October 14, 2005

Activists hope Katrina hastens US minimum wage rise

By Andrea Hopkins

WASHINGTON (Reuters) - It's a long way to go for a silver
lining, but poverty activists are hoping the deprivation
exposed by Hurricane Katrina will prompt the U.S Congress to do
what it hasn't done since 1997: Raise the minimum wage.

Some 2 million people in the United States were paid the
minimum wage of $5.15 or less in 2004. Working full time, such
minimum wage earners make $10,700 a year, just above the
threshold of $9,645 set by the federal government as its
definition of poverty for individuals and barely half the
$19,307 needed to keep a family of four above the poverty line.

Activists believe the poverty exposed by Katrina -- which
left thousands of poor blacks stranded in floodwaters while
wealthier residents fled -- will add urgency to calls for
higher minimum wages.

"I'm more optimistic than I was a month and a half ago,"
Jared Bernstein, an economist at the liberal Economic Policy
Institute, said of the prospects for a minimum-wage increase.

"I and others have been looking desperately for silver
linings in this tragedy and if Katrina were to motivate
Congress to look at this issue seriously, that would be great."

But having had their hopes for a wage hike dashed many
times in the past, anti-poverty groups are skeptical Congress
will act. Earlier this year, Republicans blocked a Democrat
proposal to boost the minimum wage to $7.25. A Republican
counterproposal to raise it to $6.25 also fell through.

"(President George W.) Bush and the Republican Congress
have no intention of raising the minimum wage," said Jen Kern,
director of the living wage resource center at anti-poverty
group ACORN.


While the country may just have awoken to the poverty in
New Orleans, the city's voters recognized it many years ago --
and even tried to do something to help.

In 2002, New Orleans residents voted to raise the city's
minimum wage by a dollar, to $6.15 an hour.

The federal wage had not budged since 1997, and its
diminishing buying power was particularly felt in Louisiana.
According to Labor Department data for 2004, one out of every
20 workers in the state earns the minimum wage or less --
nearly twice the national rate.

But support for the 2002 pay increase was not unanimous.
The hotel and restaurant sector, which employs the largest
portion of minimum wage workers, argued a raise would drive up
costs and ultimately hurt workers because there could be

Seven months after it passed, the Louisiana Supreme Court
struck down the wage increase on the grounds that state law
prohibited cities from enacting such measures. That meant the
state's lowest wage remained tied to the federal level.


Given the uphill battle a minimum-wage increase faces,
ACORN is working to raise wages at the state or local level,
either by increasing minimum wages or insisting that any
government contract workers are paid a higher wage. The
strategy works because when a state or local minimum wage
differs from the federal wage, the higher rate applies.

The shift in tactics has had some success. Nearly 20 states
and 130 cities have allowed wages to rise above the federal
standard. That's why workers are paid at least $7.35 an hour in
Washington state, $6 in New York and $8.50 in San Francisco,
but just $5.15 in Louisiana, Mississippi and Alabama.

Ironically, Hurricane Katrina may be what forces up the
minimum wage in Louisiana -- in practice, if not in law -- as
thousands of the state's evacuees realize working conditions
are better elsewhere. The resulting shortage of workers will
force wages upward.

"People have moved away from this city and have seen that
they can make more money in other places," said Stephen
Bradberry, who has lived in New Orleans for 18 years and is
leading ACORN's efforts to reduce poverty there.

"The simple fact of the matter is you cannot pay a minimum
wage in New Orleans right now, because there is nobody in the
city. So you have to pay people in order to have them come to
work," he said. "You have fast food places offering $6,000
signing bonuses."


Public support for a pay raise appears strong. A survey of
2,000 Americans in December 2004 and March 2005 by the PEW
Research Center found 82 percent supported an increase in the
minimum wage to $6.45 an hour, while 12 percent were opposed.

But opposition among business groups is strong, and the
Bush administration is also skeptical.

"I don't think the minimum wage is the most efficient way
to help the lowest income workers," White House economic
adviser Ben Bernanke said this week, arguing income tax credits
are a more direct way to help working families.

While economists are divided on the impact of raising the
minimum wage on unemployment, most agree it drives up the cost
of business, which either makes goods and services more
expensive or cuts into profits.

"If you can buy blue jeans at Wal-Mart for $20 and the cost
goes up to $25, the poor consumer who typically makes up their
demographic is harmed by that," said Employment Policy
Foundation economist William Shields. "You have to be careful
you don't end up harming the people you're trying to help."

Shields also argues that many of America's poorest do not
work at all, so a higher wage won't help. In addition, he says,
the minimum wage mostly affects teen-agers and part-time
workers -- some 50 percent of minimum wage earners are under
the age of 25 -- not the head of a household trying to support
a family.

But a study by the Economic Policy Institute published in
the wake of Hurricane Katrina found 491,000 of the lowest-paid
workers in Mississippi, Alabama and Louisiana are parents of
about 310,000 children -- suggesting families are also feeling
the pinch of the stagnant wage.

And while Katrina drew the nation's attention to poverty,
EPI's Bernstein is worried the interest will fade before
anything gets done about the minimum wage.