Workers protest for higher wages. Photo Courtesy of the Bangladesh Apparels Workers Federation

By Naimul Haq
DHAKA, Feb 9 2018 (IPS)

Although Bangladesh has made remarkable recent strides like building green factories and meeting stringent safety standards, garment workers here are still paid one of the lowest minimum wages in the world.

While the fashion industry thrives in the West, the workers who form the backbone of the 28-billion-dollar annual garment industry in Bangladesh struggle to survive on wages barely above the poverty line.According to Oxfam, a top fashion industry CEO earned in four days the lifetime pay of a factory worker.

Meanwhile, annual export earnings in Bangladesh from the industry grew from about 9.3 billion dollars in 2007 to 28.6 billion in 2016.

Encouraged by the growth, Bangladesh has set a target of exporting 50 billion dollars’ worth of apparel annually by 2021, yet the vision mentions no plans to improve workers’ living conditions.

Out of Bangladesh’s 166 million people, 31 percent live below the national poverty line of two dollars per day. The current minimum wage for a factory worker is 5,300 Taka (about 64 dollars), up from 3,000 Taka in 2013.

As the world’s second largest ready-made garments producer, Bangladesh attracts top labels and companies like Pierre Cardin, Hugo Boss, Wal-Mart, GAP and Levi Strauss, mostly from North America, Europe and very recently Australia, seeking cheap labour.

After the tragic Rana Plaza building collapse in 2013, which took 1,134 lives, top buyers gradually increased investment in infrastructure to as much as 400 million dollars in the 2015-16 fiscal year alone to ensure safer working conditions. However, local industry owners have failed to make corresponding improvements to their workers’ quality of life, 85 percent of whom are women.

Research by the international aid group Oxfam shows that only two percent of the price of an item of clothing sold in Australia, for example, goes to pay the factory workers who made it.

The picture is even worse when it comes to living, food, transport, healthcare and education for the 4.5 million workers employed in about 4,600 vibrant factories. The Oxfam report revealed grim poverty conditions and calculated that a top fashion industry CEO earned in four days the lifetime pay of a factory worker.

There are a number of issues at play, including lack of unity among the 16 trade unions, political pressure by the industry owners, loopholes in the national labour laws and misunderstanding about practical living wages and theoretical minimum wages.

Nazma Aktar, President of the Sommilito Garment Sramik Federation fighting for women’s rights in the garment industry for over three decades, told IPS, “Most buyers have a business perspective on the ready-made garments industry here in Bangladesh. Their interests are widely on exploiting cheap labour.

“The wages should be fixed on the basis of human rights and not negotiate with what the entrepreneurs can offer. Wages are not part of a business, which is why globally it has set obligatory fees like covering cost of basics – living, food, healthcare, education and transport.”

A garment worker in Bangladesh. Photo Courtesy of the Bangladesh Apparels Workers Federation

The garment  workers’ organisations are demanding Taka 16,000 (about 192 dollars) as the minimum monthly wage, citing rising costs of living. In January, the government formed a panel to initiate what it says will be a permanent wage board and promised to issue recommendations in six months. The unions also plan to seek pay grades depending on the category of worker.

Dr Khondaker Golam Moazzem, Project Director, RMG Study Project and Research Director of the Centre for Policy Dialogue (CPD), told IPS, “The disturbing low wages still paid to the RMG (Ready-Made Garments) industry workers is largely due to lack of clear definition of wages in the labour laws. As a result, it is very difficult to negotiate raise in wages for the workers.”

Moazzem, who also led a team of researchers in conducting a detailed study titled New Dynamics in Bangladesh’s Apparels Enterprises: Perspectives on Restructuring, Up-gradation and Compliance Assurance, says, “There are nine indicators of wages as defined in the labour law. Unfortunately, except two, the rest are not made public. So it seems that the laws are themselves very complex and misleading on how to define what is low and what is high income. In such a situation we suggest following International Labour Organisation’s (ILO) set definition of wages.”

Dr Nazneen Ahmed, a senior research fellow of Bangladesh Institute of Development Studies (BIDS), told IPS, “Wages in Bangladesh are still the lowest of major garment manufacturing countries. A large proportion of the RMG products of Bangladesh still can be categorized as low-end products and so the brands continue seeking low-cost labour, though they are unskilled.”

Ahmed, who carried out a detailed study on improving wages and working conditions in the Bangladeshi garment sector, explained that while a higher wage for workers is desirable, they would lead to gradual loss of the RMG market in the days of global competition. A sudden increase in wages would also trigger other industries to seek wage hikes.

“I suggest a separate pay scale for the RMG sector workers which would have a separate wage board to suggest the increases. But most effective would be to have a regular system of yearly wage increases according to rate of inflation. At the same time, we should also look at increasing production of the factory units by enhancing the skills of the workers who will be paid higher wages.

“Therefore I refer to as having a technology advancement plan. If the ‘skilled’ workers are capacitated through regular skill development training programmes, the entrepreneurs would then be able to make more profit and so in such situation I believe the industry owners would not hesitate to pay a higher salary.”

Towhidur Rahman, General Secretary of the IndustriALL Global Union, Bangladesh Chapter (IBC), told IPS, “The minimum wages fixed for any worker at entry level is absolutely unacceptable. I don’t blame the [industry] owners for this. I rather hold the union leaders responsible for their lack of unity and one voice for this situation. The demand for minimum wages should be realistic for survival of any human being.”

Rahman says, “Sadly, today we have 16 RMG workers’ organizations that have separate voices and ideologies. For such reason the entrepreneurs take advantages of lack of understanding among the workers representatives.”

Rahman explains that they proposed Tk 16,000 as minimum wage to the newly formed wage board based on a number of surveys which suggest that a worker requires a minimum of Tk 19,000 for food, shelter, transport, healthcare and other basic needs.

“I believe this is very practical and fair proposal as it is merited with evidence on a minimum living standard,” says Rahman.

Dr Zahid Hussain, a lead economist in the South Asia Finance and Poverty group of the World Bank, told IPS, “Most people naturally focus on wages as a cost of production for business.  The significance of wages as a cost is one component of what economists call ‘real unit labour cost”’. This is the cost of employing a person in terms of the value of the goods and services a business would produce. It depends on two things. The first is the real wage – the purchasing power of the worker’s pay packet, which brings into play prices of goods and services.

“The second is the productivity of the worker – how much the worker produces over a given time,” he explained. “The real cost of employing a person over time depends on how these two things change. If productivity is growing, then the real wage can grow without an increase in the real cost of labor for business. But productivity also depends on investment. Changes in technology that allow for greater productivity are often embodied in the new plant and equipment that firms invest in.

“What governs investment? A simple answer points to the expected rate of return on the investment relative to the cost of capital. So the bottom line is the following:  just increasing minimum wage without addressing the constraints on investment and its financing will most likely kill the goose that lays the golden eggs.  The whole issue of ensuring a better quality of life for the workers needs to be approached holistically such that productivity increases in tandem with wages.”

Siddiqur Rahman, President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told IPS that the industry has been offering minimum wages to factory workers considering inflation and efficiency of the workers.

“We do not do any injustice to any of our workers,” Rahman insisted.

By Peter Costantini
SEATTLE, Dec 23 2014 (IPS)

Since his college days, John Schmitt says, he’s been “very interested in questions of economic justice, economic inequality.”

Photo courtesy of John Schmitt

He served a nuts-and-bolts apprenticeship in the engine room of the labour movement, doing research for several unions’ organising campaigns. Today, he’s an influential proponent of new approaches to low-wage work that have reoriented how many economists and policy-makers understand the issue.

Schmitt is a senior economist at the Center for Economic and Policy Research in Washington, DC. He also serves as visiting professor at the Pompeu Fabra University in Barcelona, and was a Fulbright scholar at the Universidad Centroamericana “Jose Simeon Cañas” in San Salvador, El Salvador. He holds degrees are from Princeton and the London School of Economics.

IPS correspondent Peter Costantini interviewed him by telephone and e-mail between August and December 2014.

Q: Among policy prescriptions for reducing income inequality and lifting the floor of the labour market, where do you see minimum wages fitting in?

A: I think the minimum wage is very important. It concretely raises wages for a lot of low and middle-income workers, and it also establishes the principle that we as a society can demand that the economy be responsive to social needs.

It’s a legal, almost palpable statement that we have the right to demand of the economy that it serve us and not that we serve the economy. It’s not the solution, in and of itself, to economic inequality. But it’s an important first step.Two of the last three increases in the minimum wage were signed by Republican presidents, with substantial support from Republicans in Congress. So it’s a very American institution that has had a long history of bipartisan support.

And it’s an easy first step. It’s something that we’ve had in this country since the 1930s, and it has broad political support. It regularly polls way above 50 percent, even among Republicans. And in the population as a whole, 65 to 75 percent of voters support it.

Two of the last three increases in the minimum wage were signed by Republican presidents, with substantial support from Republicans in Congress. So it’s a very American institution that has had a long history of bipartisan support.

And it’s effective in doing what it’s supposed to do, which is raise wages of workers at the bottom. It does exactly what a lot of people think our social policy should do: reward people who work. Almost everybody agrees that if you’re working hard, you should get paid a decent amount of money for that.

Also, it doesn’t involve any government bureaucracy other than a relatively minor enforcement mechanism. Because everybody knows what the minimum wage is. There’s a social norm and expectation that people who work should get at least the minimum wage. [More]

Q: Beginning in the early 1990s, a new approach surfaced that challenged the old contention that minimum wage increases reduce employment among low-wage workers.

A: It was called the New Minimum Wage research. A lot of economists at the time were looking at the experience of states that had increased the minimum wage, and were finding that state increases seemed to have little or no effect on employment.

It caused a lot of controversy, which is still raging. I think the profession has moved a lot towards the belief that moderate increases in the minimum wage, like the ones that we historically have done, have little or no impact on employment.

I think what most economists are persuaded by is that the empirical evidence is not that supportive of large job losses. There’s just a lot of good research out there that consistently finds little or no negative employment effects.

The textbook model for how the labour market works is just a vast oversimplification. It can be useful in some contexts, but it’s not useful to understand a pretty complicated thing, which is what happens when the minimum wage goes up.

One of the key insights is that employers aren’t operating in a competitive labour market nor are employees. There’s the possibility that employers make adjustments in other dimensions besides laying workers off: they raise their prices somewhat, or they cut back on hours [without layoffs].

And from a worker’s point of view, if they raise your salary by 20 percent and they cut your hours by five or 10 percent you’re still better off, right? Because you’re getting paid more money and you’re working fewer hours. So there are a lot of ways that firms can adjust to minimum wage increases other than laying people off. [More]

Q: So from a worker’s point of view, I still come out ahead. Low-income work is already very unstable.

A: An important ingredient here is labour turnover. There’s a new paper that looks very carefully at what happens to labour turnover rates before and after minimum wage increases, and finds substantial declines in turnover for different kinds of workers.

A different analysis looks at a living wage law that was passed at the San Francisco airport a few years back. They found something like an 80 percent decline in turnover of baggage handlers after the minimum wage went up, the living wage.

People who don’t work in business don’t fully appreciate that turnover is extremely expensive, even for low-wage workers. Filling a vacancy can be 15, up to 20 percent, of the annual cost of that job. The people who have to fill it are managers, using their more expensive time. And meanwhile, you’re losing customers.

So if the minimum wage reduces turnover, which evidence is increasing for, then it can go a long way towards explaining why we see so little employment impact of minimum wage increases. [More]

Q: What happens when cities increase the minimum wage?

A: I have a lot of faith in the democratic process. So when a city focuses on where to set the wage, a lot of people weigh in: business people, workers, unions, community organisations, low-wage workers, local academics.

There’s a city-wide conversation. And I think this is one reason why we consistently don’t see big employment effects: that process usually arrives at some wage that’s a vast improvement over what we currently have and within the realm of what the local economy can afford.

I think we probably consistently err on the side of caution rather than on the side of going too far. [More]

Q: How do you see the 15Now movement, the fast-food workers movement, changing the labour movement?

A: There’s a lot of dynamism behind the fast food and 15 folks and what’s happening in Seattle, a lot of city and state campaigns to increase the minimum wage. They’re putting a focus on wages and wage inequality, and the need to reward people for working hard.

They’re also focusing attention on other issues that are going to be really important in the future: for example, scheduling questions. One of the recurring problems for fast-food and retail workers is not just that their wages are so low, but also that they have little or no control over their schedules.

I think any time you have people agitating for economic and social justice and getting national attention, it’s encouraging for the possibility of turning around three going on four decades of rising economic inequality.

The single most important thing is to keep some oxygen flowing here so that this conversation can continue: the media cover it, people talk about it when they’re having a beer with friends, or when they’re downtown and they see a bunch of McDonald’s workers out making noise. That’s not something we’ve seen a lot of in the last 35 years. [More]

Edited for length and clarity. For full interview, see version on IPS blog. Edited by Kitty Stapp.

Excerpt:

By Judith Niehues
COLOGNE, Sep 20 2014 (IPS)

Thomas Piketty, a French economist who works on wealth and income inequality, has triggered a debate on the distribution of income and wealth in many countries. This is no small issue because views on income inequality and concomitant redistributive preferences are crucial to the design of tax and transfer systems.

Particularly in many European countries, society is concerned about distributional issues, reflected in recurring debates on redistributive policies. However, a study presenting international survey data on subjective perceptions of inequality and redistributive preferences reveals that perceived and actual inequality diverge quite substantially in many of these countries.

Dr Judith Niehues

According to the 2009 Social Inequality Module of the International Social Survey Programme (ISSP), more than 50 percent of Germans strongly agree that differences in income are too large.

Correspondingly, a similar portion of Germans thinks that it is “the responsibility of the government to reduce the differences in income between people with high incomes and those with low incomes” – a questionnaire item which is commonly used to capture subjective preferences for redistribution.

Regarding this majority of critical views on inequality, social justice and redistribution are topics for debate that continually feature on the political agenda in Germany – reflected in the current introduction of redistributive policies, such as a minimum wage and additional pension benefits for mothers.

On the other hand, in the United States – which is characterised by a far higher degree of actual income inequality – people are less concerned about income differences, and they do not see any reason for redistributive state intervention. There is virtually no empirical relationship between the actual size of inequality within a country and how critical people view these income differences to be.

The missing link between inequality and its assessment is not specific to these two countries. In a sample of 23 European countries and the United States, there is virtually no empirical relationship between the actual size of inequality within a country and how critical people view these income differences to be.

Obviously, there might be a range of individual and national factors which may explain cross-country differences in critical views on income differences and related redistributive preferences.

For example, in line with the argument of the “American exceptionalism”, people in the United States might just accept certain inequalities as incentives because they believe in the chance of upward mobility.

On the other hand, Germans may be more convinced that income positions arise from luck or other exogenous circumstances, thus regarding inequality as more unfair, and therefore they might demand more state redistribution.

However, current research on mobility reveals that there is a tendency for countries with higher inequality to also be associated with less income mobility.

Looking instead at how types of societies are perceived – a questionnaire item also included by the ISSP – gives some clues: 54.2 percent of Germans believe that the bulk of the German population lives rather at the bottom of society.

To what extent does this perceived type of society match with actual income distribution in Germany? Although there are different ways of demarcating society into a “bottom”, a “middle” and a “top”, studies generally reveal that the middle class represents by far the largest group in German society.

In particular, independently from the chosen definition of income groups, people on middle incomes are far more numerous than those at the bottom of the income distribution scale. This rather pessimistic view on income equality is typical of the European countries studied.

In most countries, the population significantly overestimates the degree of inequality. This is particularly true for former socialist countries such as Hungary, Slovenia as well as the Czech and Slovak republics.

In Hungary, for example, 56.6 percent of the population views Hungarian society as “a small elite at the top, very few people in the middle and the great mass of people at the bottom”, although the country is characterised by one of the lowest income inequalities in the European Union.

Thus, it is not that former socialist countries view already small income differences as much more critical, but that the population is just not aware of the small level of income inequality.

The situation is different in the Scandinavian countries. Here the various populations are much more realistic about the low levels of inequality and truly identify their societies as “typical middle class models”.

In contrast to the European countries, the United States reveals a completely different picture: U.S. citizens substantially underestimate the extent of inequality in their country. The lower income group in the United States is considerably larger than Americans suppose

This varnished view on inequality in the United States is not new – but it is rather new that in European countries it tends to be the other way round.

These results provide an explanation of why redistributive policies find more support in some countries than in others.

Although results from previous ISSP surveys suggest that cross-country differences in views on inequalities and redistributive preferences tend to change slowly, it would nevertheless be interesting to see if critical views on income differences and redistributive preferences would change if citizens were aware of the actual degree of inequality in their countries.

Interestingly, the overestimation of inequality is adversely related to the absolute level of living standards in corresponding countries. Thus, it might also be the case that the perceived structuring of the society is more associated with absolute levels of living standards than commonly suggested.

(Edited by Phil Harris)

Excerpt:

A rally to raise the minimum wage in Herald Square, Manhattan, Oct. 24, 2013. Credit: The All-Nite Images/cc by 2.0

By Peter Costantini
SEATTLE, Aug 11 2014 (IPS)

In 1958, when New York State was considering raising its minimum wage, merchants complained that their profit margins were so small that they would have to cut their work forces or go out of business.  In 2014 in Seattle at hearings on a proposed minimum wage increase, some businesses voiced the same fears.

A national minimum wage was established in the United States in 1938.  Since then, Congress has increased it every few years, although since 1968 it has fallen far behind inflation and productivity growth.  By 2015, over half of the states and many localities will have raised local minimum wages above the federal level.

Graphic: Peter Costantini

Each time such raises are proposed, bitter debates break out over the potential effects.  Somehow, though, economic devastation has been repeatedly averted.

What actually happens when the minimum wage increases moderately is that total expenses across all industries go up a tiny amount, usually less than one percent.  So the wage hike has little or no effect on the great majority of businesses.  The higher costs are absorbed mainly through tiny price increases, reductions in turnover and increases in productivity.

Historically, the yearly average for recent local minimum wage increases has been 16.7 percent.  But some have been far higher.  For example, in 1950 the national minimum wage jumped 87.5 percent from 40 to 75 cents. And in 2004, the city of Santa Fe, New Mexico, raised its minimum from 5.15 to 8.50 dollars, a 65 percent increase.

Even after Santa Fe’s big raise, the average resulting cost increase for all businesses was around one percent.  For restaurants, it was a little above three percent. [More]

The small impact of raising the wage floor may be surprising to those unfamiliar with the historical record.  But the accounting is straightforward.  Nationally, only 4.3 percent of all workers earn the federal minimum wage or lower; perhaps two or three times that number would have their wages lifted by a moderate minimum wage hike.

The average raise will be somewhere around half of the difference between old and new minimums, because most affected wages will fall somewhere in between.  As a result, the total growth in payroll is small for most businesses.  And payroll, in turn, averages only about one-sixth of gross revenues for all industries nationally. [More]

Because total cost increases for most businesses are minimal and can be covered by other adjustments, moderate minimum wage raises’ effects on low-wage employment have been close to zero.  This is the broad consensus of two decades of rigorous empirical studies at national, state and local levels.

A comprehensive study of state minimum wage increases in the U.S. found “no detectable employment losses from the kind of minimum wage increases we have seen in the United States”, including for the accommodations and food services sector.  Two recent meta-studies of the past two decades of research, and examinations of increases in cities including Santa Fe, San Francisco and San Jose, also found no discernable negative effects on employment for low-wage workers.

As Harvard economist Richard Freeman put it, “The debate is over whether modest minimum wage increases have ‘no’ employment effect, modest positive effects, or small negative effects.  It is not about whether or not there are large negative effects.”

A letter to the President and Congress signed by 600 economists in support of raising the national minimum wage to 10.10 dollars cited “the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers”.

Even The Economist, the influential British neoliberal magazine, recently observed: “No-one who has studied the effects of Britain’s minimum wage now thinks it has raised unemployment.” [More]

In worst cases where an employer cannot adjust to payroll increases with price increases or efficiencies, the response will more likely be to reduce hours slightly than to cut jobs, because of the costs and disruption of layoffs.  However, any increase in wages large enough to prompt a reduction in hours would likely be big enough that the paychecks of workers receiving it would still come out ahead.

In many low-wage jobs, hours already fluctuate from week to week, workers frequently change jobs voluntarily or involuntarily, jobs come and go, and businesses start up and fold.  For low-wage workers already facing this instability, higher total yearly pay nearly always trumps any loss of yearly hours.  In fact, working fewer hours leaves more time for family, training or other work.[More]

Minimum wage increases do tend to compress the lower part of the pay scale.  Those who were making around the old minimum will now be making nearly the same as those who were making near the new minimum.  The differences between the lower rungs of the wage ladder will be diminished, which may prompt changes in business processes and work relationships.

In this situation, most businesses maintain some hierarchy, with the new minimum pushing up the wage levels just above it by small amounts.  But this “ripple effect” adds only a little to total payroll costs.  One study found that a 2004 increase of 19.4 percent in the Florida state minimum caused an average cost increase for businesses, from both mandated raises and ripple effects, of less than one-half of 1 percent of sales revenues. [More]

Only one sector has significantly higher concentrations of low-wage workers and a larger proportion of payroll expenses: accommodations and food services.  It is not a major part of the economy in most places: nationally it accounts for 2.2 percent of sales and 3.6 percent of payroll.  In these industries, 29.4 percent of workers are paid within 10 percent of the minimum wage.  The rule of thumb for restaurant payroll is about one-third of total revenues, twice the overall proportion.

Even for hotels and restaurants, however, the rises in operating costs are still covered mainly by modest price increases and significant reductions in turnover.  Many businesses in this sector have enough flexibility to raise prices without reducing revenues, especially when competitors face the same wage increases. [More]

In all sectors, low-wage workers tend to have high turnover rates, sometimes more than 100 percent annually.  Minimum wage increases often help trim personnel expenses related to firing and hiring by reducing workforce turnover and absenteeism.  Businesses may also gain from better-paid and more secure workers becoming more productive.

Businesses can also compensate for payroll growth through reductions in benefits or training, and improvements in work processes or automation.  Some employers may also accept a small reduction in profits until the wage increases are absorbed.

Even given these multiple channels for adjustment, there are often small businesses who find it hard to cover a minimum wage increase.  In recognition of this, most local minimum wage laws either exempt smaller firms and non-profits or phase in increases more slowly for them. [More]

In the broader economy as well, raising the wage floor may have positive effects.  Increased spending prompted by higher wages can stimulate growth in low-wage workers’ neighbourhoods.

Rising minimum wages also often reduce government spending on poverty programmes. Contributions to unemployment insurance, Social Security and Medicare rise with higher incomes.  Any positive or negative effects, though, will tend to be small-scale relative to the overall economy. [More]

In an era of secular stagnation and political stalemate, minimum wage increases offer an effective, politically popular, and positively motivating way to reduce income inequality from the bottom up, without reducing low-wage employment.

An expanded version of this article with footnotes and references can be found here. Part one of the series can be found here. 

Download of zip file with example spreadsheets

Edited by: Kitty Stapp

Excerpt:

A New York City rally to raise the minimum wage at Herald Square, Manhattan, Oct. 24, 2013. Credit: The All-Nite Images/cc by 2.0

By Bryant Harris
WASHINGTON, Jan 15 2014 (IPS)

Seventy-five economists, including seven Nobel Prize laureates, sent an open letter to President Barack Obama and the U.S. Congress on Tuesday, urging them to raise the federal minimum wage.

The same day, the president formally endorsed legislation that would incrementally raise the minimum wage to 10.10 dollars by 2016."When you’re cutting the pay for people at the bottom by one third, you shouldn’t be that surprised that you’re not making progress on poverty.” -- Jason Furman

“I think the fact that you see such a broad based list of economists there means that the economic case for raising the minimum wage is really mainstream and increasingly the consensus view of the economics profession,” Jason Furman, chair of the White House’s Council of Economic Advisers, told a panel at the Economic Policy Institute (EPI), a Washington-based think tank.

Labour rights advocates are also backing the proposal. “We call on Congress to enact a jobs bill, invest in our future, raise the minimum wage to $10.10, and devote its full attention to restoring full employment and raising wages,” writes Richard Trumka, the president of the AFL-CIO, a federation of unions.

The proposed legislation would raise the minimum wage by 95 cents per year over the next three years. This would increase the earnings of full-time minimum-wage workers from 15,000 dollars to 21,000 dollars per year.

Additionally, the bill would also seek to raise the minimum wage for tipped workers by 70 percent. Sen. Tom Harkin, one of the proposal’s co-sponsors, says the tipped minimum wage has not increased in 20 years.

Harkin argues that the fall in minimum wage is related to public policy that no longer guarantees an equal opportunity for low-income citizens.

“We used to agree that if you worked hard and played by the rules you could have a good economic stake in our society,” he said at Tuesday’s panel discussion. “But in recent years it’s been alarming to see how these fundamental principles and values are being degraded in our public policies.”

The bill’s other sponsor, Rep. George Miller, partially attributed the relative fall in wages to corporate labour practices.

“Those in the corporate world, some of the largest corporations in the world, decided that they’re just going to take more,” he said Tuesday. “They’ve assembled enough poor workers to make themselves rich.”

Senate Democrats intend to introduce the bill later this month.

The White House’s Furman contends that the proposed legislation would lift 1.6 million people out of poverty, while 8.6 million would witness a wage hike. Lawrence Mishel, the EPI’s president, estimates that as many as 27 million people will benefit from the proposal.

Depoliticising the minimum wage?

By many analyses, the United States is vastly overdue for an increase in its minimum wage. Furman and other economists note that when inflation is taken into account, today’s minimum wage is below where it was in 1950.

“The minimum wage was on an upward trend and reached its peak in 1968 and has fallen by one-third since,” Furman says.

“If you look at the poverty rate and don’t take into account public policy, it’s actually gone up since 1967. When you’re cutting the pay for people at the bottom by one third, you shouldn’t be that surprised that you’re not making progress on poverty.”

Part of the reason for this tardiness clearly comes down to political wrangling. The Harkin-Miller bill would thus also link and “index” future wage increases to inflation, taking the decision-making process out of the polarised confines of the U.S. Congress.

“When our bill is fully implemented, the minimum wage will no longer be at poverty wage,” Harkin explained. “The other thing is indexing, so it can’t fall down below that [poverty level] again.”

Yet business interests have long rallied against this idea.

“Indexing the minimum wage to inflation means that employers will likely be faced with automatically increasing labour costs without an automatic increase in revenues or profits,” Randy Johnson, a senior vice-president at the U.S. Chamber of Commerce, the country’s largest business lobby group, told IPS.

Conservatives also contend that increasing the minimum wage would lead to an increase in unemployment. As businesses incur higher labour costs, they say, they will inevitably be less likely to hire.

Labour groups argue that employers will be able to compensate for higher wages because of increases in worker productivity. “If it [the minimum wage] had kept up with productivity growth [since 1969] it would be $18.72,” writes Trumka in an analysis sent to IPS.

The Chamber of Commerce also raises concerns about a spike in unemployment. “While raising the minimum wage may help some low wage workers who retain their jobs,” Johnson says, “it will lead to less job creation and higher unemployment that falls disproportionately on the weakest segments of society, those with few skills and lower training.”

Furman, however, asserts that “the vast bulk of studies find that minimum wage has zero effect on unemployment.” In fact, he suggests that a higher wage would have an opposite effect, helping to “attract, motivate, and retain workers.”

Pressure building

Despite this, most Congressional Republicans will likely oppose the proposal, particularly in the heavily conservative House of Representatives. Miller admits to heavy Republican opposition, but notes that some Republicans have indicated that they may be able to find a way to commit to the bill.

While Democrats are willing to negotiate with Republicans on the bill, they remain adamant about a commitment to 10.10 dollars an hour. Harkin says this is a “bottom line”.

“If we had kept up the minimum wage from 1968, it’d be about 10.75 dollars an hour,” he says. “So to somehow bring it below that and lock in a sub-par minimum wage for the future is just not acceptable.”

Harkin also believes that an election year is the most appropriate time to fight for minimum wage legislation. He notes that public pressure leading up to the 1996 elections prompted Republicans to vote in favour of increasing the minimum wage.

“The American people are calling on us to do this clearly and unequivocally, and pressure will build,” he says.

A strike by fast-food workers for higher wages in New York City's Union Square in August 2013. Credit: The All-Nite Images/ CC by 2.0

By Ramy Srour
WASHINGTON, Dec 11 2013 (IPS)

In the midst of a nationwide movement for policymakers to raise minimum wages for millions of workers in the United States, experts here continue to debate the advantages and drawbacks of raising the federal rate.

The push for higher minimum wages has gained momentum in recent weeks, particularly with strikes by low-wage restaurant workers last Thursday in more than 100 cities. President Barack Obama also joined the debate, delivering a landmark speech condemning income inequality and the “race to the bottom” where businesses try to “pay the lowest wages” possible.

Obama’s renewed call coincided with a letter by 53 members of Congress calling on McDonald’s and other employers in the fast-food sector to raise pay for their employees. “Put[ting] more money in the hands of consumers…can help strengthen our economy,” the lawmakers noted.

But while higher minimum wages are widely believed to have a positive effect on social conditions, particularly by easing poverty among the most vulnerable sectors of society, economists maintain varying views on the issue.

“We’re all looking for ways to help low-income people get ahead, and that’s a very important goal,” Jonathan Meer, an assistant professor at Texas A&M University and an expert on economic public policy, told IPS. “But the real question is, what’s the right way to do it?”"Raising minimum wages is not going to reverse inequality, but it does help [in] mitigating it."
-- Sylvia Allegretto

So far, he said, most people have proposed minimum wage increases because “it’s the easy fall-back to say, ‘Let’s just pay people more.’ But research shows that increasing minimum wages actually reduces job growth. Simply put: people never get hired.”

This is a phenomenon economists call “disemployment” or “job loss” – that is, when employers don’t lay off workers but simply stop hiring new ones while decreasing the hours of those who are already employed. Opponents of raising the minimum wage say doing so leads to an overall lower level of employed individuals and slower job growth.

Gathering momentum

In his speech, Obama stressed that “inequality…hurts us all,” especially when “middle-class families can no longer afford to buy the goods and services that businesses are selling.” In the United States, he continued, “success has never been about survival of the fittest [but one] where we’re all better off.”

Despite strong opposition from many sectors of American society, including businesses and policymakers, some states have already started moving toward the president’s vision.

According to the most recent statistics from the U.S. Department of Labour, 19 states plus the District of Columbia have a minimum wage that is higher than the federally mandated threshold of 7.25 dollars per hour. Washington state leads the country at 9.19 dollars per hour, while several others have proposals to raise some of these rates even higher.

Others have recently raised their minimum wage, including California, Connecticut, New Jersey and New York. But experts say it is too early to establish whether these moves have had a sizable positive impact on low-income workers, and those who subscribe to the view that higher minimum wages could increase unemployment have used statistical evidence to prove their point.

But Meer said this view may be too simplistic and that it ignores the larger trends that often hide behind the numbers.

When trying to understand the relationship between minimum wage and employment, he said policymakers need to look at “the rate of job creation and job disruption.” When employers stop expanding their workforce, you get to job disruption, which is when employers stop hiring new workers because of the higher costs associated with their wages.

It is a larger trend that “goes beyond simple numbers, with more and more people living on government subsidies,” Meer said. And it is usually very “difficult to see in the conventional data.”

Meanwhile, other economists consider the link between minimum wages and employment levels to be weak, and claims of higher wages leading to job loss simply “scare tactics”. What is really at stake, they say, are the poorest sections of society.

“The biggest problem is that low-wage workers are falling further and further behind, and there’s a need to pull [them] up above the poverty line,” Sylvia Allegretto, the co-chair of the Centre on Wage and Employment Dynamics at the University of California, Berkeley, and a research associate at the Economic Policy Institute here, told IPS.

Minimum wages, then, become more than simply a way to increase or decrease unemployment and instead are about inequality itself.

Inequality vs. employment

In the United States, recent figures suggest that the wealthiest 10 percent of the population earn an average yearly income of over a million dollars, while the remaining 90 percent brings in just over 30,000 dollars. One tenth of the population controls two-thirds of the country’s economic wealth.

“Raising minimum wages is not going to reverse inequality,” Allegretto warned. “But it does help [in] mitigating it.”

She noted that a raising wage is likely to have very few negative effects, and would most likely benefit those at the very bottom of the wage scale. At the same time, the Berkeley economist recognised that there may be some disemployment risks, though she says these are largely negligible.

“Even granting that there may be some small disemployment effects to higher wages, the benefits far outweigh the costs,” she said.

Workers that keep their jobs end up having a higher income and are better off even if their hours are cut, she continued, because “higher wages help mitigate the fewer hours.”

But even if workers manage to mitigate the effects of fewer hours, critics of minimum wage laws note that the real problem is with those who fail to get hired. The divergence in the debate seems to hinge on the purpose of a minimum wage. For some, it’s about mitigating inequality. For others, it’s a matter of avoiding unemployment.

Workers stitch Hanes tee-shirts at a factory in the CODEVI free trade zone in Ouanaminthe, Haiti. Credit: Jude Stanley Roy/IPS

By Jane Regan
PORT-AU-PRINCE, Dec 3 2013 (IPS)

Haiti’s minimum wage will nudge up 12 percent on Jan. 1, from 4.65 to 5.23 dollars (or 200 to 225 gourdes) per day. Calculated hourly, it will go from 58 to 65 cents, before taxes.

But the raise will not affect Haiti’s 30,000 assembly factory workers, who are supposed to already be receiving about seven dollars for an eight-hour day – about 87 cents per hour. Recent studies have found rampant wage theft at almost two dozen of the factories that stitch clothing for companies like Gap and Walmart.“If I hear there is going to be a demonstration, I’ll be there. I cannot make it with this pocket change. The bosses know that." -- Haitian garment worker

The wage hike comes almost five years after the Haitian parliament asked for a 200-gourde minimum wage, then worth 4.96 dollars a day, but failed to overcome Washington-backed industry opposition [see sidebar].

Agreed to on Nov. 29 by a government-convened Council on Salaries (CSS) – made up of labour, business and government representatives – the raise falls far short of the minimum wage of 11.63 dollars (500 gourdes) that factory worker unions and others were demanding.

Last month, in the capital and in Haiti’s north, the Collective of Textile Factory Unions federation (KOSIT), which represents workers in three industrial parks, mobilised for the 500-gourde wage.

On Nov. 7, to chants of “500 gourdes! 500 gourdes!,” over 5,000 workers and supporters marched outside the gates of a free trade zone on the border of the Dominican Republic in Ouanaminthe. Hundreds of others marched on Nov. 26 in the capital.

The factory owners countered late last week with an open letter which pled to “keep Haiti competitive” with what they identified as their “big rivals” – Bangladesh, Cambodia and Vietnam, countries all known for harsh conditions and abuse.

Union members, other workers and their supporters demonstrate to demand a 500-gourde minimum wage in Port-au-Prince on Nov. 26, 2013. Credit: Batay Ouvriye

“We recognise that the clothing and assembly sectors are not ends in and of themselves, but they can be a very important stimulus and can serve as a motor to help Haiti open up and present itself as a country that is changing and modernising,” said the 23 Haitian, Dominican and South Korean factory owners and industrialists from the Association of Haitian Industries (ADIH).

Two days later, on Nov. 29, eight of the nine members of the CSS, including all three union representatives, approved the 225-gourde wage. (None of the union representatives were from KOSIT.)

Yannick Etienne of Batay Ouvriye (Workers Struggle), a labour group which supports KOSIT and other textile unions, said her organisation and the unions disagree with the 225-gourde salary.

“We think it is a shame that the CSS union representatives agreed to the miserable wage of 225 gourdes. At a meeting the night before, we requested that they refuse to sign any agreement that was less than 300 gourdes,” Etienne told IPS.

Rampant wage theft

The country’s 30,000 workers – almost two-thirds of them women – in Haiti’s free trade zone assembly factories stitch together clothing for Gap, Gildan Activewear, Hanes, Kohl’s, Levi’s, Russell, Target, VF, and Walmart. Haitian law stipulates that “the price paid per production unit… must be set in a way that permits a worker to earn at least 300 gourdes for an eight-hour day.”

But recent studies by three different international groups, including the U.N.’s International Labour Organisation (ILO), have documented that the vast majority of workers receive the legal minimum only rarely: about 25 percent of the time, according to the ILO.

A 29-year-old mother who works at the Multiwear factory, which makes tee-shirts for Hanes, is one of those being gypped. (Like all workers interviewed for this story, she agreed to speak only on the condition of anonymity.)

“I support my four-year-old, and two sisters, and one brother,” she told IPS. “Sometimes I make the quota and get 300 gourdes, but just once in a while.”

In its October 2013 report, the ILO’s Better Work textile factory monitoring programme found all 23 factories surveyed, including Multiwear, to be “non-compliant” with the law. To be “compliant,” Better Work said that “at least 90 percent of experienced workers” should be able to make 300 gourdes in an eight-hour day.

The mother is her family’s sole support.

“I am the oldest,” she continued. “Right now, my husband is not working. We live in one room.”

She wants the minimum wage to be raised, but said “many people won’t even show up to a sit-in, because if the bosses think you support a wage hike, you’ll immediately be fired.”

Workers, KOSIT leaders, several reports and many economists agree that 225 gourdes, and even 300 gourdes, are not living wages.

A 2011 study by the U.S.-based AFL-CIO’s Solidarity Centre held that a factory worker living in the capital and supporting two children would need to earn about 29 dollars per day (1,152 gourdes), six days a week, to support his or her family.

A 54-year-old worker from One World Apparel, owned by former presidential candidate Charles Henri Baker, also rarely earns 300 gourdes, she told IPS.

“When the boss started to hear talk about the minimum wage going up, he clamped down on us,” said the mother of three, who said she has worked at One World for eight years.

“You have to do 75 dozen pieces, but not every job is the same. Sometimes you can make the quota, but sometimes you can’t. No matter what the job is, the number is the same. Once in a while, if I work really hard, I can at least make 225 gourdes,” she added.

Both Gildan and Fruit of the Loom recently released statements promising to ensure their subcontractors respected the 300-gourde minimum.

“It is our view that the clear intent of Haiti’s minimum wage law is for production rates to be set in such a manner as to allow workers to earn at least 300 gourdes for eight hours of work in a day,” Fruit of the Loom said in a statement. “Based on our independent investigation, we concur with the WRC that the garment industry in Haiti generally falls short of that standard.”

In addition to denying most workers the 300-gourde minimum, bosses were regularly cheating labourers out of overtime and making them work essentially for free, according to a report from the Washington-based Workers Rights Consortium (WRC), issued Oct. 15, 2013.

In Stealing from the Poor, based on worker interviews and pay stubs from five factories (four in the capital and SAE-A at the Caracol Industrial Park), the WRC found repeated cases of employers paying workers the incorrect amount for overtime hours. (The ILO reported only nine percent of factories cheating workers out of overtime.)

In the capital, WRC maintains that at the four factories surveyed – One World, Genesis, Premium and GMC – workers were “being cheated of an average of seven weeks’ pay per year.” Workers sometimes willingly work “off the clock” in order to make the quotas necessary to be paid 300 gourdes, the group reported.

Economist Camille Chalmers, director of the Haitian Platform Advocating an Alternative Development (PAPDA), is highly critical of the Haitian government for, among other things, not enforcing the 300-gourde minimum. He has called for a 560-gourde minimum wage.

“The government does not play the role of arbiter, as it should,” said the university professor while speaking at a Nov. 18 meeting on the wage issue. “Government authorities instead tend to listen to the embassies, to ADIH… Our government is really tied to the upper class, the oligarchy.”

The current government – whose slogan is “Haiti is Open for Business!” – has pushed Haiti’s low wages at numerous national and international conferences.

The mother of three agrees that the minimum wage needs to go up to at least 500 gourdes.

“If I hear there is going to be a demonstration, I’ll be there,” she told IPS. “I cannot make it with this pocket change. The bosses know that. They are just cruel.”

The recent ILO/Better Work report is the seventh Better Work report to document shortfalls and violations.

Additional reporting by Patrick St. Pré.

Strikes in July in New York for higher pay for fast food workers. Credit: mtume_soul/ CC by 2.0

By Carey L. Biron
WASHINGTON, Aug 29 2013 (IPS)

Workers at fast-food restaurants in 60 cities across the United States went on a one-day strike Thursday, the largest action yet in a strengthening year-long push for higher wages and the opportunity to form unions without retaliation.

The strike affected around 1,000 stores, organisers said, and also included workers in some national retail chains. The push for higher wages coincides with a broader movement to raise the U. S. minimum wage of 7.25 dollars per hour, one of the lowest among developed economies.

For those who took part in Thursday’s strike, median wages were estimated at less than nine dollars an hour, which both workers and labour rights activists say is impossible to live on in almost any part of the country. They are demanding “living wages” of 15 dollars an hour, more than twice the current federal minimum wage.

“Raising wages for low-wage workers is an economic necessity for communities all across the country,” Pastor W.J. Rideout III, with the Inter-Faith Coalition of Pastors in Detroit, said Thursday. “The only way to get our economy going again is to put more money in the hands of consumers. These striking workers are the best stimulus our economy could have.”

Fast-food workers’ low wages stand in startling contrast to the sector’s reported profits of about 200 billion dollars a year."When a parent is forced to work two jobs and still cannot support his or her family, it is clear that there is something very wrong."
-- Mary Lassen

Last year, for instance, McDonald’s alone reported nearly 5.5 billion dollars in profit. The parent company of several other large-scale chains, including Pizza Hut, KFC and Taco Bell, saw its profits grow by nearly 75 percent, to 458 million dollars.

“For too long, large corporations have been able to ignore the needs of their employees while continuing to rake in huge profits,” Mary Lassen, managing director of the Centre for Community Change, a Washington advocacy group, told IPS in a statement.

“When a parent is forced to work two jobs and still cannot support his or her family, it is clear that there is something very wrong. It is time that corporations address the problems facing low-wage fast-food workers.”

A central sector

The industry has responded by warning that higher wages would translate into fewer jobs. Critics also suggest that these entry-level jobs are mostly important only for teenagers and those starting out in the workforce.

“The story promoted by the individuals organising these events does not provide an accurate picture of what it means to work at McDonald’s,” a spokesperson for the restaurant chain told IPS. “Our history is full of examples of individuals who worked their first job with McDonald’s and went on to successful careers both within and outside of McDonald’s.”

Yet a recent study, released in July by the National Employment Law Project, found that little more than two percent of fast-food jobs are managerial, professional or technical, thus providing “significantly limited” opportunities for advancement.

Others note that low-wage jobs in the United States, including those at fast-food restaurants, play a central role for a broad cross-section of workers.

“It is a common myth that very low-wage workers – workers who would see a raise if the minimum wage were increased – are mostly teenagers,” write David Cooper and Dan Essrow, authors of a new briefing paper and researchers with the Economic Policy Institute, a Washington think tank.

“The reality is that raising the federal minimum wage to 10.10 dollars per hour would primarily benefit older workers. Eighty-eight percent of workers who would be affected by raising the minimum wage are at least 20 years old, and a third of them are at least 40 years old.”

As the United States has stumbled through the aftermath of the 2008-2009 economic downturn, fast-food and other low-wage jobs have become increasingly important, adding some 60 percent of post-recession jobs. That centrality looks set to continue, with government estimates projecting that fast-food jobs will post the sixth-highest growth of all jobs between 2010 and 2020.

For this reason, analysts are now suggesting that low-wage workers – long seen as particularly difficult to organise – will become an increasingly powerful voice in demanding higher compensation.

Falling short

Thursday’s strike came just a day after tens of thousands of people turned out to mark the 50th anniversary of the March on Washington for Jobs and Freedom, one of the watershed events in the U.S. fight for civil rights.

At the commemoration, President Barack Obama reminded observers that the original marchers were demanding not only racial equality but also economic opportunity.

“It’s along this second dimension – of economic opportunity, the chance through honest toil to advance one’s station in life – where the goals of 50 years ago have fallen most short,” the president said Wednesday.

“[B]lack unemployment has remained almost twice as high as white unemployment, with Latino unemployment close behind. The gap in wealth between races has not lessened, it’s grown,” he stated. “The position of all working Americans, regardless of colour, has eroded.”

In the United States, upward mobility has become far more difficult over the past decade, the president noted, with labourers of all races seeing stagnating wages despite soaring corporate profits.

“The test was not, and never has been, whether the doors of opportunity are cracked a bit wider for a few,” he continued. “It was whether our economic system provides a fair shot for the many.”

One indicator of this lack of progress is that, during the 1963 march, protesters demanded a minimum wage that would translate to more than 13 dollars an hour at today’s rates. Even if the government had continued to update the minimum wage over the past half-century merely to keep up with inflation, this rate would today be around 10 dollars an hour.

Some legislative proposals have been made to set the minimum wage at this level, and in January Obama formally supported a modest rise to 9 dollars an hour. Yet all such proposals currently remain nonstarters in the Congress, evidently due to strong pushback from business groups.

Still, public support for an increase in the minimum wage is strong. According to polling carried out last month for the National Employment Law Project, 80 percent of U.S. adults support a 10.10 dollar minimum wage, with strong backing from all demographic and ideological categories.

In response to this public sentiment, U.S. states and cities alike have been stepping in and in just 2013, at least 13 states and several cities unilaterally raised their minimum wages.

Walmart has been criticised for years for paying its employees and suppliers notably low rates. Credit: Brent Hellickson/cc by 2.0

By Cydney Hargis
WASHINGTON, Jul 19 2013 (IPS)

Proponents of a proposed higher “living wage” requirement for workers at large retailers here in Washington are stepping up their campaign, urging the city’s mayor to sign pending legislation into law.

Dozens of other U.S. cities have enacted similar laws, which increase minimum wages at those businesses covered by the legislation by around 50 percent. Yet the legal battle here has garnered national attention because it appears to be aimed at one company in particular – Walmart.“We want him [Mayor Gray] to remember that he was elected by the citizens and not by Walmart." -- Reverend Graylan Hagler of Faith Strategies

“We will give the mayor our support if he has the backbone to sign the bill,” Reverend Graylan Hagler, president of Faith Strategies, a religious group here that has led demonstrations in support of the living wage bill this week, told IPS.

“To cave in to the threat of this corporation is to send a mixed message to the public that somehow corporations can come in and damage our sense of self-respect.”

Walmart, which has been criticised for years for paying its employees and suppliers notably low rates, had previously announced plans to build six stores in the Washington area, its first stores in the city. But it also warned that it would halt those plans on at least three stores (three others are under construction) if the living wage legislation were passed.

“This is a difficult decision for us – and unfortunate now for most D.C. residents – but the council has forced our hand,” Walmart spokesperson Steve Restivo said in a statement.

Last week, the Washington city council passed the so-called Large Retailer Accountability Act, and sent it on to Mayor Vincent Gray. The bill requires all indoor stores of 75,000 square feet or larger, and with a parent company that has a gross revenue of at least one billion dollars, to pay their employees a minimum of 12.50 dollars an hour, minus benefits.

After the vote, Walmart made its threat to pull out of the area. 

“With the passage of the Large Retailer Accountability Act, any future plans for retail expansion in the city must be revisited,” stated a letter from the company.

“Arbitrary conditions that subject our stores to rules that other employers, including countless competitors, are not equally subjected to unfairly distort the marketplace and are cause of grave concern.”

Since the vote, several other large retail stores that may be affected by the law – including Autozone, Lowe’s, Home Depot, Macy’s, Target and Walgreens – joined Walmart in opposition to the act.

In 2012, Walmart was sued by three female workers in Tennessee on behalf of female employees in four other southern states, claiming that the company pays women less than men and blocks promotions for female workers. The case was eventually thrown out by the Supreme Court.

Citizen values

The wage fight in Washington is part of a longstanding, and still building, push-and-pull in the United States.

The city of Chicago approved a similar bill seven years ago, and the city alderman who sponsored the bill, Joe Moore, said Walmart made the same kinds of threats – refusing to open stores while the legislation was even being considered. Then-mayor Richard Daley ultimately vetoed the legislation and Walmart subsequently opened several stores in the city.

New York State, too, raised its minimum wage in March, but only after the state allowed tax subsidies to stores that hire seasonal employees, including Walmart.

Here in Washington, the fight now is to try to ascertain what the residents – and voters – of the city may want.

“We want him (Mayor Gray) to remember that he was elected by the citizens and not by Walmart,” Hagler told IPS. “I think the mayor is smart enough and analytical enough to come around and do the right thing.”

Yet according to a poll carried out by Walmart, some 73 percent of DC residents in areas supposedly getting a store said they were in favour of Walmart.

For his part, Mayor Gray has previously promised his home ward hundreds of new jobs, with a new Walmart store in that area offering an obvious anchor for this pledge. According to many analysts, including Hagler, the mayor is now hesitant to take those jobs away.

“I’ve got to look at the full impact of the (living wage) bill,” Gray told reporters recently. “Everybody has looked at it from the perspective of Walmart, but it’s bigger than Walmart.”

Corporate bullying

According to some analysts, the impacts of a living wage are less dramatic for either side of this equation than is currently being admitted.

A study done by the Labor Center at the University of California at Berkley, for instance, found that if Walmart raised its minimum wage to 12 dollars an hour, and wanted to retain its profit margin, retail prices would only rise by around 1.1 percent.

“The notion that this (living wage law) is going to undermine Walmart’s business is so dramatically absurd,” David Cooper, an economic analyst for the Economic Policy Institute, a liberal Washington think tank, told IPS.

Walmart has a history of driving out small regional competitors and undercutting their prices, while paying their workers so little that they can barely survive without public assistance, according to Cooper.

“DC has been a thriving and growing location for business, and Walmart would do great business even if they have to pay their workers more,” he says. “It would be a shame for the mayor to cave to what amounts to corporate bullying.”

Up to 1 million unpaid internships are offered each year. Credit: Joel Gillman/CC by 2.0

By Cydney Hargis
WASHINGTON, Jun 15 2013 (IPS)

A landmark court decision this week has challenged the controversial existence of unpaid internships, highlighting calls for greater clarity on the legal definition of an internship.

The judge, William Pauley, ruled that Fox Searchlight Pictures, a movie studio, violated U.S. and New York minimum wage laws by not paying two of its interns during the production of a 2010 movie, “Black Swan”.

“Just like someone that has an entry-level position, interns receive benefits and contacts, but they don’t get paid,” Maurice Pianko, director and lead attorney of Intern Justice, an advocacy group, told IPS. “Just because somebody is receiving experience doesn’t mean they shouldn’t get paid.”

In the “Black Swan” case, plaintiff Eric Glatt, a law student and former accounting intern during the movie’s production, called unpaid internships “a form of institutionalised wage theft”.

According to a report by the National Association of Colleges and Employers, 55 percent of the class of 2012 in the United States had an internship sometime during their time at school, and 47 percent of those were unpaid."Just because somebody is receiving experience doesn't mean they shouldn't get paid."
-- Maurice Pianko

Up to 1 million unpaid internships are offered each year, according to estimates by Ross Eisenbrey, vice-president of the Economic Policy Institute, a Washington think tank. Further, he said the number of unpaid positions has increased in the aftermath of the 2008 economic downturn.

Eisenbrey also blamed unpaid internships for bringing down overall wages.

“The return on a college investment has fallen,” he recently told the media. “Students are facing higher and higher debt burdens, and the reaction of employers is to make matters worse for them by hiring more and more people without paying them.”

Benefiting the intern

Under the Fair Labour Standards Act, the U.S. Department of Labour has outlined six criteria for a position to be considered an internship and thus be legally unpaid in the private sector.

Among them are requirements that the experience must be for the benefit of the intern and the employer cannot derive any immediate advantage from the intern’s work.

If the six criteria are not met, interns must be paid according the minimum wage or more. This week, Pauley ruled that the “Black Swan” interns did not receive any training similar to that of an educational setting, one of the criteria given by the Department of Labour.

“The benefits they may have received – such as knowledge of how a production or accounting office functions or references for future jobs – are the results of simply having worked as any other employee works,” the judge stated in the ruling.

20th Century Fox, the parent company of Fox Searchlight Pictures, issued a statement expressing its disappointment with the ruling, calling it “erroneous” and saying it would appeal.

“I hope this sends a shockwave through employers who think, ‘If I call someone an intern, I don’t have to pay them,'” Glatt said.

Corporate liability

Last month, another federal judge in New York declined to allow a class action lawsuit proceed against the Hearst Corporation, a publisher, challenging unpaid internships at Harper’s Bazaar, one of the publisher’s magazines.

In that case, Diana Wang, a former Harper’s Bazaar intern, filed the lawsuit on behalf of all Hearst Corporation interns. But a judge denied the class action status because Wang couldn’t prove that all Hearst interns had faced similar conditions.

On Thursday, two previous magazine interns filed a lawsuit against another U.S. publisher, Conde Nast Publications, for failing to pay them minimum wage. The lawsuit is currently waiting to receive class action status.

For some advocates of changes to U.S. labour policy regarding internships, the overall goal needs to be to turn those unpaid positions into entry-level positions.

“Employers need workers to help them produce that product,” Intern Justice’s Pianko said. “What that means is that if there are no interns, those positions will be transitioned into paid entry-level positions.”

Still, others say achieving this goal would be very difficult. Brantley Davis, of the advocacy group Coalition for the Future American Worker, estimated that eliminating unpaid internships stands just a 10 percent chance.

“Experience is experience,” he told IPS, “and you need it for the workforce.”

In 2010, federal and state labour official did indeed move to crack down on illegal internships. But at the time, few plaintiffs came forward.

That now appears to be changing. Over the past two years, six lawsuits have been filed demanding minimum wage compensation for activities performed as interns.

According to Pianko, “All we need is one former unpaid intern to come forward and they [corporations] could be facing a four-, five- or six-figure liability.”

President Obama with Sen. Tom Harkin at the door of the Oval Office. Harkin introduced the Fair Minimum Wage Act of 2013, which currently has 29 co-sponsors. Credit: Official White House Photo by Pete Souza

By Matthew Charles Cardinale
ATLANTA, Georgia, May 29 2013 (IPS)

During his State of the Union address earlier this year, U.S. President Barack Obama spoke about the need to increase the federal minimum wage, which Congress has not voted to raise since 2007.

But while several legislative proposals have been introduced to raise the federal minimum wage, they have not gone anywhere."Inequality in the U.S. has been growing for decades and those at the very top are getting most of the rewards for growing productivity in this economy." -- Roger Hickey of the Campaign for America’s Future

In the U.S. Senate, where federal minimum wage increase legislation is more likely to pass because it is majority Democratic, one committee hearing has been held but no vote as of yet.

The Fair Minimum Wage Act of 2013, introduced by retiring Senator Tom Harkin of Iowa, has 29 co-sponsors.  Its House counterpart, introduced by Rep. George Miller, a Democrat from California, has 140 co-sponsors.

On Mar. 15, the House considered the legislation indirectly, when a motion was made to add the federal minimum wage increase to unrelated workforce development legislation. That motion failed 184 to 233, with not a single Republican voting yes, and a few Democrats joining nearly all Republicans in voting no.

“We know our economy is stronger when we reward an honest day’s work with honest wages.  But today, a full-time worker making the minimum wage earns 14,500 dollars a year.  Even with the tax relief we put in place, a family with two kids that earns the minimum wage still lives below the poverty line.  That’s wrong,” Obama said during his Feb. 12 remarks to the nation.

“Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to nine dollars an hour.  We should be able to get that done,” he said.

“When I heard that, I nearly jumped through the TV and kissed him,” Rev. Harriet Bradley, co-chair of the Atlanta chapter of 9to5, an advocacy organisation that promotes the policy concerns of working class women, told IPS. “He was telling the truth.”

The current federal minimum wage is seven dollars and 25 cents per hour.  This is what Rev. Bradley makes in her full-time job as a caregiver.  She provides home-based health care for people who qualify under Medicare.

Bradley also receives a two-dollar per hour mileage reimbursement, but no healthcare or any other benefit from her job. She lives in an extended stay hotel – where she pays rent by the week, rather than by the month – because she finds it to be more economical than an efficiency apartment.

When asked how she survives on such a wage, she cites “the Lord.  Jesus Christ does this every day.”

The most recent minimum wage increase was in 2009, the last increase implemented pursuant to Congress’s 2007 vote.

The federal minimum wage today is worth 31 percent less than what it was at its peak in 1968, even as productivity has increased.  If the federal minimum wage had kept pace with inflation since 1960, today it would be more than 10 dollars per hour.  If it had actually kept pace with the increased productivity of U.S. workers, it would be 22 dollars per hour.

Because the federal minimum wage is below the poverty line, many workers are forced to rely on safety net programmes such as public or subsidised housing, food stamps, and the like.

On Mar. 14, the Senate’s Health, Education, Labor, and Pension (HELP) Committee held a hearing regarding increasing the federal minimum wage, and, for what would be the first time in U.S. history, requiring future increases to be tied to inflation.

Only three senators attended the hearing: Sen. Harkin; Lamar Alexander, a Republican from Tennessee; and Elizabeth Warren, a Democrat from Massachusetts.

A strong advocate for working class people, Harkin is retiring at the end of this term. However, passing the federal minimum wage increase before then is a top priority for him.

At the hearing, Warren was very critical and aggressive in her questioning of two small business owners who claimed that forcing them to raise their wages would also force them to lay off workers.

Nineteen of the 50 U.S. states have state minimum wages that are higher than the federal minimum wage, meaning that people who live in those states earn those higher wages; and 10 of them have minimum wages that are indexed to inflation.

At the hearing, Dr. Arindrajit Dube, a professor of economics at the University of Massachusetts, testified that in states that had raised the minimum wage at the state level, there had been few or no job losses as a result.

Raising the federal minimum wage is “important because inequality in the U.S. has been growing for decades and those at the very top are getting most of the rewards for growing productivity in this economy,” Roger Hickey, co-director of the Campaign for America’s Future, told IPS.

“An increase in the minimum wage, which hasn’t happened in many years, would not only be good for those families that are trying to put bread on the table… It would be good for economic growth if more low-wage people had a wage increase,” he said.

“You would suddenly have more demand in the economy for the goods and services that corporations produce and we’d have more growth, and therefore, more jobs, so it’s a win, win, win. I think generally it’s accepted that will be acted upon after the immigration bill is debated and hopefully passed. ..If Republicans stall or defeat a vote in the House, it will certainly become an election year issue.”