GFI Founder’s Update — June ‘21
It’s time to pay up on wages
Dear Friend,
Over the past year we have heard a constant drumbeat extolling the virtues of “essential workers” — those who work on the front lines of the pandemic to ensure that the rest of us are able to have the food and care we need. With vaccination rates in the U.S. at a global high, allowing state economies to come roaring back, will we quickly forget the role essential workers played to save our lives?
Essential workers work in critical sectors of the global economy: agriculture, transportation, health care, education, emergency services and manufacturing. In the United State, roughly 45% of all essential workers identify as people of color. More striking, however, is that workers in these vital jobs suffer chronic and acute under-compensation. According to the Brookings Institution, nearly half (47%) of Americans in low-wage occupations, earning less than $15 per hour, are essential workers. Furthermore, some of the lowest wages are found in occupations that have sacrificed the most during the pandemic, including those in the care economy who, on average, earn merely a dollar or two above the $7.25 federal minimum wage.
The response from U.S. political leaders has thus far been shameful. When leaders had a chance to increase the federal minimum wage to $15 per hour they failed. More egregiously, several states have whined that workers are not returning to work, and they have slashed unemployment benefits to force their return. This, despite the fact that many workers remain rightfully fearful of the pandemic, do not have childcare or must care for an ill family member or older parent.. How quickly leaders forget that these benefits not only helped struggling workers through the economic devastation brought into their households by the pandemic, but also kept the national economy churning.
Leaders quick to claim that increased federal unemployment benefits “distort the market” forget that many federal and state interventions, including those that allow employers to pay so-called “tipped workers” far less than the minimum wage, are in fact putting downward pressure on the minimum wage and distorting the true value of workers — especially essential workers.
Further, it is a failure of moral and political leadership that the people who have cared for our parents through the pandemic and ensured there was food on our tables are making barely enough to survive in the current economy. Recent estimates show that “even a single adult with no children will need to be earning more than $15/hr on a full-time, full-year basis in order to achieve an adequate standard of living.” Workers who have children or others to care for need even more. Look at the personal care workers to whom we owe so much — almost 20% live below the poverty line, while more than 40% rely on some form of government assistance. Similarly, a typical cashier at a grocery store makes between just $10 and $11 per hour, a sub-poverty line wage for a family of four.
The truth is, $15/hr should be the starting point, not the goal. The purpose of the minimum wage was to create a minimum standard of living to protect the health and well-being of workers. Today’s minimum wage has failed to meet that objective. Adjusting for inflation, $7.25/hr minimum wage is 30% smaller than the 1968 minimum wage. This reduced value comes at a time when the productivity of minimum wage earners — the amount of output produced by these workers — has doubled in the past 50 years. If the minimum wage had kept pace with labor productivity it would be $22/hr by 2020, and $23.53/hr by 2025.
These wages would not only more accurately reflect the U.S. labor market but also correctly evaluate the value we should be placing on the work of those workers who allowed our families and our economy to survive the pandemic. For far too long we have failed to value the work and workers who make our economy churn. The pandemic forced us to see and, for once, actually value the work of essential workers. We cannot turn our backs now.
Karen Tramontano, GFI Founder & President
