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Blog: Reduce Poverty among Women by Raising the Minimum Wage

Mar 03, 2014 | By Carolyn Burstein, NETWORK Communications Fellow

Millions of workers – mostly women – struggle to make ends meet on minimum wage earnings. Women comprise nearly two-thirds of minimum-wage workers although they are only 49.2% of the employed population. They also comprise 61% of full-time minimum-wage workers (working 35 or more hours each week) and nearly two-thirds of workers in tipped occupations.

The share of women varies somewhat by state from a low of 47.7% in California to a high of 63.3% in Mississippi (www.epi.org/raising-federal-minimum-wage). They provide care for children and frail elders, clean homes and offices, and wait tables. Bringing home $10.10 an hour would mean more money for food, gas, diapers and shoes.

The Economic Policy Institute (EPI) provides important facts that defy our stereotypes about minimum-wage workers: more than three-quarters of women are 20 or older (not teenagers!) and most do not have a spouse's income to rely on.

Full-time work at $7.25 an hour pays only $15,080 a year. That's nearly $4,500 below the poverty level for a mom and two kids. It's even slightly below the poverty level for a family of two. Increasing the minimum wage to $10.10 per hour, as proposed by the president and legislation pending in Congress, would boost annual earnings to about $20,200, enough to help pull a mom and her two kids out of poverty.

If the minimum wage had been indexed to inflation, as we do for Social Security, it would be $10.72 today. If it had grown at the same rate as productivity (which it did until the 1980s), it would be $18.30 today, according to an EPI study.

The declining real value of the minimum wage has significantly contributed to the enormous growth in U.S. income inequality. The gap between the minimum and average wages of typical American workers used to be much smaller than it is today. From the mid-sixties to the early 1980s, minimum-wage workers earned a wage that was equal to about half that of the typical American worker. Today's minimum wage is equal to only about 36% of that worker (of course, much could be said about the inadequate "typical" wage today). But raising the minimum-wage to $10.10 by 2016 would return the minimum-wage to roughly 50% of the average production worker wage.

Increasing the minimum wage would boost wages for millions of working women and help close the wage gap. The EPI estimates that if the minimum wage were gradually increased to $10.10 per hour, almost 28 million workers would get a raise, including over 1 million workers earning slightly more than the minimum wage due to what economists call the "spillover effects." The Center for American Progress concludes that about 55% of those directly affected and nearly 50% of those indirectly affected by the increase would be women. Similarly, women of color would be affected by the increase: 16% of affected female workers are African American, while 19% are Latina (www.americanprogressaction.org/women-are-the-biggest-losers...)

Since women are the majority of minimum-wage workers, raising the minimum-wage would help close the wage gap. The typical woman earns 77 cents for every dollar the typical man does; African-American women working full-time year round made only 64 cents; and Hispanic women only 54 cents for every dollar paid to their white, non-Hispanic male counterparts. The fact that all women are more likely to be minimum-wage earners than men contributes to that disparity.

Raising the minimum-wage would also strengthen the American economy. Increasing the wages paid to low-wage workers results in lower turnover, boosts worker efforts, and encourages employers to invest in their workers. Most minimum-wage workers need this income to make ends meet and tend to spend it quickly, boosting the economy. Research indicates that for every $1 added to the minimum-wage, low-wage worker households spent an additional $2800 the following year, thus increasing spending nationwide by about $48 billion, even benefiting the GDP (Federal Reserve Bank of Chicago study entitled "The Spending and Debt Responses to Minimum-wage Increases").

The federal minimum cash wage for employees in tipped occupations is $2.13 per hour, unchanged in over 20 years and less than one-third of the minimum-wage. Restaurant servers, the largest group of tipped employees, experience poverty at nearly three times the rate of the workforce as a whole -- and about 70% of servers are women, according to the National Women's Law Center. Because of the numbers of women involved, it's worth examining the restaurant industry as a prime example of gender inequity. A recent study by the Restaurant Opportunities Centers United revealed:

  • 66% of tipped workers are women who receive a pittance for a wage and often receive less than their share of tips
  • Restaurant occupations are among the lowest paid in the U.S. and employ a majority of women who are paid below the poverty level
  • Servers -- of whom 71% are women -- are almost three times more likely to be paid below the poverty level than the general workforce and nearly twice as likely to need food stamps as the general population
  • Women are more often kept among the lower paid positions than in most industries; for example, women are hired for only 19% of chef positions, one of the highest paid in the restaurant business
  • Women also are confined to the lower-paying segments of the industry, such as quick serve and family-style rather than the highest paying fine dining segment
  • Women restaurant servers who are full-time are paid just 68% of what male servers are paid, even though they are considered in the same category of servers

The restaurant business is only one example of an industry where minimum wages and low-paid women predominate, where women receive unequal treatment and where poverty wages are the norm. One could just as easily have chosen the hotel industry, the healthcare industry or many others.

Raising the minimum-wage would allow almost 2.8 million women see their incomes rise above the poverty line. This one move alone wouldn't solve all of the inequities women face in the labor market, but it would be a step in the right direction.