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Jeannette Wicks-Lim: Milwaukee Comptroller wrong for assuming raising minimum wage for county employees would cost millions of dollars

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JAISAL NOOR, TRNN PRODUCER: Welcome to The Real News Network. I’m Jaisal Noor in Baltimore. And welcome to this latest edition of The PERI Report.

Now joining us is Jeanette Wicks-Lim. She’s an assistant research professor at the University of Massachusetts Amherst who specializes in labor economics with an emphasis on the low-wage labor market.

Thank you so much for joining us.


NOOR: So tell us about what’s happening in Milwaukee regarding increasing the minimum wage there.

WICKS-LIM: Sure. Right now there’s an ordinance that’s being debated in the County of Milwaukee where there is some discussion about raising minimum-wage rate there for businesses that do business with the county from $7.25 is the current effective rate there to $12.45. That’s about a 72 percent minimum-wage increase. And this is, just like I mentioned, for businesses that do businesses with the county. So that includes service contractors, so businesses that provide services to the county and so have contracts with the county. It also includes leaseholders and concession agreement holders. So, again, these are businesses that have some business tie with the county. And then also businesses that get subsidies from the county in the form of reduced rates for loans or some kind of below-market value sale for land, those kinds of things. So, again, this is a third group of businesses that have some kind of business link to the county that would be subject to the $12.45 minimum wage.

NOOR: And, you know, as you mentioned, it’s being debated right now. There’s been a few proposals thrown around. One person that’s come out against it or has raised concerns about it is the Milwaukee County comptroller, who says this effort will cost taxpayers millions of dollars, possibly bankrupting the county’s family care program. What’s your response? And what’s been the response on the ground against that argument?

WICKS-LIM: Well, so this report that came out by the comptroller just came out last week, so I’m not sure what the overall response has been from the public or the other government officials.

But I just wanted to first sort of set the context for this debate, you know, around this issue of this living-wage ordinance more generally. You know, the idea behind the $12.45 rate is to get families to the poverty line–well, actually just a little bit above the poverty line. So the idea is that any business that’s doing business with the county should provide jobs that give a family a living wage, a wage that provides them just above the poverty line in terms of income. So that’s the idea behind the measure.

And so, you know, advocates for this ordinance, what they’re trying to do is say, well, these are county dollars that are been used for these businesses. We want to promote living-wage jobs, and this is one way that we can do it.

Now, so this issue about what would the fiscal impact be, this is the big issue that comes up around these kinds of living-wage ordinances, what would the budget impact be of this kind of minimum wage. And I recently released a report, last week, where I did my own estimate of how this living-wage ordinance would impact the county of Milwaukee, and my overall assessment was that there would be a minimal impact on the budget, and something on the order of–when we’re thinking about county contractors (so that’s going to be the biggest, the largest cost for the county), you’re look at something on the order of less than 0.1 percent of the county’s budget in terms of what the costs would be with this minimum-wage or this living-wage ordinance going into effect. So when you look at what the impact would be overall, it’s quite minimal.

Of course, this is quite in contrast with the comptroller’s assessment, and there are a couple of reasons why our assessments are quite different. For one, the comptroller is assuming that the county will absorb any and all cost increases that the living-wage ordinance would impose on businesses. Now, this in fact is not what we’ve seen in the past when you’ve seen living-wage ordinances passed in municipalities. A lot of times, businesses absorb, you know, about half the cost from these living-wage increases. So they absorb the cost increases by, you know, becoming more efficient, you know, having some labor cost savings because the turnover rates in their workers goes down. And then also they may find other ways to raise revenue. Or, for nonprofit businesses that are also covered by this living-wage ordinance, they would reduce what’s called operating surplusses. So it’s sort of the nonprofit version of profits. They would find ways, you know, bring down revenue–expenditures in other areas.

So what we’ve seen with other living-wage ordinances are cost increases to the county’s budget or the municipalities’ budget. They’re much, much smaller than what people typically predict. And I think that’s the case here again is that the comptroller is making really pessimistic assumptions about how the cost increases would be absorbed by the county or by the contractors. And when I look at what the past experience has been, the impact on the county’s budget should be very minimal.

NOOR: And, you know, at The Real News we just covered how Washington, D.C., and several neighboring counties just raised their minimum wage as well. How much does this reflect this growing national trend at addressing the issue of very low paid workers?

WICKS-LIM: Right. Yeah. And I think that this is part of a larger trend. What we’re seeing is, a lot of different places, workers figuring out ways to change the rules so that their pay starts to go up. What we’ve seen, you know, for years now is, particularly for workers at the low end of the wage distribution, seeing their wages either decline in real value or just sort of stay exactly where they were, you know, ten, 20, 30 years ago. So I think that while we saw kind of a lull in the living-wage movement over the last five, ten years, now we’re seeing this sort of reignited, ’cause I think that there is this feeling that even though there’s been this what we consider an economic recovery from the great recession, wages for low-wage workers in particular are just not moving. So it’s, I think, sparked a reinvigorated living-wage movement across the country.

NOOR: Jeanette Wickes-Lim, thank you so much for joining us.

WICKS-LIM: Thanks for having me.

NOOR: Thank you for joining us on The Real News Network.


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Jeannette Wicks-Lim is an economist at PERI, the Political Economy Research Institute. She completed her Ph.D. in economics at the University of Massachusetts Amherst in 2005. Wicks-Lim specializes in labor economics with an emphasis on the low-wage labor market and has an overlapping interest in the political economy of race. Her dissertation, Mandated wage floors and the wage structure: Analyzing the ripple effects of minimum and prevailing wage laws, is a study of the overall impact of mandated wage floors on wages. Specifically, she provides empirical estimates of the extent to which mandated wage floors cause wage changes beyond those required by law, either through wage effects that ripple across the wage distribution or spillover to workers that are not covered by mandated wage floors. Jeannette regularly publishes commentary in Dollars & Sense.