Massachusetts is among the richest states in the nation, second in per capita income only to Connecticut, where the minimum wage is pegged at $8.25 an hour — just a tad above the $8 rate here. New Jersey, the third-richest state, pays $7.25 an hour. All three states are rated among the worst places to live for minimum-wage workers by Bloomberg, hardly a den of bleeding-heart analysts. The reason is the disparity between the minimum wage and the high average income of the rest of the state. In economics, as in life, everything is relative.
Last week, the Legislature opened hearings on gradually raising the minimum wage in Massachusetts for the first time in five years. Although inflation has been modest, it now costs $8.51 to buy what $8 would cover in 2008. Low-wage workers are forever playing catch-up, which is why indexing the wage to rise with inflation makes sense. (Washington state started this in 2001, and its minimum wage is $9.19 now.) But neither should the Legislature lock in inequities by setting the rate too low to start. If policymakers want to match the buying power of the minimum wage at its peak, in 1968, it would be $10.58 today. That’s the benchmark they should work around.
As it is now, people working full-time at minimum wage jobs in Massachusetts earn just over $16,000 a year — well below the federal poverty threshold for a family of three. And that federal measure is universally recognized as too low for Massachusetts, since it averages in cheap-cost-of-living states such as Mississippi and Alabama. Here is another example of comparative value: It takes more income for a family to be self-sufficient in Massachusetts than almost anywhere else. Factoring the costs of day care, housing, utilities, and food, the Crittenton Women’s Union estimates that a mother with two young children would need $65,880 to meet basic expenses without relying on any state subsidies. That’s an eye-popping $31.55 an hour.
Many supporters of a minimum wage increase, including Senate President Therese Murray, have noted this disparity. In her testimony before a standing-room-only crowd last Tuesday, Murray advanced the argument that increasing the minimum wage would relieve pressure on state spending by reducing the need for housing subsidies, fuel assistance, and the like. “People complain about government getting bigger and bigger,” she said. But because the minimum wage doesn’t cover the basics for working families, “your taxes are going more and more to subsidize full-time workers who are relying on taxpayer-funded services to live here.”
In other words, you can measure a fair minimum wage simply by what’s right — that no one working full-time should still be in poverty — or you can measure it by the amount of public sector spending needed because the private sector isn’t doing its share.
While we’re talking about burden sharing, let’s remember the biggest gap of all: the widening income disparity that threatens to derail the American ideal of social mobility. According to the economist Emmanuel Saez and others, the share of the nation’s total income going to the top 1 percent of Americans has increased from 8 percent in 1975 to 17 percent today. The gap between minimum wage workers and others has only widened over the past three decades, even as all workers have become more productive. According to the Massachusetts Budget and Policy Center, if the minimum wage had grown over the last 35 years at the same rate as worker productivity, it would be $16.02 today. If it rose at the same rate as CEO compensation, it would be $62.36.
A century ago, Massachusetts was the first state to set a minimum wage, 26 years before President Roosevelt signed national legislation. Given the cost of living in Massachusetts, the erosive power of inflation, and tipping scales of income inequality, it would seem that a swift and permanent wage increase is the minimum required.
Correction: My last column incorrectly identified the 2011 commencement speaker at Rutgers University. Author Toni Morrison delivered that speech. Reality TV personality Snooki was invited to speak on campus by Rutgers students; she was paid $32,000 from student programming fees.Renée Loth's column appears regularly in the Globe.