Busted! Finance, Labor experts debunk minimum wage myths.

Over 75 community members joined Iowa CCI last Tuesday, June 28th in Des Moines to learn the truth about raising the minimum wage and to discuss the upcoming ordinance for Polk County.

There are dozens of myths around the minimum wage but little to no research to support these arguments. So why do we consistently hear these narratives from minimum wage opponents?

To help combat these myths that frequently surround the minimum wage CCI invited Peter Fisher, an expert in public finance and lead researcher for the Iowa Policy Project (IPP), and Paul Iversen, a former labor attorney and current Labor Educator for the University of Iowa’s Labor Center, to speak to Polk County residents and set the record straight.

Myth #1: We need a raise, but not $15/hr – this is Iowa, not California!

According to a recent poll conducted nationwide by Hart Research Associates, 71% of adults in the US support an increase in the minimum wage to $11/hr by 2020, 75% support an increase to $12.50, and 63% support an increase to $15/hr.

While the support for a substantial increase is overwhelming, here in Iowa we are constantly being told that these numbers are not realistic for our state. Opponents are quick to point out that places like Des Moines or Iowa City are not comparable to cities like New York or Seattle – two cities that have recently adopted a $15/hr minimum wage. What opponents fail to recognize is what it actually costs to live in Iowa.

Peter Fisher broke down the Iowa Policy Project’s 2016 Cost of Living Study and specifically addressed what working individuals and families need to earn in order to make ends meet in Polk County. IPP’s basic budget analysis provides specific information on costs of housing/utilities, food, healthcare, childcare, transportation, and household expenses such as clothing. It is a no-frills budget and does not factor in student loans, discretionary spending, or emergency savings.

Fisher explained that a single individual in Polk County would need at least $13.44/hr to simply make ends meet; a single parent with one child would need at least $22.62/hr; and a family of four with both parents working full time would need at least $17/hr.

Myth #2: It’s just teenagers and college kids working these low-wage jobs.

It is a common misconception that low-wage jobs are entry-level jobs for teenagers to have spending money. At one point in time, a few decades ago, this statement was somewhat true.

However, the working environment has shifted immensely. Manufacturing jobs that were once prevalent – and paid a family-supporting wage – have now been moved overseas where labor laws are less stringent. And the ones that have remained stateside do not offer competitive wages comparable to their value 30+ years ago. Now, these jobs have been replaced by the booming service and retail industries, and these industries are expected to grow exponentially in the coming years.

Fisher spent time focusing on who would benefit from an increase in the minimum wage from $12/hr-$15/hr in Polk County. Based on IPP’s findings, we can assume that the percentages of beneficiaries also reflects the age range for low-wage workers. For example, adults between the ages of 20-39 would see the greatest benefit with over 50% seeing an increase in their income, while adults 40 and over came in at a close second with 40% or more seeing an increase in their income. Teenagers were a distant third as beneficiaries for a minimum wage increase.

The reality is that its adults and parents working these jobs to support themselves and their families.

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**Image from Iowa Policy Project’s 2016 Cost of Living Study**

Myth 3: Raising the minimum wage will create job loss and force businesses to close.

When President Franklin D Roosevelt enacted the Fair Labor Standards Act and debuted the concept of a minimum wage in 1938, business leaders and opponents claimed that this concept was ludicrous. They felt that during a time of economic despair that setting regulations for pay and workers’ rights would create tough times for business.

Throughout history, opponents of the minimum wage continued to claim these same points but provided no concrete data to support those arguments with the exception of one report from the Congressional Budget Office (CBO). This report states that large increases in the minimum wage would lead to high rates of unemployment.

Opponents of a substantial minimum wage increase often refer to the CBO report as a means to pass a lower raise such as $8.25/hr or $9/hr.

Both Paul Iversen and Peter Fisher explained in detail the various reasons why this report is not accurate. The main reason being that the research examined a change in the minimum wage but kept all other aspects of the economy constant. Iversen explained that this is a flaw in research because an increase of income would cause an increase in purchasing and production. Simply put – when people have more money in their pockets, more money gets filtered back into our economy. When this is not taken into account, research like the CBO report would show that job loss is a certainty.

Iversen continued by providing various examples of studies demonstrating the positive economic impacts that raising the minimum wage has had. Among those was an astonishing report from the University of California Berkley. The study examined employment rates of nearly 300 pairs of counties from 1990-2006. The pairs of counties consisted of one county with the federal minimum wage of $7.25/hr and a neighboring county with a higher minimum wage.

There was no evidence in any of the 288 pairs of counties studied that showed there was a higher rate of unemployment in the higher wage counties compared to the lower wage counties. In fact, the employment rates were nearly identical. Iversen stated it was important to note the sample size of this research. In many studies it’s difficult to have such a large sample size.

A study such as this makes it clear that raising the minimum wage does not cause significant job loss. It actually spurs business growth due to the increase of demand. Businesses expand their customer base when more people have higher incomes. They also increase productivity and sales due to more people spending more money.

By the end of the meeting, folks were ready to mobilize and fight for $15/hr in Polk County.

It’s going to take all of us – working together – to get a living wage across Iowa. Join us at our upcoming events to ensure that the Polk County Supervisors hear why we need $15/hr.

Join us for the upcoming Fight for $15 events! Click here.