Mar 31, 2016

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7 ways to address wage stagnation and income inequality

by | Mar 31, 2016

Despite steady job growth, rising productivity and declining unemployment in recent years, it is clear that broadly shared prosperity has not rebounded in Colorado.

According to CCLP’s State of Working Colorado 2015-16, the median hourly wage has remained virtually stagnant since the economic recovery began in 2009. In fact, wages for most Colorado workers are lower than they were in 2000. Meanwhile, economic gains are increasingly concentrated among a small share of high earners in the state.

Growing income inequality produced by stagnant wages for the vast majority of workers is not just a product of the Great Recession. This trend emerged over the last 35 years — driven by a series of policy choices that have reduced the power of workers (both individually and collectively) and bolstered the power of already-affluent corporate executives and shareholders.

Policy choices that have contributed to wage stagnation and income inequality include failure to update the minimum wage, eroded labor standards, right to work laws that have weakened labor unions, corporate tax cuts, and Federal Reserve policy favoring low inflation over low unemployment.

Realizing that these dynamics in the job market and the economy are unsustainable for Colorado’s long-term economic health, we identified seven policies that reform business practices and labor standards and could make a difference in closing the gap in income inequality and increasing wages:

1. Raise the minimum wage — Wages at the lowest level lag behind those in the middle because the minimum wage has not been adequately updated. Low-wage workers earn less today despite being more educated, more productive and working more hours. Updating the minimum wage would lift the standard of living of many low-wage workers in Colorado — most of whom are adult women and people of color.

2. Restore and protect collective bargaining — The decline in collective bargaining has been a significant factor in stagnating wages for low- and middle-income workers. Reviving and protecting the rights of workers to organize and bargain for wages and benefits is an important part of restoring their lost power. A temporary victory for workers came with the recent 4-4 split decision of the U.S. Supreme Court in  Friedrich’s v. California Teachers Association, which upholds a lower court decision permitting public employee unions to collect fees from non-members who benefit from collective bargaining and union representation.

3. Update overtime rules —The share of salaried workers covered by overtime protections has fallen from 65 percent in 1975 percent to 11 percent today. The salary threshold (the level below which workers are guaranteed overtime) has eroded to the point where the Fair Labor Standard Act only covers those who earn less than $23,660. President Obama directed the Department of Labor to update the salary threshold to the 1975 value — setting the threshold to about $50,000. Such a move would provide overtime protections to over 6 million workers. The rulemaking process is nearly complete and the Department of Labor is expected to issue a final rule soon.

4. Provide earned sick leave and paid family leave — The U.S. has been slow to update labor standards to meet the changing needs of the modern labor force — namely earned sick leave and paid family leave — so workers do not have to make the difficult choice between caring for sick family members and losing income or even their job.

5. Address worker misclassification and wage theft — Employers increasingly misclassify workers as independent contractors to skirt workplace protection laws, shift the burden of payroll taxes and reduce labor costs. Misclassification denies workers the protections offered by labor laws including overtime protections and results in substantial losses in state workers’ compensation, unemployment insurance and income tax payments. Efforts on this front include improving enforcement of labor standards and vigilance against policies that would make misclassification easier.

6. Regularizing undocumented workers — Undocumented workers earn lower wages and have fewer legal protections in the workplace — making them particularly vulnerable to exploitation. Providing a path to legal work and residency for these workers will lift their wages and other workers in the same field.

7. Close gender and racial pay gaps — Though the aforementioned policies will impact the gender and racial pay gap, additional work is needed on enforcement of antidiscrimination laws in hiring, promotion and pay.

Not coincidentally, Colorado legislators have attempted to address six of these seven policy areas in recent years – without success. While it might be tempting to blame the top 1 percent of income earners for the disparities that hurt a vast majority of American workers, the root of the problem isn’t that simple.

The need to update overtime laws, and provide paid sick and family leave, pay equity, and protection against misclassification all stem from the power of business in state legislatures and Congress and a shortage of labor advocates. Fortunately, Coloradans have the power to insist that their lawmakers implement policies that help their constituents and to hold them accountable. And, in the case of raising the minimum wage, they might get a chance to vote in favor of such policies through a ballot initiative.

Transforming the slow and unequal wage growth of the last several decades into broad-based wage growth is the central economic challenge facing Colorado. Thoughtful policy changes can help us chart a course that is focused on broadly shared economic growth and prosperity.

– Michelle Webster

Recent articles

HEALTH:
HEALTH FIRST COLORADO (MEDICAID)

To maintain health and well-being, people of all ages need access to quality health care that improves outcomes and reduces costs for the community. Health First Colorado, the state's Medicaid program, is public health insurance for low-income Coloradans who qualify. The program is funded jointly by a federal-state partnership and is administered by the Colorado Department of Health Care Policy & Financing.

Benefits of the program include behavioral health, dental services, emergency care, family planning services, hospitalization, laboratory services, maternity care, newborn care, outpatient care, prescription drugs, preventive and wellness services, primary care and rehabilitative services.

In tandem with the Affordable Care Act, Colorado expanded Medicaid eligibility in 2013 - providing hundreds of thousands of adults with incomes less than 133% FPL with health insurance for the first time increasing the health and economic well-being of these Coloradans. Most of the money for newly eligible Medicaid clients has been covered by the federal government, which will gradually decrease its contribution to 90% by 2020.

Other populations eligible for Medicaid include children, who qualify with income up to 142% FPL, pregnant women with household income under 195% FPL, and adults with dependent children with household income under 68% FPL.

Some analyses indicate that Colorado's investment in Medicaid will pay off in the long run by reducing spending on programs for the uninsured.

FOOD SECURITY:
SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM (SNAP)

Hunger, though often invisible, affects everyone. It impacts people's physical, mental and emotional health and can be a culprit of obesity, depression, acute and chronic illnesses and other preventable medical conditions. Hunger also hinders education and productivity, not only stunting a child's overall well-being and academic achievement, but consuming an adult's ability to be a focused, industrious member of society. Even those who have never worried about having enough food experience the ripple effects of hunger, which seeps into our communities and erodes our state's economy.

Community resources like the Supplemental Nutrition Assistance Program (SNAP), formerly known as Food Stamps, exist to ensure that families and individuals can purchase groceries, with the average benefit being about $1.40 per meal, per person.

Funding for SNAP comes from the USDA, but the administrative costs are split between local, state, and federal governments. Yet, the lack of investment in a strong, effective SNAP program impedes Colorado's progress in becoming the healthiest state in the nation and providing a better, brighter future for all. Indeed, Colorado ranks 44th in the nation for access to SNAP and lost out on more than $261 million in grocery sales due to a large access gap in SNAP enrollment.

See the Food Assistance (SNAP) Benefit Calculator to get an estimate of your eligibility for food benefits.

FOOD SECURITY:
SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS AND CHILDREN (WIC)

Every child deserves the nutritional resources needed to get a healthy start on life both inside and outside the mother's womb. In particular, good nutrition and health care is critical for establishing a strong foundation that could affect a child's future physical and mental health, academic achievement and economic productivity. Likewise, the inability to access good nutrition and health care endangers the very integrity of that foundation.

The Special Supplemental Nutrition Program for Women, Infants and Children (WIC) provides federal grants to states for supplemental foods, health care referrals, and nutrition information for low-income pregnant, breastfeeding and non-breastfeeding postpartum women and to infants and children up to age five who are found to be at nutritional risk.

Research has shown that WIC has played an important role in improving birth outcomes and containing health care costs, resulting in longer pregnancies, fewer infant deaths, a greater likelihood of receiving prenatal care, improved infant-feeding practices, and immunization rates

Financial Security:
Colorado Works

In building a foundation for self-sufficiency, some Colorado families need some extra tools to ensure they can weather challenging financial circumstances and obtain basic resources to help them and their communities reach their potential.

Colorado Works is Colorado's Temporary Assistance for Needy Families (TANF) program and provides public assistance to families in need. The Colorado Works program is designed to assist participants in becoming self-sufficient by strengthening the economic and social stability of families. The program provides monthly cash assistance and support services to eligible Colorado families.

The program is primarily funded by a federal block grant to the state. Counties also contribute about 20% of the cost.

EARLY LEARNING:
COLORADO CHILD CARE ASSISTANCE PROGRAM (CCCAP)

Child care is a must for working families. Along with ensuring that parents can work or obtain job skills training to improve their families' economic security, studies show that quality child care improves children's academic performance, career development and health outcomes.

Yet despite these proven benefits, low-income families often struggle with the cost of child care. Colorado ranks among the top 10 most expensive states in the country for center-based child care. For families with an infant, full-time enrollment at a child care center cost an average of $15,140 a year-or about three-quarters of the total income of a family of three living at the Federal Poverty Level (FPL).

The Colorado Child Care Assistance Program (CCCAP) provides child care assistance to parents who are working, searching for employment or participating in training, and parents who are enrolled in the Colorado Works Program and need child care services to support their efforts toward self-sufficiency. Most of the money for CCCAP comes from the federal Child Care and Development Fund. Each county can set their own income eligibility limit as long as it is at or above 165% of the federal poverty level and does not exceed 85% of area median income.

Unfortunately, while the need is growing, only an estimated one-quarter of all eligible children in the state are served by CCCAP. Low reimbursement rates have also resulted in fewer providers willing to accept CCCAP subsidies.