Wage Labor Market."
Coming up, Iraq wants weapons and the art and craft of graphic novels.
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