Minimum wage debate: Meet people living on it
One in a series of stories ahead of Saturday's Democratic presidential debate, looking at issues that have figured prominently in the race.
Clarification: This story has been updated to include a more precise interpretation of an analysis of Iowa workers by an Iowa State University scientist. The Sioux City area has the state's highest proportion of people working in three sectors that generally employ more workers being paid roughly the minimum wage.
Heather Costello of Sioux City works for $7.25 an hour, the federal minimum wage. For 40 hours a week, she presses meats into Lunchables on an assembly line at Tur-Pak Foods in Sioux City.
She's single and 39. Her weekly balance sheet: She brings home $250, pays $30 for transportation to her job through an employment agency, $25 to settle a debt, and roughly $84 a week for the rent-subsidized apartment she just moved into. That will leave $111 for food and, someday she hopes, a car.
So this is her dream: a $9-an-hour job.
Costello said she doesn’t pay enough attention to politics to know how her financial situation could be helped by presidential candidates campaigning in Iowa who continue to debate whether — or how much — the federal minimum wage should increase.
The issue typically surfaces among Democrats, who will debate in Des Moines on Saturday. Bernie Sanders and Martin O’Malley have advocated raising the minimum wage to $15 an hour, and Hillary Clinton has called for a raise to $12.
Most Republicans running for president oppose raising the federal minimum wage, which hasn’t increased since 2009. Democrats and some economists say increasing the wage is needed to help the working poor get by and narrow U.S. income inequality. Most Republicans and some economists say raising the minimum will cause job losses and raise prices.
The issue is boiling up across the country today. Fast-food and other low-wage workers are expected to walk off the job in 270 cities Tuesday as part of a push for a nationwide $15 minimum wage.
“I’m really just busy trying to find out how I am going to squeeze by. I may have to get another job for groceries,” said Costello, who until recently has been living in a homeless shelter for women.
She knows enough about the wage debate to realize this: Some people will say folks are paid what they are worth in the market, and they will point to mistakes that lowered her worth in the workforce. She had a child at 16 and another at 19. She has no college education and became an alcoholic later in life.
But the bottom line, Costello said, is that she is one year sober and one year on a job that pays her to do a task, which she does reliably every workday from 6:30 a.m. to 3:30 p.m., at a wage that puts her near the federal poverty level.
As much as she likes the company, her fellow employees and the work, she said that task is worth more than $7.25 an hour, with the lone benefit of one week of paid vacation.
“My children are 19 and 22 and both work at Burger King. They make more than me, I think $9 and $9.50 an hour,” she said. “I need a job like theirs that gives raises.”
Economists say impact would be mixed
Nearly 3 million U.S. workers make minimum wage. Iowa had the 12th highest percentage of hourly workers earning at or below the minimum wage in 2014 (5 percent), according to the U.S. Bureau of Labor Statistics. Tennessee was highest with 6.8 percent.
Iowa hasn’t raised its minimum wage since 2007. Every state surrounding it except Wisconsin has raised its rate since then.
The data are mixed on the effects of a minimum wage increase on individuals and the economy, said Peter Orazem, a professor of economics at Iowa State University.
“People who remain employed are going to make more. That’s good. For people who don’t remain employed, that’s bad,” he said, citing estimates that for every 10 percent increase in the minimum wage, there is a 1 percent to 3 percent reduction in employment.
Orazem said he has heard arguments that it is better to not have a job than to have one that pays below the social standard.
"I am not in that camp. That’s a little presumptuous," he said. "Most are just starting out and getting trained; there aren’t many lifetime minimum wage workers.”
If setting a higher minimum wage is a signal of social standards, that’s fine, he continued, but “the general consensus is it’s not a good poverty alleviation device,” and most prevailing wages in urban areas are above the minimum. A better device is expanding the earned income tax credit, targeted at helping low-income working families and those with children.
John Solow, an economics professor at the University of Iowa, agreed that while a minimum wage increase would improve living standards for low-wage workers, some jobs would be trimmed, and the price of goods would rise.
“The important issue is how big those two effects are and how do you balance them,” he said. “Some could make the argument that we have an obligation to those families that suffer, who shouldn’t live in that sort of poverty. As a general matter, that is something I agree with. Do we really want to compete with India and China in a race to the bottom? In India, people are picking over piles of garbage.”
Effects extend beyond those earning $7.25
Sioux City's market area has the highest percentage of people (24 percent) in Iowa working in three job categories with the largest shares of people working at or near the minimum wage, according to an analysis compiled for the Register by Liesl Eathington, a scientist for the Iowa Community Indicators Program at ISU.
Jean Logan, who heads a nonprofit that assists the low-income population, said she sees the effects every day of wages that haven’t kept up with inflation.
“Of course we should be serving people on disability or aging people who can’t work anymore, but the real rise has been working families,” said Logan, executive director of the Community Action Agency of Siouxland. “People are working, and they still qualify for assistance.
“We don’t want to think about poverty, but it’s our brothers and sisters and families with kids who play baseball with our kids and go to church with us," Logan said. "For those in poverty, it’s a lot of quiet desperation.”
One argument against a raise is that the bulk of minimum wage workers are teens in part-time jobs just earning spending money. In the U.S., 48 percent of those working at or below minimum wage are ages 16 to 24.
Yet some economists believe that raising the minimum would raise the wages of all low-income workers, and many are not teenagers.
MORE: 'Core Four' support Johnson County minimum wage increase
Peter Fisher, who has a doctorate in economics and is the research director for the nonprofit Iowa Policy Project, cited a 2006 study by Jeannette Wicks-Lim that shows the ripple effect of a minimum wage increase would benefit four times the number of people who actually make minimum wage. Wicks-Lim is an assistant research professor with the Political Economy Research Institute at the University of Massachusetts Amherst.
Fisher also analyzed Economic Policy Institute data for Iowa, and found that 78 percent of those who would be helped by a minimum wage increase to $10.10 an hour are age 20 or older.
Fisher said the job losses after a minimum wage increase would be “relatively small.”
The Congressional Budget Office last year estimated that raising the minimum wage to $10.10 an hour would eliminate 500,000 jobs, or 0.3 percent of the workforce.
With an increase, Fisher agrees that firms would try to cut labor costs with fewer workers and automation, but others would find they save money on training and recruitment with lower turnover of employees, as more get raises who are already above the minimum.
Jeremy Ogle, 36, has seen the effects firsthand in Sioux City. As a customer service worker, he saw his hourly income increase by a dollar to $10.15 an hour when his South Dakota firm increased its wages after that state increased its minimum wage to $8.50.
The single father, who is raising a 4-year-old son, graduated from Morningside College in May and works 30 hours a week. The increase helped, but he’s still mostly eating sandwiches so his son can eat meat, fruits and vegetables. He said he hasn’t bought new clothes in five years.
The political science major volunteers for Republican presidential candidates in Iowa, fully aware that raising the minimum wage is not a priority of many in the party. “But in my opinion, it is something we can’t avoid,” he said.
Raise stalled last year in Iowa Legislature
With the federal minimum wage stuck at $7.25, 29 states and many cities and counties in the U.S. have raised it on their own. Iowa's Johnson County joined the trend this fall.
Legislation to raise the statewide minimum to $8.25 stalled last session.
State Sen. Tom Courtney, R-Burlington, who supported the bill, said opponents wrongly argue that hardly anyone is working for the minimum wage.
“Then why are they opposed to raising it?” he asked. “I tell you why. They know it’s not true. There are poor people trying to live on $14,000 a year.”
Others say one detriment would be firms hiring part-time workers to keep benefits and costs lower.
Michael Patz said employers are already doing it. He is 25, works at a grocery store in West Des Moines, and can’t get his employer to increase his $9-an-hour job to more than 30 hours because the company doesn’t want to pay benefits.
With student loans, rent he shares with an employed girlfriend and no car, he still barely has enough to make it. He treated himself to an expensive bottle of craft beer as a birthday present recently, but he rarely goes out. He said workers need a raise, but it's difficult to accomplish with corporate influence in politics.
“It’s profits, profits,” he said. “Politicians and the 1 percent want to keep lower-class Iowans down. It benefits them.”
Others say businesses are just trying to survive and that an increase could put them out of business
Johnson County's ordinance, which took effect Nov. 1, sets a new minimum wage of $8.20, which will increase to $10.10 by January 2017. But four of the county's 11 cities countered with their own ordinance to keep the rate at $7.25.
One of them was Shueyville, where Mayor Mickey Coonfare said her informal survey of local businesses indicated raising the minimum wage would prompt some to close.
Coonfare said most people working for minimum wage in Shueyville are teenagers who work part-time, but even those businesses with people working for more than the minimum wage would be hurt.
“We are a tiny town with very few businesses,” she said. “The last thing I wanted to do is have businesses close.”
While the debate rages on, Iowans such as Patsy Butler of West Des Moines struggle to make it. The 59-year-old lifelong manufacturing employee is working for a West Des Moines plant on the assembly line for $9 an hour with no benefits.
Out of the $1,150 a month she makes, Butler says $900 a month goes to the lot rent for a trailer she owns, utilities, gas and a student loan. The remaining $250 is to buy food. She’s on her adult daughter’s cellphone plan.
“I just have me, and I’m having a hard time. Thank God it’s just me,” she said.
Her dream? $13 an hour. She could go out then and circulate a little money back into the local economy.
“I’m not getting paid what I’m worth. I’m fast,” she said. “Nine dollars an hour isn’t enough, even for a young person. It’s my generation that is running everything, the big-time corporations and the government. I’m a little bit embarrassed that my generation has become greedy power mongers.”
Next: College affordability
Ahead of Saturday's Democratic presidential debate at Drake University, KCCI-TV and The Des Moines Register are exploring issues that have figured prominently in the Democratic race.
KCCI-TV's 10 p.m. Tuesday newscast: You'll meet Iowa students who are struggling to pull together the money to pay for college and their ideas for policy changes, including a Des Moines Area Community College student who's juggling college with raising a family, another DMACC student who wishes for more work-study options and an Iowa State student whose parents have multiple children in school at the same time.
Wednesday in the Register: Iowa has the dubious distinction of ranking No. 8 in the country when it comes to average student debt. Reporter Jeff Charis-Carlson has interviewed Iowans with varied experiences in paying for college, from those who have managed to graduate with little or no debt to a law school graduate who expects to be paying off his loans until age 62.
About the debate
When: 8 p.m., Saturday, Nov. 14
Main host: CBS News
Partners: CBS affiliate KCCI-TV, The Des Moines Register, Twitter, Drake University, the Iowa Democratic Party and the Democratic National Committee
Debate site: Sheslow Auditorium, Drake University
Moderators: Lead moderator is John Dickerson of CBS News, anchor of “Face the Nation.” Also moderating are Nancy Cordes, congressional correspondent, CBS News; Kevin Cooney, anchor, KCCI-TV; and Kathie Obradovich, columnist, The Des Moines Register.
Tickets: The Iowa Democratic Party has a very limited number of tickets available; those interested in attending should email info@iowademocrats.org.
Live coverage
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