Why Indiana’s Economy Lags

Indiana’s Institute for Working Families conducts research on Indiana’s economy–more specifically, the ways in which the state’s economy is or is not working for low-income Hoosiers who work.

The news, you will not be shocked to discover, is not good.

Recently, the Institute posted a list of 16 reasons why Indiana’s minimum wage should be raised. I encourage you to click through and read them all, but I want to highlight some of the most compelling.

  • There is not one county in Indiana where where working full time at the minimum wage of $7.25 per hour is sufficient to support even a single adult.
  • Waiters and waitresses in Indiana are paid $2.13 per hour by their employers (29% of the minimum wage). The last time they saw a raise was a quarter-century ago (1991), even as the industry has seen strong growth and profitability.
  • In Indiana, the median number of work hours at the minimum wage for a single adult to become self-sufficient is 48 hours per week. The number of hours increases significantly to 108 hours for a single adult with one preschooler and one school-age child. For a family with two adults, a preschooler, and a school-age child, each adult would need to work 64 hours for the family to be self-sufficient.
  • Standard and Poor’s cites rising income inequality as “contributing to weaker tax revenue growth”, making it more difficult for state and local governments to invest in education and infrastructure.
  • Children whose parents work for the minimum wage live below the federal poverty line. Research has found that children being raised in poverty have lower academic achievement, poorer nutrition, fewer job prospects as adults, and worse physical health than their more affluent peers.

The usual objection to raising the minimum wage makes superficial sense: if businesses have to raise what they pay, they will hire fewer workers. Logical as that seems, the evidence from decades of research says otherwise. As the Institute notes,

Two recent meta-analyses of research on minimum wage increases during the 1990s found that “the minimum wage has little or no discernable effect on the employment prospects of low-wage workers.”

There is a reason for this seemingly counter-intuitive result: when the minimum wage goes up, the buying power of low-wage workers also goes up. Unlike wealthier Americans, low-wage workers spend those extra dollars, and that increased spending boosts the economy. Increased buying power translates to increased sales of goods and services; employers who see improved bottom lines hire more workers.

A raise in the minimum wage to 10.10 per hour would affect 637,000 Hoosiers (23.4% of the workforce). That number includes 436,000 who are currently making less than $10.10 and another 201,000 whose wages would be pushed up due to pay scale adjustments. That’s a lot of additional buying power.

And as an added bonus, paying a living wage to hard-working Americans might ameliorate some of the rage and resentment currently fueling our toxic politics.

Just a thought.

 

31 thoughts on “Why Indiana’s Economy Lags

  1. YES. Thank you Prof K. 15.00 would be a good place to start. It is time that “we the people” stopped propping up WalMart and McDonalds and the other billion dollar companies that keep their employees on starvation wages. There IS no downside to paying working people a living wage. Let get going. Thanks again Prof.

  2. Social Security and Disability recipients received no COLA this year because consumers did not spend enough on goods and services. They could not spend money they do not have; businesses continue raising prices on goods and services to make up for the lack of consumers…consumers who do not have the money to consume their goods and services due to low wages which do NOT increase to keep up with their rising cost demands. Do the math!

    And of course, as always, FOLLOW THE MONEY!

  3. Has anyone tried to explain this economic theory to Republican friends? When I have mentioned this to them, they at first get that “deer in the headlight” look in their eyes and I can see it sink in just a little bit. I explain to them that the people they are really subsidizing with their tax dollars are the Waltons and all of the other billionaires that pay minimum wage to their employees. When I ask them if they think anyone can actually live on minimum wage, they all say No. So why do they think any employer should be able to hire workers at such low pay? Because they have been taught that higher wages would mean fewer jobs and more people on “the dole”.

    I imagine that when they walk away they may think about this for a little bit, but then will most likely go back to condemning “the low wage people” when they get back to their comfortable circles of like-minded friends. At least I take comfort in knowing that I planted a little seed of doubt in their minds regarding what has been pounded into their heads over the years.

  4. @ JoAnn – this past year Walmart even had reduced sales. What does that tell you about the economy? For many years their sales have been increasing because fewer people have the money to shop elsewhere. It is a very sad day when Walmart’s sales reflect that their shoppers can’t even afford to purchase the bare minimum living essentials at their stores.

  5. Nancy. Republicans still believe that repealing regulations, even on the financial markets and cutting taxes on the wealthy will revive the economy. Republicans deny science and economics.

  6. We teachers see the effects of this inequity every day.

    This year the parameters for what qualifies for free and reduced lunch were changed so that fewer kids made the cut. Food pantries in elementary schools are a common thing these days. Summer school lunch programs are held in every country so kids can have at least one meal when school is not in session.

    The politicians love to make those “low-wage earners” responsible for their own plight, but how can they hold the children responsible?

  7. Sheila, Tom and Nancy,

    “Just a thought.” – “It’s a very good thought!” – ” At least I take comfort in knowing that I planted a little seed of doubt in their minds regarding what has been pounded into their heads over the years.”

    Be very, very, careful. Good thoughts are now considered SUBVERSIVE inside the “Devil’s triangle of Dallas, Jacksonville and Indianapolis.”

  8. Nancy, my republican friends think you can’t spend your way out of a recession. They just see more money coming out of their own pockets for increases in the price of goods & services if wages are raised.

    I think it does take a leap of faith to believe that raising wages will help the economy, and they are too scared to have that faith.

  9. Want to help? Thursday, March 31

    Advocating justice for working people, including raising the minimum wage and rectifying wage theft, faith leaders are invited to a breakfast meeting, 9-10:30 am, at Unleavened Bread Café, E. 30 and Central, sponsored by Community Faith and Labor Coalition (whose members are also encouraged to come). To RSVP, contact Judy Voss at reverendjudy@hotmail.com or 295-9630.

  10. Make more money regardless of the impact on others. The one rule of capitalism.

    In other words, optimize each business, specifically not anything above that level.

    Enter government. Optimize the big picture for all community members.

    Each business individually pays the lowest compensation consistent with the labor market. They cannot do otherwise.

    Minimum wage has to come from a government dictate based on optimizing the system not the components.

    We must tune out the whinning of business followers and elect statesman who understand and accept the responsibilities of government. They are typically not business people who have been trained to optimize the pieces but not the whole.

    That’s why the Republican Party is acting incompetently and assuring their own extinction.

    We can afford that. In fact we can’t afford not that.

  11. Republicans believe that businesses create jobs. Experience shows that DEMAND creates jobs. Businesses are the conduits of jobs. Those businessmen who complain about higher wages ignore the fact that, when the lower classes do well, everyone does well. We have been playing the game of “trickle down” economics since Reagan was President. The past 26 years have proven that it doesn’t work and, in fact, has the opposite effect.

  12. A study conducted in 1990 is your source for trying to disprove a reduction in workforce? Lmao. You have to be dumber than the GOP to buy that line.

    The economics were different as was the market. The fact is under today’s market an increase in minimum wage WILL cut jobs – Oregon is a great example of this and there was even an article discussing the impacts on small business in the state. You know, current information.

    The minimum wage increase is needed but it’s a band-aid fix and one of long-term benefit with a steep investment cost. Initially businesses will cut jobs and hiring and raise prices while they recalibrate to the new wages and for small business this might add years to any growth if they aren’t outright sunk (most local and small businesses do not have high profit margins to cut into). Even your franchises and chain stores will need to stifle growth for a while.

    With the way the economy has been stacked there is a danger to this period of shrinkage due to the still healing economy and outrageously inflated prices.

    Any legislation will drive up the costs of goods, reducing the value of that pay raise as well.

    We need to fix the value of the dollar, dismantle most of our trade agreements, eliminate the Federal Reserve, establish pay-cap ratios and encourage investment into our workforce before any minimum wage increase can make an impact.

    Raising the minimum wage is a great piece of propaganda, easy to rally behind and acceptable by the majority of people, but it isn’t a fix. In fact, companies will just self-correct to maintain the same situation have now where inflated prices and undeserved CEO/investor pay sucks up the wages while worker wages stagnate again.

    A minimum wage increase, at least by itself, is nothing more than throwing scraps to the starving in hopes they’ll shut up.

  13. I’m always suspicious of an argument about a conclusion that contains an insult. Are Sheila’s data out of date (apparently not according to Mary) or is she “dumber than the GOP”? Thanks to Mary for being civil.

  14. Joe, a low minimum wage is essentially welfare for marginal businesses.

    Why would we want to take away resources keeping people who businesses cannot produce jobs for afloat through their troubles and give those resources to failing business owners? Why not let businesses too economically marginal to pay living wages go out of business and be replaced by successful businesses?

  15. Joe, trade agreements have one purpose and that is to economically benefit all of the countries involved.

    Why do you pretend that America would enact a trade agreement not beneficial to American business?

  16. Ah Joe, finally a cogent thought.

    “encourage investment into our workforce”

    Education, the key to the future and the biggest responsibility of all responsible people.

  17. As a student in the 1970s, I worked at a precast concrete plant in the summers. I was being paid $12/hour as a ‘bottom of the rung, seasonal employee’. What happened?

  18. How sad for America that so many jobs have been exported over seas by various trade agreements. When I go into a store, I cannot find an athletic shoe made in the USA. Even the toothpicks in my kitchen cabinet are made in China. Probably all of the electronics we buy are made off shore.

    No wonder the minimum wage has become such an issue. The manufacturing jobs that once paid high wages and had good benefits are gone. What are you left with??? My first job back in late 1960’s was with McDonald’s, I think it paid .90 cents an hour, no benefits. Next job was in a steel mill with a union, entry level was $2.39 an hour with benefits. There were advancement possibilities.

    The steel mill was sold, and then closed putting thousands out on the street with no jobs. The steel mill was leveled. Today you would never know it existed. The McDonald’s I started working at is still there.

    Not so strange is that it is accepted that you must pay millions a year for a star athlete on the Pacers or Colts. My daughter worked as a server making minimum wage, once in a while she would bring us home a milkshake treat. When she paid her bill the Marion County Food and Beverage tax was levied. That Food and Beverage tax helps, construct and maintain the Sports Palaces the Colts and Pacers play in.

  19. What you also have to plant (as in seed-thoughts) is that everyone of us taxpayers are directly subsiding the corporations that employ low wage workers with food stamps, housings subsides and lunch programs that feed those children, not the corporations, because of the tax breaks were written for them, not us. We taxpayers are the true providers for low wage workers and not their employers! Until everyone understands that, nothing will change.

    It’s welfare to the corporations that are given tax breaks and deductions and instead of them paying their fair share for the common good, we are being robbed blind by the lobbyists that represent those corporations. It’s rigged against us. We must stop it. Right now.

  20. Louie, unfortunately there are two unavoidable, IMO, uncomfortable facts.

    We cannot economically isolate America from the rest of humanity. Among other reasons are global IT networking and container shipping.

    What’s best for the economy in no way protects individual jobs.

    People have always suffered from economic deprivation due to skills – demand mismatch and the inability of business to adequately provide jobs.

    The best that “we” can do to relieve that deprivation is to continuously improve education, carry those effected through the bad times by welfare, optimize the economy as a whole, and regulate substandard businesses out of the picture.

    I’m afraid that the best we can do, and should do is what we can do that’s consistent with that reality.

  21. Why not 20 dollars an hour then everyone would have more money, what could possibly go wrong.

  22. “Get a skill set”. With the changes in technology and robotics dominating the market place now, how to you do that? We have many people who were laid off when jobs moved offshore. They went into debt to finance their new skill set. We know that once you reach 50, especially if you are a woman, you have less chance of getting a job in your chosen field that pays a living wage with benefits. Employers have foisted the cost of training to their desired/required skill set (for now) onto the taxpayer as well. Public schools are to educate the citizenry to create an informed electorate, not to train the workers for private business. This amidst the drive to private public education allowing business to double dip. They get to make a profit on training to their required skill set in their employees. Add to that the reduction in hours so no benefits are required, stagnant wages for decades and you have a recipe for the disaster we are in.

  23. Abdul, your comment reflects the simple-minded comments of people who have been lucky enough to not suffer the hardship of job loss in the past 10-15 years.

    What would you suggest to the thousands of college graduates in this state alone who cannot find work at a living wage? I am referring to graduates with majors that are supposed to be in need, i.e. accounting. The jobs just aren’t out there, even for those with education and skills. There are people with masters degrees that are stocking shelves at Walmart. The brain drain continues to exist in Indiana.

    Jobs openings with employers that require specialized technical skills remain unfilled because they want potential employees to risk taking out loans for thousands of dollars just to learn such specialized skills that they can only be used at certain companies – with no guarantee of employment. Why would people take such a financial risk in today’s job market? Those companies should be offering their own specialized job training via apprenticeships to share those risks. And to add insult to injury, those companies want people to spend money on this specialized training and then want to start them out at $12/ hour for a highly skilled labor position. That wage is barely enough to cover basic living expenses. It certainly doesn’t leave extra money to pay backthe loans for that training.

  24. Numbers to think about – an increase of $2.85 an hour affecting 637000 people means 3.8 BILLION dollars of spending power in Indiana. A lot of that money is currently going out of state in the form of profits for multi-national companies who do NOT reinvest nearly that much in Indiana…

  25. The bullet points make it clear that the republican plan to pauperize the US, and privatize everything, is working!

    None of this impoverishment is happening by accident. The republicans agreed years ago to destroy the country in order to turn it all into cheap real estate so it can be bought up by a few for pennies on the dollar, and it’s working!

    The antidote is easy. Vote out ALL republicans. Vote for Bernie Sanders.

Comments are closed.