Sen. Mitt Romney unveiled a surprisingly bold approach to helping low-income families, proposing a monthly payment of up to $350 per child.
It’s a reasonable alternative to annual lump-sum tax payments and welfare programs, one that is worthy of consideration in the future.
Romney’s proposal came on the same day the Senate approved a budget blueprint clearing the way for passage of President Joe Biden’s $1.9 trillion COVID relief bill. Likely to be left out is a priority of the new president, a phased-in hike to the minimum wage, from the current $7.25 an hour up to $15 an hour by 2025.
With businesses struggling during the pandemic, even Vermont Sen. Bernie Sanders agreed this year is not a time to greatly increase the minimum wage.
That doesn’t mean the fight is going away, however. The federal minimum wage has been stagnant since 2009 and most Americans make well more than that paltry rate. It needs to be increased to help the lowest income working Americans, but there are legitimate drawbacks to leaving it to Congress.
For example, a national minimum wage doesn’t account for differences in costs of living. Set it too high, it could be incredibly disruptive to places with very low costs of living like Mississippi and Arkansas. Set it too low and it is meaningless in high-cost states like Hawaii and California.
One size doesn’t fit all and that’s why states are better positioned to craft their own wage floors. Twenty-nine states and the District of Columbia have done just that. Utah isn’t one of them and, according to the Labor Department, has never had a minimum wage higher than the federal floor.
This year, two freshman Democratic representatives are proposing bills that would change that.
Rep. Clare Collard, D-Magna, is sponsoring HB284, which would set a $12 minimum wage starting in July and then increase it incrementally up to $15 by 2026.
Rep. Ashlee Matthews, D-West Jordan, is taking a different approach. Her bill (yet to be released) would gradually raise wages to $10.75 for workers in urban counties by 2028, and $9.25 for those in rural areas.
“This is long overdue,” Matthews said. “Many Utahns are not able to pay their bills, pay for rent, even as they work multiple jobs. Having a job should lift you out of poverty, not keep you in it.”
Collard’s bill is likely too much for Utah’s Republican-dominated Legislature to swallow. Matthews’ bill, however, has two features that might make it a little more palatable.
First, is the $1.50 difference for urban vs. rural counties, accounting for differences in cost-of-living.
Second, and more significant, is that once the state reaches the minimum wage target set in the bill, the rate would be indexed for inflation — as 18 states now do — meaning it would rise with the cost of living.
The slow, phased-in approach Matthews is taking, while perhaps more politically palatable, seems too cautious. As of 2019, the average wage for the bottom 10% of earners in Utah was $10 an hour, meaning a gradual 7-year increase will help very few.
It would be better to raise it faster — perhaps $9.75 starting in July 2022, giving businesses some time to rebound from the pandemic, then adding 75-cent increments annually until it reaches $11, then indexing it to inflation.
Business groups probably wouldn’t like that. They have already voiced opposition to Collard’s bill and aren’t likely to be big fans of Matthews’ either.
The Salt Lake Chamber contends minimum wage laws stifle growth, force employers to cut staff and scare away businesses and would be particularly harmful on the heels of a pandemic.
“Now is just not the right time to do it,” David Davis, president of the Utah Retailers Association, told me. “I think with the best of intentions in helping workers at the lower end of the spectrum, it tends to ultimately hurt them.”
Putting money in the pockets of low-income workers, however, can drive consumer spending, which drives the economy, according to Matthew Weinstein, an economist with the anti-poverty group Voices for Utah Children.
And, he said, it doesn’t stunt job growth. After New York raised its minimum wage, a study by the U.S. Federal Reserve looked at adjacent counties on the border of New York and Pennsylvania, which did not raise its wages. It found that employment in leisure and hospitality rose faster in the New York counties, as did employee earnings.
“Employers have so much power that we’ve underpriced labor,” he said. “Workers are producing so much more than they’re getting paid, there is room to raise the floor” and not force employers to cut staffing.
Another bill that could curb poverty among the work poor is Rep. Robert Spendlove’s HB309, creating a Utah Earned Income Tax Credit. The idea is to give a refundable credit to working families equal to 10% of the federal version of the same credit. It would mean up to $640 for working families, depending on their income and number of children.
Spendlove’s proposal was included in a tax package the Legislature passed in late 2019, but the law was repealed in the face of widespread opposition and a voter referendum to repeal the bill.
Spendlove’s bill, I suspect, will pass. As for the state minimum wage, if the Legislature doesn’t respond, hopefully voters will take charge again. Eight states have enacted minimum wage laws through ballot measures, the most recent being Florida, where 61% voted to amend the state constitution to raise the minimum wage to $10 and then by a dollar a year until it reaches $15 per hour in 2026.
Hopefully Utah legislators respond to the needs of their low-income working constituents and it doesn’t come to that. But if they don’t, we’ve seen voter initiatives succeed in the past, and the 2022 election cycle isn’t far off.