While stagnant wages and sluggish job growth continue to cloud the post-recession recovery, a bright spot exists on the horizon in Florida. Over 200,000 of the state’s lowest-paid workers will be getting a raise this week as the state minimum wage increases by 12 cents to $7.79.
Thanks to a ballot initiative passed by Florida voters in 2004, the minimum wage automatically adjusts every year to keep pace with the rising cost of living — this key policy reform, known as “indexing,” has already been adopted by nine other states as well. As a result, the wages paid to those Floridians who wake up each morning to do the hard work of cleaning office buildings, serving food, and providing care for the elderly will not gradually erode each year as the cost of basic expenses like food, gasoline, and utilities continues to rise.
As the country continues to debate how best to create jobs and accelerate the economic recovery, our elected officials in Washington could learn from the example that Florida has set in addressing the urgent problems of America’s low-wage economy. After more than three years since the official end of the Great Recession, average wages are still declining in real terms, even as workers throughout the U.S. put in longer hours to help make ends meet. Workers with less disposable income are holding back on spending. In a country where consumer spending makes up 70 percent of the total economy, stagnant wages spell limited growth and a continued weak recovery.
By contrast, the modestly higher wages received by low-paid workers in Florida this year will go right back into the economy, generating economic growth as these workers put food on their tables and raise their families. According to an analysis from the nonpartisan Economic Policy Institute, Florida’s minimum wage increase this year will boost the average directly affected worker’s pay by $370 per year, generating over $46 million in new consumer spending.
While the value of higher wages for Florida’s low-paid workers remains clear, those who oppose any increase in the minimum wage still claim that higher wages will only slow job growth or burden local businesses. These concerns find no support from the facts: Indeed, businesses that pay fair wages to their employees ultimately benefit from reduced turnover and higher worker productivity, as their employees are spared from the struggle of balancing two jobs in order to make ends meet.
The real strain on economic growth in today’s economy stems from the decision made by many national fast food chains and big box retailers to inflate profits by paying rock-bottom wages, siphoning money out of local communities and impoverishing the customer base needed to sustain economic growth. According to a recent report by the Research Institute on Social and Economic Policy, average wages declined by roughly $1,000 per year for the average working Floridian over the course of 2011.
A partial explanation for this disappointing news lies in the quality of jobs that Florida has created since the recession. These jobs are mainly minimum wage or slightly above minimum wage, and they are in service, retail and tourism industries, traditionally among the lowest paid.
While this year’s 14-cent minimum wage increase will mean a lot to workers who are struggling just to get by, Florida’s minimum wage remains well below the level needed to ensure that full-time work provides a path out of poverty.
Contrary to myth, roughly 90 percent of workers benefiting from Florida’s minimum wage increase are adults over 20, and more than 45 percent have at least some college education. When large numbers of skilled adult workers find themselves relying on the minimum wage to make ends meet, a national response is required in order to preserve the American Dream of upward economic mobility.
Congress has only acted three times in the last 30 years to raise the federal minimum wage. It’s time for a new level of leadership. It’s time for Congress to learn from Florida’s example by raising the minimum wage to the level of a living wage, and indexing it to rise automatically with the cost of living.
Alayne Unterberger is associate research director at the Research Institute on Social and Economic Policy.