Policy report shows minimum wage lifts women out of poverty, boosts consumer spending
In his State of the Union address, President Barack Obama made a bold claim: “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 $9 an hour. This single step would raise the incomes of millions of working families.”
Amid the cacophony of voices, critics and proponents alike are raising a number of questions about the outcome of his proposal. Will hiking the minimum wage significantly improve the nation’s economic growth by 2015? Will 46 million Americans—15 percent of the population—get the boost they need to climb above the poverty line? Or will it raise prices and lead to unemployment?
Despite the criticisms, a policy report released by the Institute for Urban Policy Research & Analysis (IUPRA) shows raising the minimum will not only help the U.S. economy, it will also lift millions of the lowest-wage workers—mainly women of color—out of the cycle of poverty.
The U.S. census shows the 15 percent poverty rate is about the same as it was in 1993 and was the highest since 1983. And for African American and Hispanic women, a full-time minimum wage job isn’t enough to break out of the poverty cycle. According to the policy report, working women of color make $0.64 and $0.56, respectively, for every dollar white men earn.
Shetal Vohra-Gupta, an IUPRA research fellow and lead author of the policy report, says this disparity is concerning because female-led households with children have increased by approximately 10 percent during the past decade—and more families than ever before depend on women as primary breadwinners.
“It says something about our policies and policy makers when a mother who works full-time cannot provide enough for her children in terms of quality child care, nutritional foods and a stable home,” says Vohra-Gupta.
To illustrate the adverse effects of a stagnant minimum wage, the analysis points to Texas, which has the largest number of low-wage workers ($7.25/hour) in the nation, according to the Bureau of Labor Statistics. Despite its national reputation for economic growth, Texas ranks sixth in the number of people living in poverty, and its poverty rate is growing faster than the national average, according to the 2010 U.S. census.
African American and Hispanic women are hit the hardest. Drawing from U.S. census and American Community Surveys data, the report shows the nation’s total of single-mother households increased 163 percent among Hispanics and 33 percent among African Americans during the past decade.
“Wages that do not provide women with the ability to meet their needs is a major national problem that is often ignored,” says King Davis, professor of African and African Diaspora Studies and IUPRA director. “This research shows just how concentrated low wages are in populations of women of color.”
To rise above the poverty threshold, a single mother raising two children and working full time would need to earn $17.50 to $31.60 an hour, according to the Economic Policy Institute, a nonpartisan think tank for economic research. This amount, known as the living wage, is more than twice the average minimum wage in most communities.
In addition to lifting millions of Americans out of poverty, a higher minimum wage, adjusted with inflation, will also give the U.S. economy a much needed economic stimulus, Davis says. Even a modest pay increase will boost consumer spending on basic necessities, such as food, gas and clothing.
“Low wage earners cannot participate fully in the economy, thus lowering the overall economic health of their neighborhoods and communities,” Davis says. “Dr. Vohra-Gupta identifies that where race, low education and limited skills combine, the risks of long-term poverty for the women and their children requires policy action by a Congress that is intent on eliminating rather than increasing the worth of entitlements.”
Banner image: Luz Torres, a housekeeper at the Eldorado Hotel in Santa Fe, New Mexico, cleans one of the hotel’s rooms in December 2011. Torres is paid more than Santa Fe’s minimum wage.