Kentucky would benefit from a higher minimum wage

Published 4:31 pm Tuesday, January 8, 2019


The Advocate-Messenger

Legislation up for consideration in the Kentucky legislature this year would raise the state’s minimum wage above the federal minimum of $7.25. The bill filed by Lexington Democrat Sen. Reggie Thomas would phase in a $15 minimum hourly wage over the next seven years.

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It’s unlikely the current legislator and governor will be very interested in raising workers’ wages, but that shouldn’t stop supporters of more pay for middle- and lower-class workers from fighting for it.

Whether or not $15 an hour is the right target, there are plenty of reasons to support something more than $7.25 an hour, which amounts to about $15,000 annually.

People making minimum wage often also use government assistance programs because they’re not paid enough to be financially self-sufficient. In fact, minimum wage is worth so little these days that for many people without a job who are subsisting on government anti-poverty programs, they would actually be worse off financially getting a job.

A natural market effect of a higher minimum wage would be increasing wages for all workers, creating an incentive for more people to seek out and keep jobs. The end result — fewer people on welfare programs and more people working taxpaying jobs — means taxes could actually be lowered.

Paying workers more is also just the right thing to do. Someone who is willing to show up to work and help their employer turn a profit is worth more than $290 a week. In fact, minimum wage work was worth more in 2009, when the current federal minimum of $7.25 was put in place. Adjusting for inflation, the minimum wage today is worth $6.33 in 2009 dollars. That means someone squeaking by on minimum wage and government benefits has lost nearly $1 an hour in spending power over the last decade.

During that same timeframe, compensation for the nation’s top CEOs — the people at the top of the biggest 350 companies — have seen their spending power increase dramatically by comparison. CEOs earned an average of 187.8 times what a typical private-sector employee made in 2009, according to the Economic Policy Institute. In 2017, they made 311.7 times more.

These CEOs are raking in the cash for themselves and their stockholders on the backs of workers who can’t make enough to stay off of welfare. The government is essentially subsidizing the massive salaries at the top by allowing the minimum wage to remain so low.

A common argument against minimum wage increases is that employers will simply employ fewer people or choose to locate elsewhere. It sounds logical enough if you don’t look beneath the surface, and there’s just enough of a veiled threat that many don’t challenge it. But it’s easily disproven.

A majority of states actually do have minimum wages than the federal minimum. Those states include the economic powerhouses of California, New York, Ohio, Michigan and Illinois. Business hasn’t gone elsewhere because of increases to the minimum wage; in fact, higher wages can attract good workers, improving the quality of an area’s workforce and making it more likely to be chosen for new business development projects.

Four states bordering Kentucky have set higher minimum wages — West Virginia ($8.75), Ohio ($8.30), Illinois ($8.25) and Missouri ($7.85). As we mentioned before, higher minimum wages drive up all wages, meaning West Virginia, with it’s extra $1.50 an hour, may be a more attractive place for workers of all skill levels than the Bluegrass State. In fact, West Virginia was ranked fifth in the nation in 2017 for people who moved to the state for jobs, according to Forbes. By contrast, Kentucky had the eighth-most people moving away.

Higher wages certainly haven’t hurt Ohio. The influential economic development publication Site Selection Magazine ranked Ohio as having the fourth-best business climate in the nation in 2018. Kentucky was in a tie for 10th. Ohio also had the second-most economic development projects in the nation in 2017, according to the magazine. Kentucky had the seventh-most. On a per-capita basis, Kentucky had the second-most projects and Ohio had the third-most. Imagine where Kentucky could rank if its wages began to rise and people stopped moving away.