Wednesday, January 29, 2014

About the minimum wage increase . . .

. . . which is almost sure to come up for a vote this week . . .

There are important things to understand about the minimum wage in Delaware, not the least of which would be that about 11,000 workers make at or below the minimum, which is about 5% of our workforce.  About two-thirds of those workers are women; about 51% of them are age 24 or younger [2012 stats].

The first thing to realize is that whether you support the bill or not, it is not going to do very much, either to the businesses or for the employees.  Governor Markell's proposed 10-cent per gallon hike to the gasoline tax will hurt businesses a lot more than the minimum wage hike, and neither McDonalds or Wal-Mart can really cut their staffing much further.

But the optics allow the Democrats to portray themselves as on the side of the workers, and the Republicans to present themselves as on the side of small businesses . . . while neither one gets anything done for Delaware citizens (especially in Wilmington) stranded in poverty in a State where it is far more difficult than the national average to get out of poverty.

So what can we do?  First, let's talk a little more honestly about the issue, and expose a couple of unlovely truths that you won't hear from the Democrats and Republicans in the General Assembly, or from Governor Markell's press releases.  [And then, I promise, I'll make specific policy recommendations that are different from what you're seeing out of your favorite D or R politicians.]

Item One:  The Delaware Democratic Party's platform doesn't call for raising the minimum wage, it calls for enacting a Livable or Living Wage.  Strangely, I can find no record of ANY Democratic Senator or Representative or Governor EVER proposing legislation to enact a Living Wage.  Nor can you even find excuses--like, "We wouldn't be able to pass it in a Democratically controlled General Assembly with a Democratic Governor."

What's the difference between minimum wage and living wage?

This what MIT says:
The living wage shown is the hourly rate that an individual must earn to support their family, if they are the sole provider and are working full-time (2080 hours per year). 
So how does that work out in reality?  Consider the example that the WNJ used in a story a few weeks back about the difficulty of a single parent with two children attempting to survive on the minimum wage.  I'll use that three-person, one-adult family all the way through for consistency's sake (you can look up other combinations at the relevant websites to which I link).

So, according to MIT, if that woman is working in New Castle County, Delaware, then the Poverty Wage is $8.80 per hour--which is, by the way, $0.55 ABOVE what the General Assembly is currently so proud of itself for proposing.

So, TAKEAWAY NUMBER ONE:  The Democrats in the General Assembly are NOT even proposing to raise the Minimum Wage even to the poverty level for our hypothetical example.

In order to reach a Living Wage, MIT tells us, this lady in NCC would have to earn $26.47/hour or a gross pay of $55,057.  I know it may be difficult to imagine the greeter at Wal-Mart making $55K per year (which is almost the median family income for Delaware), but that's what the Delaware Democratic Party says in its platform that it wants to enact.

And pretty much everyone in Delaware (including Democrats) knows that nobody is going to propose that--you can't even find a Democrat willing to write a bill for, say, a $15 minimum wage.

Before we get to Item Two, I should also point out--in fairness to the Democrats--that you can only trash them so far on this issue because the Delaware GOP doesn't even have a platform to which they aspire--at least not one you can find published anywhere.

Item Two:  While it is convenient and politically expedient to slam Wal-Mart or McDonalds for exploiting low wage labor and taking subsidies from the government in the form of welfare, the State of Delaware is one of the biggest offenders in the regard.

According to the December 2013 report of Delaware OMB, as many as 250+ full-time State of Delaware employees are being paid at near or BELOW the Poverty Line.

How does that match up with what the State of Delaware pays its lowest paid full-time workers?

Oh, gee, not only don't we approach a living wage, but hundreds if not more than 1,000 full-time state workers actually qualify for Food Stamps.

While the politicians in the General Assembly are busy dictating wages to everyone else (but still keeping them below the Poverty Line), you'd think that either they or Governor Markell would have wanted to insure that all full-time state employees were above the Poverty Line at least to the extent of not needing Food Stamps.  Guess not.

Item Three: raising the Minimum Wage, or even the lower 5 steps of the State Employees wages (and please remember how stingy Governor Markell and the legislature have been in giving them raises over the past five years) doesn't even put a dent in the fact that Delaware as a state is filled with working poor, and the State isn't really doing a damn thing to get them out of that poverty.

Really?  About 27% of Delawareans are below 138% of the Poverty Line (including many State Employees), a fact we can independently verify by discovering that over 25% of Delaware's population qualifies for Medicaid.  [For comparison, note that percentages below that 138% of the Poverty Line in Wilmington proper run from about 25% to over 60% depending on the area.]  This is actually pretty close to national averages, but--and it is big BUT--it is actually harder to get OUT OF POVERTY in Delaware than it is in most other places in the US.

Don't believe it?  The most recent major study by Equality of Opportunity found that the Wilmington "Commuting Zone" ranked 526th of 709 such areas nationwide (and Dover ranked lower).  CZs that ranked substantially higher than any place in Delaware included Newark NJ (!), Scranton PA, and Washington DC (!!).

There are a lot of reasons why this has happened in Delaware [and you can read about some of them here], but the real question is:  given that we have structural, systemic poverty in Delaware, and not a lot is being done about it by our legislators.

And maybe not a lot could be, in the sense of fragmented and differentiated government programs to end poverty.  Maybe the kind of hand-waving that leads them to feel good about themselves by raising the minimum wage for private sector workers (while not touching State employees, where they would have to find the money) or create "free enterprise zones" is about as good as they think they can do.

If so, maybe it is more time for a change that we thought.  Maybe it is not so much a failure of nerve or a subservience to corporate taskmaster as it is a failure of imagination.

What could imagination achieve if we started with the principle that government could do a lot of good by simply getting out of the way?

I'll take Wilmington as a specific example.

1.  Let the working poor keep more of what they make.  

A.  State and local taxes.  Here's a thought:  let's eliminate all state income liability on earnings of individuals below 138% of the poverty line.  You file a form at the beginning of the year and NOTHING comes out of your paycheck for state or city withholding until you have crossed the 138% of the Poverty Line.  How much is that?  If you are the single parent of two and are making straight "new" minimum wage of $8.25, you're having 1.94% withheld by state and local, or $12.81/pay period, or $333.06/year.

B.  Delaware EITC--let's make it refundable.  Delaware is one of only four states that has an Earned Income Tax Credit that is not refundable--it can only reduce tax liability.  Our example individual would qualify for $5,372 in Federal EITC.  20% of that would be $1,074.40.  Even if you subtracted out the $330.06 tax liability from that, you'd still have people being able to pocket an additional $41.32/pay period and over $1,074/year.

The most obvious counter-argument to these changes of actually allowing the working poor a break on taxes is . . . that the State can't afford it.  It's too expensive.  Which is, if you think about it, exactly the same argument that small business owners are making and the General Assembly is dispensing.  Here's my argument:  let poor people keep more of their own money and, guess what?  They'll spend it in the local economy and create jobs--funny about that argument--it works whether it is money from the private sector or the public sector, doesn't it?

Ask yourself, if you are a Democrat, why aren't there bills being worked to this effect.

2.  Let's start eliminating barriers to people taking charge of their own lives.  I know we've all be raised on Victimology 101 (Democrats) or the Moocher Theory of Welfare (Republicans), but how about we actually start treating poor people like they could make their own decisions about their own lives?  How do we do this?

A.  Let's give them property of their own.  Look, the City of Wilmington reports literally hundreds and hundreds of abandoned properties (including well over 100 OWNED by the City of Wilmington).  Let's create a simple process that lets groups of citizens in the neighborhoods claim them and either homestead them or sell them for profit themselves.  Let's include a 10-year waiver of all property taxes, chuck out most regulations that go with them, and eliminate any state taxes on profits they make from sale, rental, or lease during the same period.  Want a renaissance in Wilmington--give people a real, tangible stake in the property.

B.  Let's eliminate business licensing, reporting, and taxing for "micro-businesses."  All around the world right now--except, ironically, in America--people are starting businesses in their homes, out of abandoned buildings, in the streets.  In America--and Delaware--we've put up so many regulatory barriers that are ostensibly for safety, but in reality function as barriers to letting poor people act as their own entrepreneurs.  Forget seducing large employers with "right to work" zones--let's just trash the regulations that keep poor people from creating their own work.  Will there be unsafe conditions and bad decisions and poor products along the way?  Absolutely.  But let's stop treating poor people like they're intellectual and moral dependents, and give them the leeway to fend for themselves.

3.  Let's reduce crime by reducing demand for drugs by legalization of marijuana and decriminalization of almost everything else.  Instead of incarceration, let's treat real addiction as a medical problem.  [And lets dedicate 100% of all marijuana taxes from sales in Wilmington to the schools inside the city.  If you're going to tax people, don't take the money out of their community.]

4.  Let's pay for this all by (A) reducing some of the bloated budget of the Delaware Department of Public Safety and Homeland Security that has lamentably failed over the past decade to even make a dent in helping to make Wilmington safer; and (B) reducing or eliminating many of the risky investments in corporate start-ups or the "bribes" we pay large corporations to relocate here.

Yes, I know these ideas are skeletal, and you'd have to do the policy work on them, but here's my point:  nobody in the General Assembly is thinking outside the box because all of their corporate donors have invested heavily in the tape to keep the box wrapped up tight around them.

Let's actually start discussing NEW ideas.


Scott Gesty said...

Great post Steve! Nice to see someone running for the GA offering fresh ideas that include LESS government intervention in not just business, but peoples lives!

Dana Garrett said...

I think that your tax elimination proposals would have minimal impact on poor people being able to meet their obligations unless your proposal to provide housing to the poor was enacted. That would reduce a significant liability (unlike the poor's tax obligations alone) that would translate into relative substantial available income. Of course, acknowledging that is tantamount to admitting that it's the private sector (those landlords and mortgage companies) and not the public sector that puts the big squeeze on the poor.

I like your idea about eliminating the costs for micro businesses.

I would also recommend that laws be enacted that would enable workers to more easily organize into unions. That unionized workers do better financially and have better job security is a fact demonstrated so many times that saying it is virtually tautologous.

delacrat said...

Steve, Dana,

These all sound like good ideas to me. But the focus was on the City of Wilmington and because I don't live in the City of Wilmington, I suggest asking the people in the City of Wilmington for their thoughts about your proposals.

tom said...

As you pointed out in a previous post "We don't need to fix the minimum wage, we need to fix the money".

The General Assembly could easily do this by creating or adopting a Delaware currency based on silver and/or gold. All it would take is a single law declaring some form of silver or gold coin to be legal currency within the State of Delaware, exempting it from capital gains taxes (and sales taxes, lest they get any ideas...), and requiring all government entities to accept it and make payments in it if requested. And yes, "government entities" would include every corporation chartered by or doing business in the State of Delaware.

There is a reason why section 19 of the Coinage Act of April 2, 1792 made debasing the currency one of the earliest capital offenses created by the federal government, and the Federal Reserve is doing a fine job of demonstrating it..