Jeannette Wicks-Lim: A proposal to combine minimum wage and earned income tax credit policies to guarantee a decent living wage

Peter Jay of Real News interviews Jeannette Wicks-Lim about the proposal to help poor people with a minimum wage combined with an earned tax credit. Wicks-Lim is an Assistant Research Professor at Political Economy Research Institute located at the University of Massachussetts, Amherst:

• One in seven Americans now live in poverty
• Current policy terms gurantee a decent living standard for only 12 percent of low-income working families
• PERI recommends a 70% raise in minimum wage rates, from today's Federal Minimum wage rate of $7.35 to $12.30 per hour
• In conjunction, PERI recommends the maxiumum EITC benefit would rise from $5,028 to $9,040 and households with income up to $57,000 would receive some benefit
• Hence, this program would take current minimum wage earners making $15,000 per year and push them into a $30,000 a year bracket
• PERI says their studies show costs of minimum wage increases in restaurants was only 3-4% on average. Hence a restaurant bill which used to cost $20.00 would cost $20.60 and that small increase would help pay for the minimum wage increase of all the workers in that restaurant
• The EITC could be paid for with a doubling of the current $51 Billion outlay for the smaller EITC. Money from the defense budget could go to helping Americans at home.

Wicks-Lim also says that PERI does not look at the extra income as something adding fire to the demand side in the Economy; instead, it looks at it as a more equal distribution of income throughout an Economy. She says with more equal income distribution, the Economy is much more robust and stable.

She points out the following:

1. Labor costs generally represent less than half of overall business costs
2. Low-wage workers make up a small proportion of their workforce
3. Many low-wage workers only receive a fraction of the actual size of a minimum wage hike because their current wages are already near what would be the new minimum rate