How Los Angeles Is Showing the Nation How to Reduce Poverty

This week the nation’s second-largest city made immense strides in combating poverty and wealth inequality.

The Los Angeles City Council approved by 14 to 1 legislation to raise the minimum wage to $15 an hour, which would provide a necessary income increase to more than 723,000 Angeleno workers, almost 50 percent of the city’s workforce. The law will raise the current $9 minimum wage to $15 through a five-year period, while giving small employers an extra year. The legislation’s ripple effects include $1.25 in economic stimulus for every dollar in increased wages, adding $414 million to tax revenue and creating 46,400 new jobs throughout the city.

Los Angeles is an example for what a living wage could do for the entire nation. At the Economic Policy Institute in Washington on Wednesday, advocates for raising the minimum wage met to discuss why national action is necessary.

One of the advocates, economist Elise Gould, presented the findings from her report “Broad-Based Wage Growth is a Key Tool in the Fight Against Poverty.” According to the report, wages have significantly stagnated since 1979, even while adjusted for inflation. Meanwhile, economy-wide productivity has risen by 64 percent. “Had wages grown in tandem with productivity over 1979-2013 and if the economy were at full employment, the non-elderly market-based poverty rate would be 4.3 percentage points lower. This means that 11.2 million fewer people would be in poverty.”

Over a quarter of America’s workers earn less than $10.55 an hour. And these low-wage workers aren’t just teens working at burger joints to earn some extra cash; these are adults working multiple low-wage jobs to make ends meet for their families. In the United States today, 87.9 percent of low-wage workers are over the age of 20. Since 1979, the average age of these workers increased from 32.4 to 35.1 years old. (This can largely be attributed to a 14.8 percentage point drop in teenagers working low-wage jobs.) During this same period, the share of low-wage workers between the ages of 25 and 64 increased by 11.7 percentage points, according to the Center for Economic and Policy Research.

According to the policy agenda of EPI’s Raising America’s Pay initiative, “wage stagnation is the country’s key economic challenge.”

Wage stagnation during a time of high economic activity is no fluke. Policy choices made by those with the most power and wealth in the United States have purposefully created an economy with unfair pay practices. According to Gould, “policies made the economy the way it is today, therefore policies can change this.”

“These trends are not by accident,” said Deepak Bhargava, Executive Director of Center for Community Change, at Wednesday’s press conference. “They’re driven by corporate actors, the top 1 percent, and the deliberate action to undermine the labor unions.”

The Economic Policy Institute’s Agenda to Raise America’s Pay recommends policies to raise the minimum wage (crucially to a living wage), update overtime rules, and enforce labor standards. The EPI also stresses an end to discriminatory practices that contribute to race and gender inequities by “strengthening laws in the hiring, promotion, and pay of women and minority workers.”

The Agenda also recommends paid sick/family leave and strengthening the rights of unions, and changing the tax code to restrain the top 1 percent incomes (which have doubled since 1979).

Prosperity for American workers continually grew from the period between the Great Depression until the 1970s, when corporate executives took a greater hold on Wall Street. It is time to restore our workers to the same type of prosperity that the United States was once known for. “The key to restoration,” said Rep. Keith Ellison (D-Minn) as he wrapped up the conference, “is raising wages.”

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