Economic Outlook - June 2006

State pays a high price for low minimum wage

State Treasurer Richard Moore wants the General Assembly to increase the minimum wage in North Carolina to $6.15 an hour. It would be the first time since 1973 — and only the second time in history — that the state’s minimum wage exceeded the federal one. Both are now $5.15. Though minimum-wage law is administered by the Department of Labor, he has been beating the drums for an increase as he talks with legislators, business leaders, civic groups and others.

BNC: The legislature couldn’t pass an increase last session. Why push it again?

Moore: It is a pro-family, pro-business, pro-North Carolina policy that makes good sense. When you adjust the current minimum wage for the rise in prices since the last wage increase in 1997, it’s actually worth less than it was before 1997. When you look at a longer time horizon, the minimum wage is at its second-lowest point in the last 50 years. While the cost of just about everything has been going up, the real value of the minimum wage has actually gone down to historic lows.

What good will it do?

It will pay minimum-wage workers an extra $173 each month, before taxes. That is money a worker can spend in our local businesses, save for the future or use to feed and clothe his family. That makes it less likely that taxpayers will have to pick up the tab for health-care bills, for food assistance and for other kinds of public assistance.

Who will be helped most?

It would benefit more than 100,000 North Carolina workers. More than half of them are over the age of 25, and three-quarters are over the age of 20. Almost a third of minimum-wage workers in our state are full-time employees. It also will help thousands of teenagers and college students. One of the most troubling statistics I’ve heard recently is that more students drop out of college because of financial reasons than because of grades. So it won’t hurt to put more money in the pockets of our students.

How will it help businesses?

The current minimum wage may put businesses that pay a better wage at a competitive disadvantage. I have talked with many business owners and managers about this. Not only were they shocked to find out that the minimum wage was so low, but they said that they pay well above it. However, if your competition pays the minimum, their employees are almost forced to use public programs paid for by your tax dollars to get by. In effect, you end up subsidizing your competitor’s business.

Without productivity gains, won’t a higher minimum wage shrink employment?

Study after study has shown that in the periods after a minimum-wage increase, the labor market shows few, if any, negative effects. In fact, some studies have even shown that the labor market improves for low-income workers. This is because businesses actually start to do better when consumers have more money in their pockets. Lee Scott, the CEO of Wal-Mart, has supported raising the national minimum wage for exactly this reason.

Won’t it make North Carolina less competitive in luring jobs from other states and keeping the jobs that are here?

North Carolina will remain competitive in attracting and retaining good jobs by educating the workers to fill those jobs, by investing in the industries of the future and by maintaining the quality of life and culture that businesses look for. That’s why we must remain focused on improving education in our state — from pre-kindergarten to the graduate level.

Why not let Congress handle it?

It does not seem likely that it’s going to pass. Besides, should we really wait for Congress and Washington to do what’s right? In areas from education to predatory lending practices, this state has not hesitated to move ahead of the country to expand opportunity for our people when we saw the need.

Why have you jumped into the fray?

The costs of health care, gasoline and housing are increasing rapidly, creating a crushing burden for North Carolina’s low-income families. When the door to advancement and opportunity is closed, we all suffer and it can have a huge impact on the bottom line. Also, our state’s public purse, which I am directly responsible for, is only as strong as the private purses that fund it. Anyone operating on $5.15 an hour just can’t make it.

Are you positioning yourself to run for governor?

I am advocating for an increase in the minimum wage because it is the right thing to do — for our state, our economy and our families. This is something that I think we can get done in this legislative session. I am working hard to make sure that happens.