While sluggish job growth continues to cloud the post-recession recovery, Montana offers a bright spot. Approximately 22,000 of Montana’s lowest-paid workers got a raise this January, as the state’s minimum wage increased by 15 cents to $7.80.
Thanks to a ballot initiative supported by labor and approved by more than 70 percent of Montana voters in 2006, the state’s 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 a result, for those Montanans who do the hard work like cleaning buildings, serving food and providing care for the elderly, the buying power of their wages will not gradually erode as the costs of basic expenses like food, gas and utilities continue to rise.
Inevitably, workers with less disposable income are holding back on spending, depriving local businesses of potential sales revenue. In a country where consumer spending makes up 70 percent of the total economy, stagnant wages spell limited growth and a weak recovery.
By contrast, every dime of the modestly higher wages received by low-paid workers in Montana this year will go right back into the economy, generating economic growth as these workers put food on their tables. According to the Economic Policy Institute, Montana’s minimum wage increase this year will boost the average affected worker’s pay by $310 per year, generating nearly $4 million in new consumer spending. That is hard-earned, guaranteed-to-be-spent economic stimulus for local Montana businesses.
While the value of higher wages for Montana’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 business. These concerns find no support from the facts: Businesses that pay fair wages ultimately benefit from reduced turnover and higher productivity, as their employees are spared from the struggle of balancing two jobs in order to make ends meet.
In fact, the real strain on growth in today’s economy stems from the national fast food chains and big box retailers who inflate their profits by paying rock-bottom wages, siphoning money out of local communities, causing the closure of Montana-owned businesses, and impoverishing the customer base needed to sustain economic growth.
And yet, while this year’s 15-cent increase will mean a lot to workers that are struggling, the truth is Montana’s minimum wage remains well below the level needed to ensure that full-time work provides a path out of poverty. Contrary to myth, over 69 percent of Montana’s minimum wage workers are adults over the age of 20. Seventy-four percent are putting in more than 20 hours per week, and a stunning 47 percent have at least some college education.
When large numbers of skilled adult workers find themselves relying on the minimum wage, there is something seriously wrong with our economy.
It’s time to make a change. Our nation should follow Montana’s example by requiring indexing of the minimum wage for all workers nationwide. A national response is required in order to preserve the American dream of upward economic mobility. A fair day’s pay for a hard day’s work is the place to start.
(Al Ekblad is executive secretary of the Montana State AFL-CIO.)