By Dr. John Gilderbloom and Wes Gooms, Masters in Planning and Ph.D. Student—not representing University of Louisville, Center for Sustainable Urban Neighborhoods http://sun.louisville.edu
Cell: (502) 608-7567 Cell: (202) 549-1779
Jgilde02@sprynet.com / charlesgrooms@gmail.com
I agree with the Republican council member who urged the Metro Council to get the opinion of the University of Louisville Sustainable Urban Neighborhoods (SUN) program. I urge you to ignore the $2.5 million in questionable research from out sourced consultants, many who lack a Ph.D. or have a published record of scholarship; most are flown in from as far away as Norway, San Francisco, St. Louis, Atlanta, Virginia, and Lexington making questionable and bias claims about the economics of the city’s poor neighborhoods. So why not ask your own highly decorated Urban Programs at the University of Louisville instead of sending hard earned taxpayer money outside of Louisville for advice? Let UofL knowledge serve the city of Louisville. In a forthcoming article in the Journal Housing and Society, I and co-authors show how there has been gross statistical manipulation through the use of false data on local neighborhood economic dynamics which have hurt poor neighborhoods. Bad data means, bad decision making; fair and objective research could inform city council members to make good decisions that will benefit the citizens of Louisville. Raising the minimum wage is a win-win for everyone.
John Gilderbloom
Metro Council member David James is correct in his assertion that there will be a boom in local community spending with an additional $86 million in new spending by roughly 65,000 poor residents in Metro Louisville. What isn’t being considered is SUN’s comparative research on how increasing wages is a win-win for community development showing a direct correlation between wage increases for the poor and greater spending on rental housing. In other words, there would be a significant reduction in the thousands of housing code violations that renters face every year which result in lower taxes collected in poor neighborhoods and less services as a consequence. Many who earn minimum wage rent their homes. Many of them are substandard because renters don’t earn enough to pay more, which discourages landlords from properly maintaining properties and fall into foreclosure. Homeowners in these areas are also better able to afford repairs to their homes, or to move from renting to owning. Moreover, local community spending would also increase helping out small business owners. This research is based on comparing Louisville with 144 similar size cities in the U.S. Our analysis is based on objective, rigorous and reliable research methods using state of the art statistical methods. The research results have never been challenged in the political and economic arena; rather, SUN has received many awards including the Presidential Medal for Outstanding Research at the University of Louisville. Thank you for the opportunity to provide this input for your consideration.
The U.S. has an expectation that its citizens, if they are able, should work to support themselves and their families. As citizens, we are told regularly that we need to have a cushion in case we lose a job, to save for retirement, put our kids through college. Humans have physiological need of safe food, shelter, education, etc. Our market-based economy is designed to require funds be earned to purchase goods and services to satisfy our needs. It is a societal expectation.
The current minimum wage of $7.25 results in an annual wage of $15,080.
The current poverty threshold for a family of three is $15,656.
The current minimum wage is below POVERTY LEVEL.
Michigan League for Public Policy Estimated a family of three in Michigan needed to earn $19.12/hour.
MIT estimated a Living Wage Poverty Level of $22.90/hour.
I calculated an hourly wage of $38.38/hour to pay for everything society expects our self-sufficient citizens to pay for.
The proposal before you is for $10.10/hour.
It is Government’s job to create and regulate the rules that form the market. The free market is not a separate beast that lives and breathes on its own. It is created by society – Government is an institution of society. When the market fails, Government MUST act. When citizens are unable to provide their families a morally decent living because wages earned CANNOT match minimum costs of their needs, Government MUST act.
Additional Information.
Also in 1990, Patricia Ruggles of The Urban Institute published “Drawing the Line: Alternative Poverty Measures and Their Implications for Public Policy.” In it she writes “Even if we accept, as this book does, the view that our current standards represented a reasonable social minimum in 1963, normative standards change over time, and norms such as the poverty line (threshold) must consequently be reassessed periodically.” She continues: “…to be comparative in normative terms to its 1963 level our current poverty standard would have to be substantially higher.” In fact, she found that “Even the much less detailed examination of consumption patterns and needs offered here [her book] implies that the poverty line should probably be substantially higher than it is currently – close to $15,000 for a family of three in 1988, for example, rather than at its official level [in 1988] of about $9,500.” Using such a “corrected” poverty threshold would have also resulted in poverty rates of more than 20%, rather than the official rate of approximately 13% at the time. Ruggles points out that a poverty threshold that inaccurately measures the poverty rate as low and declining is likely to keep anti-poverty program funding from being seen as a “national vital priority.” Further, “if we [the U.S.] believe that circumstances are improving more (or more rapidly) for some population subgroups than for others, we may choose to reallocate spending to provide more to those whose need appears to be greater. For these reasons, basic flaws in our current measures that result in misleading conclusions about the incidence of real economic need should be of concern to policy analysts and policymakers.”
Data from Masters Thesis: Exploration of Poverty: The Roles of Human Needs, Civic Rights, Moral Obligation and Social Expectations in Defining and Measuring Poverty.
Poverty threshold figures for 2013 based on data from US Census Bureau
Weekly costs were multiplied by 52 and divided by 12 to obtain monthly costs.
Quarterly costs were multiplied by 4 then divided by 12 to obtain monthly costs.
a: Food costs for 3-person households in the MIT threshold are 2.215 times higher than for 1-person households, and food costs for 4-person households are 1.33 times higher than for 3-person households. These same factors have been used to calculate food costs for the proposed equality-poverty threshold. The base food costs for a 1-person household were determined by using the average $100/week food bill of the author at a local organic food cooperative grocery store.
b: Childcare costs for the equality-poverty threshold were obtained by from Shorewood Early Learning Daycare Center for two children, one infant, and one three-year-old. Infant weekly cost $230. 3YO weekly cost: $195. Total Monthly Daycare Cost: $1,842.
c: Medical costs for the equality-poverty threshold use the cost from the MIT living wage threshold and a multiple of 1.44 per person (the ratio which exists between the MIT 1-person and 3-person household figures) above the 1-person household monthly rate.
d: Housing costs for the equality-poverty threshold are averages based on rental rates offered by Eastmore Property Management, a prominent Shorewood property management company (the 3-bedroom cost was based on the one example offered by Eastmore). The equality-poverty threshold housing cost for a 4-person household is for a duplex or single-family home (from Craigslist for Shorewood) with the presumption that a household with two adults would choose to take-on exterior maintenance responsibilities in exchange for access and use of the adjoining yard.
e: Transportation cost breakdown for the MIT threshold is unknown. The costs of taking the bus in the equality-poverty threshold are based on $2.25/trip @ 2 trips/day for 5 days/week for 52 weeks/year. Car expense is based on a monthly payment on a $15,000 loan for 60 months at 0% interest (These offers are prevalent at the time of writing of this thesis, and allows for the presumption that the lendee’s credit is as good as a non-poor citizen’s credit). $50/month in gas expense is included in the monthly car expense figure. It is assumed a car is necessary so the household may reach destinations that are not served by public transportation. It is assumed that the MIT ‘living wage’ threshold includes insurance in their transportation category, while it is separated out for the ‘equality-poverty’ threshold.
f: Other cost breakdown for the MIT threshold is unknown. Other cost breakdown for the ‘equality-poverty’ threshold uses these costs plus telephone costs calculated by the Michigan League for Public Policy, however, because they are anywhere from 18% to 100% higher than costs determined by the Michigan League for Public Policy for housekeeping supplies (laundry and cleaning supplies, cleaning and toilet tissues, stationary supplies, postage, miscellaneous household products, and lawn and garden products – if applicable). They also include personal care products and services (including oral and hair hygiene products, shaving needs, cosmetics and bath products, electric personal care products and other personal care and services for males and females as applicable). It would not be unreasonable to expect middle- and higher-income families to spend even more than used for this comparison.
g: Savings Rate (Bankrate.com) based on recommended percentage for a 40-year old person at the required income level.
h: Retirement Savings Rate (IRS.gov, ehow.com, usatoday.com) based on often cited recommendation of 10% of income.
i: Entertainment costs are based on a once-monthly movie and once-weekly dining out. The cost of movie tickets was obtained from Marcus Theaters. Adult tickets are $13 each, children’s tickets are $10 each. No refreshment costs are included. Dining out costs were obtained from Northstar American Bistro by averaging prices from their menu. Each meal out was assumed to include 1 appetizer per household, 1 entrée per adult, 1 sandwich per child, and 1 dessert per 1-2 people. Taxes of 5% and tip of 20% were added. Appetizer cost: $10.31. Entrée cost: $20.80. Sandwich cost: $12.20. Dessert cost: $6.45. Monthly dining out cost for 1-person household: $162.76 Monthly dining out cost for 3-person household: $268.49 Monthly dining out cost for 4-person household: $386.58
j: Based on package (Internet/TV/phone) deals from AT&T U-verse in Shorewood, WI, with mid-level service speed/quality/options. Sourced from www.att.com
k: Utility costs include electricity only and are based on actual 12-month expenses for a 1-bedroom apartment of 700 square feet. Utility costs for 3-bedroom single family home for the 3- and 4-person households were based on actual monthly average utility costs of $225.
l: For purposes of this comparison, all households rent their homes in Shorewood, WI. The one-person household rents a one-bedroom apartment, and the three- and four-person households rent a three-bedroom apartment. Coverage is for $20,000 in personal property, $500 deductible, and $300,000 in personal liability coverage for the one-person household. Coverage is for $30,000 in personal property, $500 deductible, and $300,000 personal liability coverage for the three- and four-person households. The auto insurance policy is for a 2013 Honda Fit, also in Shorewood, WI. The one-person household is assumed to be a male with 2 points on his driving record, with $100K/$300K/$100K coverage and $500 deductible for comprehensive and collision. The three-person household is assumed to be a female with 2 points on her driving record with two children with $100K/$300K/$100K coverage and $500 deductible for comprehensive and collision. The four-person household is assumed to be a married couple (M & F) with two children, the husband having 2 points on his driving record with $100K/$300K/$100K coverage and $500 deductible for comprehensive and collision. The insurance costs are estimates provided by an insurance broker serving Shorewood, WI, and other communities in Wisconsin. Auto rates are Wisconsin minimums, thus reflecting coverage and rates lower than might be reasonable to possess. There are no rate differences if one of the two-adult households stays home rather than works.
m: Based on a monthly payment determined using an income of $50,000 with $9,500 in student debt. It is quite possible that outstanding loan balances would be substantially higher, resulting in higher monthly payments.
n: Kid College Fund Savings rate of 1% is an arbitrarily chosen figure.
o: Clothing costs are those as calculated by the Michigan League of Public Policy for identical family types as those compared in this thesis.
p: Emergency fund (rainy day fund) recommended to be enough cash to cover 3-6 months of living expenses. The use of 1% of required after tax income to build that fund is an arbitrary figure determined by me to minimize reductions to funds available for day-to-day life while working towards building this safety net.
Research demonstrating no or positive effects to increased minimum wage.
Card, D.; Katz, L.F.; Krueger, A.B. (April 1994). “Employment Effects of Minimum and Subminimum Wages. Panel: Data on State Minimum-Wage Laws – Comment.” Industrial & Labor Relations Review. Vol. 42, Issue 3: 487-497. Princeton, NJ. Industrial Labor Relations Review.
Card, David; Krueger, Alan B. (September 1994). “Minimum-Wages and Employment – A Case-Study of the Fast-Food Industry in New Jersey and Pennsylvania.” The American Economic Review. Vol. 84, Issue 4: 772-793. American Economic Association. Accessed 10-13-2014 from University of Wisconsin-Milwaukee online libraries.
Card, David; Krueger, Alan B. (May 1995). “Time-Series Minimum-Wage Studies – A Meta-analysis.” The American Economic Review. Vol. 85, Issue 2: 238-243. American Economic Association. Accessed 10-13-2014 from University of Wisconsin-Milwaukee online libraries.
Card, David; Krueger, Alan B. (1995). “Myth and Measurement: The New Economics of the Minimum Wage.” Princeton, NJ. Pp. 276-313. Princeton University Press.
Card, David; Krueger, Alan B. (December 2000) . “Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania: Reply.” American Economic Review. Vol. 90, Issue 5: 1397-1420. American Economic Association. Accessed 10-13-2014 from University of Wisconsin-Milwaukee online libraries.
Research regarding what poverty threshold should be currently.
Ruggles, Patricia. (1990). “Drawing the Line: Alternative Poverty Measures and their Implications for Public Policy.” The Urban Institute Press. Washington, DC.
Gilderbloom, John (2008) Invisible City: Poverty, Planning and New Urbanism. Austin, TX: University of Texas Press.