From the TUC

Fair pay letter from America #2: higher wages would boost the US economy

30 Mar 2014, By Guest

Union campaigns for higher minimum wages and living wages in the USA have stressed that the poverty wages paid by billionaire corporations force workers and their dependents to claim food stamps, at significant expense to American taxpayers. Retail and hospitality workers are often paid so little that they are forced to depend on public assistance. So are many others, such as outsourced airport workers and nearly a third of bank clerks.

Raising the minimum wage to $10.10 per hour could save $4.6 billion per year in Supplemental Nutrition Assistance Program spending. In the past few years, the new normal in the USA has been the proliferation of low-wage occupations in which the median wage is less than $15 per hour: low-skilled jobs held by workers who are increasingly struggling to survive.

Yet some private retailers, such as Costco, already pay their employees significantly more than minimum wage. And in February 2014 retailer The Gap announced plans to increase its employees’ minimum wages to $10 per hour by June 2015.

Raising the minimum wage would have other beneficial economic effects. The Fair Minimum Wage Act – which would boost wages for 28 million workers, including 3.5m who are working full-time and living in poverty – is simply the beginning of a broader campaign, which must advocate for tipped workers, agricultural workers and victims of wage theft, and young people with college debt stuck in unpaid internships and low-wage, low-skilled jobs, which could last for years.

Raising the minimum wage and indexing it to inflation would increase the overall real earnings for workers by at least $2 billion, according to the Congressional Budget Office. The Brookings Institution estimates that raising the minimum wage to $10.10 and restructuring the earned income tax credit would reduce the nation’s poverty rate by 3.6% and allow 1.8 million people to escape poverty. And former Labor Secretary Robert Reich estimates that increasing the minimum wage to $10.10 per hour would lift even more – up to 4.6 million people – out of poverty.

Six hundred economists have written to both houses of Congress stating that raising the minimum wage to $10.10 per hour would have little or no adverse effect on hiring. But a higher minimum is needed. Living wage rates range from $13.92 per hour in Montana to $22.66 in New York City.

Despite having a sympathetic two-term Democratic President and a Democratic Senate, the last three years in particular have been challenging ones for American unions. Republican lawmakers and anti-labour organisations have engaged in a well-coordinated and relentless political assault on public and private sector unions and the wages, working conditions and legal protections of their members, especially at the state level.

Unions’ central involvement in the push for a living wage at the state and local levels, as well as for an increase in the federal minimum wage, has provided an important bright spot, one that may point to better things on the horizon. Ultimately, however, overcoming wage stagnation and the proliferation of low-wage work will require a revival of strong unions and widespread collective bargaining, which was the bedrock of US economic growth for several decades after World War Two, a period in which workers’ wages increased in line with productivity.

After several years of relative inactivity on the minimum wage, union-led activities around the issue have helped start a national conversation about economic inequality and could yet signal the start of a new movement consisting of progressive Democrats, the unions and American workers.

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