Low wage workers wait while assembly fiddles

Before the Legislature recesses, it ought to help Wisconsin's low-wage workers by fixing the state's minimum wage law by indexing it to the rate of inflation.

The state minimum wage was raised from $6.50 to $7.25 in July 2009 when the federal minimum wage was increased. Like the national, it can only be increased through legislative action. As a result, increases are far and few between.

In the years when the legislature fails to act, the minimum wage quickly loses value (purchasing power) as prices rise. While the costs of health care, gasoline and education have soared, the minimum wage has declined in value. Currently, it is worth 10% less than it was in 1979.

The solution is simple: raise the state's minimum wage and index it to the cost of living. This will ensure that the state’s more than 300,000 low-wage workers' real wages don't decline just because the legislature fails to act.

And fail it has. The state last increased its minimum wage five years ago in 2005 and that was the first increase in 7 years. So in 12 years Wisconsin legislators have increased the minimum wage only two times. During that time their own salaries have been increased six times totaling almost $11,000.

It's not as if indexing is a radical idea.

In 1972 when Republican Richard Nixon was President, the United States Congress indexed Social Security to the CPI to insure that the nation's retirees and disabled weren't thrown into poverty simply because prices increased. This simple act rescued tens of millions from poverty. The elderly are no longer America's largest impoverished group.

Raising the minimum wage and indexing it to the cost of living will reduce inequality and increase productivity.

Until the 1980s, bottom rung jobs were valuable because the minimum wage was raised frequently enough to be an effective wage floor. Regular increases also raised the pay of workers whose wages were several rungs above the minimum and consequently reduced employee turn-over. Employers, forced to value their low-end workers, offered them training and advancement that led to increased productivity. Everybody benefited.

Ten states have already indexed their minimum wage to the cost of living. Twelve have increased their minimum wage above the national. None experienced the decline in employment that opponents of raising the minimum wage predict.

Critics opposed to raising the minimum wage use simple supply and demand theory to argue that an increase in the minimum wage (the price of labor) will reduce jobs ( the quantity of labor demanded) and increase competition for the jobs (the quantity of labor supplied) hurting the very low paid workers we are trying to help.

But studies of states that actually raised the minimum wage in the early 1990s (when the real minimum wage was falling) by economists David Card and Alan Kreuger found no increase in unemployment.

A more recent study by Jeff Chapman that reviewed the experience in all twelve states that have raised their minimum above the federal minimum concludes:"...the facts clearly show that the benefits of such increases outweigh any potential costs.”

There is a simple explanation for these findings. Most firms paying the minimum wage are large national retail and fast-food chains like Wal-Mart and McDonald’s, not the ubiquitous mom and pop stores of 1950’s main street. These firms make staffing decisions based on how many employees they need to efficiently serve their customers at any given time, not on marginal increases in the price of labor. The incremental increases in wages that result from indexing are absorbed through marginal price increases and or increased productivity.

Some say now is not the right time to address this problem. But if it wasn't right to index the minimum wage to the C.P.I when the economy was booming and it isn't right to raise it now, when will the time be right?

It is important to raise the minimum wage and index it now because Wisconsin is mired in what is at best a jobless recovery that will rob low-wage workers of the bargaining power they need to negotiate fair wages for their labor for the foreseeable future.

The Wisconsin Senate has already passed a bill, SB-1 that raises the state's minimum wage to $7.60 an hour and indexes it to the cost of living. It would help 316,000 Wisconsin workers, those paid the minimum and those whose wages are anchored by it.

There is a companion Assembly Bill, AB-41, but it has been stalled in committee.

What is the Assembly waiting for?

The Legislature should review all corporate tax breaks

Yesterday, the Wisconsin legislature closed a huge corporate tax loop hole. In unanimously passing the “Newark” bill, SB 122, the legislature saved residential property owners millions of dollars and reversed, at least temporarily, its three decade romance with corporate property tax exemptions!

Governor Doyle is expected to sign the bill next week.

Under the 2004 Newark court ruling, hundreds of millions of dollars of industrial property that use recycled material to create new products would have been exempted from paying property taxes. The exception was initially granted to the Newark Group, a Milwaukee paperboard manufacturer. Other manufacturers quickly began to line up at the trough seeking over $145,000,000 in exemptions. Besides major paper industry facilities, a cheese plant and chemical factory requested the exemption. Because the ruling applied to any producer using recycled materials to make a new product, entire industries could have come off the tax rolls. The new law effectively ends this corporate run on the public bank!

Exempting property from taxes, shifts the tax burden to the property left on the rolls. Simply put- Wisconsin's already over taxed homeowners, predominantly hard working people and retirees, would have seen their property taxes go up even more because of the Newark ruling!

Since the early 1970’s the Wisconsin legislature under pressure from the Wisconsin Manufacturers and Commerce (WMC) has passed property tax exemptions and other corporate tax breaks. It began when the legislature exempted manufacturing machinery and equipment as a way to stimulate economic growth and job creation. The idea was companies would buy advanced manufacturing equipment if the cost was reduced by exempting it from property taxes. But manufacturing companies don’t buy new equipment because it is marginally cheaper. They buy it when they need to increase productivity or total production. So tax breaks grew, but not manufacturing jobs! Obscenely, homeowners were subsidizing corporate Wisconsin.

By the early 1990’s exemptions were costing the state over a billion dollars annually! And the legislature under pressure from the WMC added even more-exempting computer equipment in the late ‘90’s at a cost of over $100 million annually. The legislature’s love affair with tax breaks even led it to contemplate exempting TYME machines!

Forward Wisconsin, the state’s marketing and business recruitment arm, brags on it web site: ” Wisconsin's business-friendly attitude is reflected in positive business tax changes that have been made in every biennial legislative session since the early 1970s… Wisconsin business taxes are low - lower than those in 35 other states.”

And despite all this, Wisconsin’s rates of economic growth and wages, another thing Forward Wisconsin brags about, are below the national average,

As the business community has reduced its public investments, the burden for paying for schools, roads, tech colleges, public safety, the University of Wisconsin system and other public goods has been shifted to homeowners!

According to the Legislative Fiscal Bureau, residential property carried 51% of the state’s total property tax burden in 1970, but 71% in 2005. In contrast, manufacturing property comprised 18% of the burden in 1970 but only 3.6% by 2005. Under the guise of tax breaks the legislature had presided over a massive shift in the tax burden. Corporate Wisconsin walked and homeowners were left with the bill!

The legislature’s action killing the Newark exemption yesterday was a welcomed break from their past practice. It should now review the entire menu of existing corporate tax exemptions to determine which are effective in promoting economic growth and job creation and which are indefensible corporate welfare. Wisconsin’s wage earners and tax payers are waiting!