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Jump Starting Real Wage Growth for Women: Increasing the Minimum Wage and Improving Overtime Laws

By Heidi Hartmann

In the context of a lost decade of wage growth for women, two recent proposals—to increase the federal minimum wage to $10.10 per hour (including increasing the separate minimum wage for tipped workers), and to increase the threshold salary for overtime pay to $50,000 annually—can provide much needed relief to women.  

Increasing the minimum wage requires that the U.S. Congress pass a law. The current minimum wage of $7.25 was set in 2007and went into effect in 2009, but President Obama has already acted by executive order to require firms that hold contracts with the federal government to pay their workers a minimum of $10.10 per hour.  In contrast, increasing the salary threshold for receiving overtime pay, does not require congressional action, but does require action by the Secretary of Labor. President Obama has recently directed Secretary Perez to consider what can be done to ensure that workers are paid fairly for their overtime hours. The Fair Labor Standards Act sets the overtime pay premium at 50 percent more than the regular wage or salary, also known as “time and a half.” Currently the threshold annual salary is set at about $23,000 ($455 per week).  A worker classified as executive, administrative, or professional, who earns more than that annual salary does not currently need to be paid overtime.

Because women earn less than men on average, it is not surprising that women are the majority—64 percent—of those who earn the minimum wage and would thus benefit disproportionately from an increase in the minimum wage.  Economists expect that employers will also increase the pay of workers earning somewhat above the minimum, in keeping with past experience of minimum wage increases.  An EPI analysis shows that 15.3 million women—9.6 million directly and 5.7 million through the spillover effect— would receive a pay increase were the minimum wage to be raised to $10.10 per hour.  EPI also finds that nearly one-third of all working single mothers—or 2.3 million women—would receive a direct or indirect pay increase. Overall 55 percent of workers who would benefit from the increase are women.

A new report from the White House released earlier this morning points out that an even larger proportion of those affected by the tipped minimum wage—which has been stuck at $2.13 per hour since 1991—are women:  72 percent of tipped workers are women in occupations such as hair stylists, restaurant servers, and bartenders.  Employers need pay such workers only $2.13 per hour on the assumption that tips will raise their pay to the required $7.25 per hour.  According the White House report, about 10 percent of workers in these jobs say that does not happen.  The average wages of tipped workers are very low and their likelihood of being in poverty is high.  The White House analysis finds that about half of workers in tipped occupations would benefit from the proposal to increase the tipped minimum wage to $4.90 per hour by 2016. Of those whose wages would increase, 74 percent are women.

Likewise, women are the majority (54 percent) of all supervisory, managerial, and professional workers earning less than the proposed new overtime threshold of $984 per week, meaning that 5.3 million women would be newly covered by a requirement to be paid overtime when they work more than 40 hours per week. Currently, about 1 million of these women typically work more than 40 hours per week and would have to be paid 50 percent more for those additional hours beyond 40.   Furthermore, of all those high-level workers who earn above the new threshold and would not be required to be paid overtime, only 37 percent are women.  (Findings reference an unpublished analysis by EPI’s Heidi Shierholz.)

These two changes—the first by law, the second by regulation, and both administered by the Wages and Hour Division of the U.S. Department of Labor—would help ensure that real wages rise for millions of women, not to mention many men, in the coming decade.  In its new report the White House estimates that the minimum wage change alone would close the wage gap between women and men by more than one percentage point.

Heidi Hartmann, PhD, is the founder and president of the Institute for Women’s Policy Research.

The Lost Decade of Wage Growth for Women

by Heidi Hartmann

Twice a year, the Institute for Women’s Policy Research (IWPR) updates its fact sheet, “The Gender Wage Gap,” to report the latest data as they become available from the Bureau of Labor Statistics and the Census Bureau.  This year, we noticed something new when we added the latest figure for median weekly earnings for men and women who work full-time—a virtual standstill in women’s real wages for the past ten years. This was true when looking at trends in both usual weekly earnings and annual earnings for those who work full-time, year-round.

For several decades, as new Fed chair Janet Yellen notes, women have been the success story in the economy. Women increasingly pursued higher education, eventually surpassing men in college graduation rates. Women also joined the labor force in larger numbers, worked more throughout their lives, and entered a variety of occupations that had been formerly virtually closed to them, becoming  bus drivers, mail carriers, fire fighters, police officers, bankers, lawyers, doctors, and many others.

These gains in education and work experience (what economists call human capital) contributed to narrowing the wage gap, and the equal opportunity legislation of the 1960s and 1970s helped too. The gender wage gap closed from 40 percent in 1960 to 23 percent in 2012 (in terms of annual earnings). Women’s real earnings—meaning wages adjusted for inflation—grew as well, from $22,418 in 1960 to $28,496 in 1970, $30,136 in 1980, $34,247 in 1990, $37,146 in 2000, and $38,345 in 2012.

In contrast, men’s real earnings have not grown since about 1975, although men’s real earnings have remained higher than women’s. In that year, men’s earnings were $50,093 (in 2013 dollars) and in 2012, they were $50,122.  In other words, men have had nearly four decades of stagnant wages.  Explanations for this are many, but the most persuasive in my view is that, for a variety of reasons stemming from institutional and policy changes, the productivity gains that the U.S. economy has enjoyed have simply not been passed on to workers (except those at the very top). Ordinarily, we economists expect workers’ wages to grow along with GDP growth and productivity growth (more output per hour worked).   In the modern economy, men’s real wages have simply failed to thrive.

Women’s real earnings, however, did grow, until about 2002 when they too caught “real wages failure to thrive” disease. What caused this stagnation for women? Economists Francine Blau and Lawrence Kahn from Cornell University have described women’s success in the labor market as “swimming upstream.” Women were able, for several decades, to overcome the forces that have been generating increased economic inequality in America. By increasing their human capital and gaining access to new, better paid  occupations, firms, and industries, women were able to achieve a significant degree of equality with men, despite trends pushing the top and the bottom further apart.

Now it seems as if the current is finally overpowering women, making it increasingly difficult for them to swim upstream. This is not to say that discrimination is any worse than it has been in the past, but progress in reducing discrimination is no longer being made.  As IWPR’s fact sheet shows, women’s annual earnings in 2012 are slightly less than they were in 2001, at $38,438.  Women’s weekly earnings at $706 in 2013 are about the same as they were in 2004, at $707.

What is to be done?  I believe only a major policy shift, similar to what occurred in the 1960s and 1970s, with the Equal Pay Act (1963), the Civil Rights Act (1964), and Title IX (1972), will be able to get women’s wages back on track.  The changes needed fall into four areas:  1) better enforcement of existing equal employment opportunity (EEO) laws and new legislation to fill the gaps in current law; 2) policies that help bring up the bottom of the labor market, which can jump start real wage growth; 3) policies that address the family needs of workers; and 4) policies that address the power of women.

Starting with the last first, encouraging collective bargaining for workers, encouraging women to take leadership positions in labor unions, encouraging women to run for public office (public funding for elections would help!), and ensuring that more women serve on corporate boards of directors would all increase women’s power.  Policies that address such work-family issues as child care and paid family leave are sorely lacking in the United States, compared with other wealthy nations, and it’s high time we caught up—these policies are likely to increase women’s wages in the long run as they help equalize caregiving between women and men and lead women to invest more in their careers.  Policies that especially bring up the bottom of the labor market have also fallen behind their historic norms:  the minimum wage in real dollars is below where it was in the 1960s.  The current proposal to increase the minimum wage to $10.10 per hour and raise the minimum wage for tipped workers to $4.90 per hour (it has been stuck at $2.13 per hour since 1991) is estimated by the White House to narrow the gender wage gap by more than one percentage point. The Obama Administration is also working on increasing the likelihood that those supervisory workers who earn  modest salaries (for example, less than $50,000 per year, 54 percent of whom are women) will be paid  time and a half for their hours worked beyond 40 per week.  Stronger enforcement of the EEO laws we have goes without saying, so that women continue to be able to enter jobs that are currently done mostly by men (men’s jobs).  We could also strengthen the law by making it illegal for employers to retaliate against workers who share pay information and requiring employers to pay comparable men’s and women’s jobs equally.

Heidi Hartmann, PhD, is founder and president of the Institute for Women’s Policy Research.

Putting People First: The Yellen Era Begins at the Fed

by Heidi Hartmann

IWPR President Heidi Hartmann (right) with IMF Managing Director Christine LaGarde and Fed Chair Janet Yellen at Chair Yellen's ceremonial swearing in ceremony in Washington, DC on March 5, 2014.

IWPR President Heidi Hartmann (right) with IMF Managing Director Christine LaGarde (left) and Fed Chair Janet Yellen (center) at Chair Yellen’s ceremonial swearing in ceremony in Washington, DC on March 5, 2014.

Last week, at her ceremonial swearing in at the imposing atrium of the Federal Reserve Board in Washington, DC, Janet Yellen gave a remarkable speech.  Short—less than 3 pages double-spaced—it nevertheless conveyed what Chair Yellen brings to the table.

Her remarks began with a few standard points about the mission of the Federal Reserve. In speaking of her own and the Fed’s mission, she promised “to help restore the health of the economy and promote a strong and stable financial system.”  She noted that substantial progress had been made in the past several years, but that much remained to be done to achieve the twin goals of the Federal Reserve—full employment and stable prices. She noted that “the economy continues to operate considerably short of these objectives.”

She moved on to mention the steps the Board has taken to strengthen financial regulation and the steps it will take to implement the Dodd- Frank Act.  She promised to continue former Chairman Bernanke’s movement toward making the Federal Reserve more transparent and accountable through further improving communication with the public.  These remarks echo those by Bernanke in 2010, when he emphasized the need for stronger regulation of the banking system to prevent another crisis and the role of improved communication with the public in restoring the public’s faith in the banking system.

But there were also several parts of the speech that revealed something about where her passions lie and how the Yellen era at the Fed is likely to differ from previous tenures.

Chair Yellen described the oath of office that she had just taken as “a public promise to carry out [her] duties guided by no interest other than the public interest.”

Then, she devoted the second-longest paragraph in her speech to extolling the skills and dedication of the “men and women” on the Fed’s staff, emphasizing their integrity, tireless work, creativity, and perseverance.

Finally, in the climax of her speech she brought home the importance of the Fed’s work to the average American, closing with this promise and an evocative description of what achieving that promise means to an unemployed worker:

“I promise to never forget the individual lives, experiences and challenges that lie behind the statistics we use to gauge the health of the economy. The unemployment rate represents millions of individuals who are eager to work but struggling to provide for themselves and their families.  When we make progress toward our goals, each job that is created lifts this burden for someone who is better equipped to be a good parent, to build a stronger community, and to contribute to a more prosperous nation.”

For me, an economist who has dedicated my life to advancing the status of women, experiencing first-hand Janet Yellen’s elevation to this leadership position—making her arguably the most powerful woman in the world—was deeply moving.

Indeed, the swearing-in ceremony—in which her oath and speech were joyfully acknowledged by cheers and applause from the gathered guests and the many staff members crowding every inch of the Fed’s atrium, balcony and sweeping stairways—epitomized the rationale for the struggle to win such high for places for women.  They often bring a different perspective to leadership, based on a lifetime of difference.  A difference that tends to put people first.

Heidi Hartmann, Ph.D., is an economist and president of the Institute for Women’s Policy Research.

IWPR President Heidi Hartmann Recognized as a 2014 American Academy of Political and Social Sciences Fellow

by Jennifer Clark and Mallory Mpare

Heidi Hartmann,IWPR is proud to announce that co-founder and President Heidi Hartmann, Ph.D., has been named a 2014 American Academy of Political and Social Sciences (AAPSS) Fellow. Each year, AAPSS Fellows are elected in recognition of their contributions to improving society through research and public policy.

Reflecting the wide-ranging and interdisciplinary nature of the Academy, this year’s Fellows include economists and psychologists, as well as professionals in communications, education, and public policy. Dr. Hartmann shares this honor with several notable thought leaders, including Senator Elizabeth Warren.

Each Fellowship is named after a distinguished scholar or civic leader who has contributed to The Annals, the bimonthly journal for the Academy’s scholarship. Dr. Hartmann—whose areas of expertise include women and the economy, employment, and pay equity—has been named the 2014 Charlotte Perkins Gilman Fellow. This is an appropriate distinction, as Gilman was a self-taught economist, who wrote a book entitled, Women and Economics: A Study of the Economic Relation Between Men and Women as a Factor in Social Evolution at the turn of the century. She is also known for the popular short story, “The Yellow Wallpaper,” which was a best seller of the Feminist Press. There have been 5 other Charlotte Perkins Gilman fellows, including a winner of the Nobel Prize.

Dr. Heidi Hartmann, a MacArthur fellow, is a leading economist and women’s movement scholar whose work has been translated into more than a dozen languages. In 1987—noting the lack of women-focused, policy-oriented research—she founded IWPR, which is now the leading American think tank informing women’s policy issues. In addition to her recent recognition as an AAPSS Fellow, Dr. Hartmann has received a number of accolades, including honorary degrees from Swarthmore and Claremont Graduate University, the Winn Newman Lifetime Achievement Award for Work on Pay Equity in 2002, and the 2012 Women of Vision Award from the National Organization for Women.

Dr. Hartmann will be inducted as a Fellow on May 8, 2014, in a ceremony in Washington, D.C.

Equal Pay for Women and a Higher Minimum Wage Will Move the Economy Forward

by Heidi Hartmann

This post originally appeared on Working Economics, the blog of the Economic Policy Institute.

Heidi Hartmann,Yesterday morning, I had the honor of participating in a Democratic Steering and Policy Committee hearing, hosted by Leader Nancy Pelosi, in the Cannon House Office Building. Appearing with Lilly Ledbetter—whose story of pay discrimination went all the way to the Supreme Court and ultimately resulted in new legislation in 2009 named after her—and Laura Miu, a psychological counselor, who recently experienced pay discrimination, I was able to share recent research by the Institute for Women’s Policy Research (IWPR), which I lead, and by the Economic Policy Institute (EPI), the think tank that provides the last word on virtually all topics related to American workers. The briefing attracted 20 members of Congress, including Representatives Rosa DeLauro and Robert Andrews, who co-chair the Steering and Policy Committee, and Representatives Donna Edwards and Doris Matsui, who chair and vice-chair, respectively, the Democratic Women’s Working Group. IWPR’s research was originally released in January when it appeared in the latest Shriver Report, A Woman’s Nation Pushes Back from the Brink, produced in partnership with the Center for American Progress. EPI’s research was published as an update in December 2013 of an earlier paper last spring that details the impact of an increase in the minimum wage to $10.10 per hour.

The economic progress women have made in the past five decades is enormous. Women have entered many occupations that had been virtually closed to them, now earn more over their lifetimes, and contribute more to family income and to the economy as a whole than ever before.

But there is still a long way to go. Despite the passage of the Lilly Ledbetter Fair Pay Act of 2009, which makes it easier for women to sue for equal pay—avoiding a similar plight as the bill’s namesake, when she learned she was earning vastly unequal pay near the end of her career—progress toward closing the pay gap has stagnated. Since 2000, the wage ratio has remained around 76.5 percent. If trends of the past five decades are projected forward, it will take almost another five decades—until 2058—for women to reach pay equity.

Our researchers at the Institute for Women’s Policy Research have shown that if women received pay equal to comparable men, the poverty rate of all working women and their families would fall by half, from 8.1 percent to 3.9 percent. The number of women affected is substantial: 42.5 million working women—about 60 percent of all working women—would receive a pay increase, with the average annual pay increase estimated at $6,251 (including $0 amounts for those who got no raise). Moreover, paying women the same as comparable men would have added an additional $448 billion (equivalent to almost 3 percent of GDP) to the economy in 2012, about the equivalent of adding another state the size of Virginia to the nation.

Raising the minimum wage has been estimated to have a similarly dramatic effect on growing the economy and reducing poverty, especially among women. In a recent research paper, David Cooper at EPI calculates that 27.8 million workers—nearly a fifth of working Americans—would be directly and indirectly affected by an increase in the federal minimum wage to $10.10 per hour, across the three years 2014 -2016. These pay increases, Cooper estimated, would result in the GDP increasing by 0.3 percent ($22 billion). Moreover, 85,000 new jobs would be created by the additional spending power of low-wage workers.

Cooper shows that women would constitute 55 percent of the workers affected directly and indirectly by the increase in the federal minimum wage to $10.10 per hour: 15.3 million women would receive a pay increase. The typical minimum wage worker is 35 years of age and provides half her or his family income. Nearly one-fifth of American children have at least one parent whose earnings would be raised by an increase in the federal minimum wage to $10.10 per hour. Moreover, unpublished EPI data shows that 2.3 million single mothers, or nearly one-third of all working single mothers, would be directly and indirectly affected by the increase in the federal minimum wage.

The members present at the hearing were eager to hear about the importance of eliminating the gender pay gap and increasing the minimum wage, but they were also intensely interested in the issue of pay secrecy. Lilly Ledbetter explained that she had been told when hired that if she so much as discussed her pay with anyone she would be immediately let go. The members wanted to know how many other people might be affected by pay secrecy. A survey conducted by IWPR in 2010 was the first and (so far as we know), the only survey to look into pay secrecy. The survey found that, like Ledbetter, many workers do not know what their colleagues are being paid and are unlikely to be able to find out. More than 60 percent (62 percent of women, 60 percent of men) of private-sector workers responded that discussing pay at work is either strongly discouraged or prohibited.  By contrast, only 18 percent of female public-sector workers and 11 percent of male public-sector workers reported being discouraged from discussing pay rates or fearing penalties for doing so, and the gender wage gap is much smaller in the public-sector than in the private-sector.

Public policies can combat both unequal pay and low minimum wages. More than half of the states have made pay adjustments in their civil service systems that raise the pay of female-dominated jobs. Firms that contract with local and state governments and the federal government to provide goods and services can be required to meet standards, such as non-retaliation toward workers who share pay information or a higher minimum wage (as President Obama said in the State of the Union speech that he would require of federal contractors), or report their gender wage ratios within job categories, as has been done in New Mexico for state contractors.

The stall in the economic progress of women in the past decade, coupled with the large number of women and families who would benefit from increases in women’s earnings resulting from stronger equal pay remedies and a higher federal minimum wage, make the case that implementing new laws and public policies is urgent. Paying women equally and raising the minimum wage would significantly reduce poverty and boost the growth of the U.S. economy.

Heidi Hartmann, Ph.D., is the president and founder of the Institute for Women’s Policy Research.

IWPR Board Member Spotlight: William Rodgers, III

by Caroline Dobuzinskis, former IWPR Communications Manager, and
Mallory Mpare

In MWilliam Rodgers III-headshotay of 2013, William Rodgers, III, joined IWPR’s board of directors, bringing with him experience in academia, government, and public service. Rodgers is currently Professor of Public Policy and Chief Economist at the Heldrich Center for Workforce Development at Rutgers University. He holds a BA from Dartmouth College, MAs from the University of California—Santa Barbara and Harvard University, and a Ph.D. in economics from Harvard University.

From 2000–2001, Rodgers served as U.S. Labor Secretary Alexis Herman’s chief economist and at the start of President Barack Obama’s first term, served on the Labor Department’s transition team. He was elected to the National Academy of Social Insurance in 2006 and serves as Vice President of the United Way Worldwide’s U.S. Board of Trustees.

Rodgers has known of IWPR’s work for a number of years and was originally introduced to the Institute through his work on racial inequality. “I was really intrigued by IWPR’s work and there are aspects of my research that have always dealt with integrating gender,” said Rodgers.

Rodgers describes his personal mission as “empowering people through economics.” This aligns well with IWPR’s effort to inform policy, inspire change, and improve lives through sound research that supports better policies for women and families.

When Rodgers joined the faculty at William and Mary College in 1993, he put this mission into action, by assisting a grassroots campaign calling for the landscapers and gardeners employed at the college to be paid livable wages. Rodgers built an economic and business case for why the wages should be increased, comparing the school’s salary structure to the local salary structure. His work moved both the school’s president and provost to join the campaign, and salary adjustments were eventually made.

“That piece of research probably impacted [many] workers,” said Rodgers. “People had felt invisible. That was the worst. The low pay was bad but the worst insult was being invisible.” Rodgers’ own interactions with the workers showed him why the change was important and he considers his role in increasing wages one of his most memorable accomplishments.

“My mom—and Secretary Herman, when I worked at Labor—instilled in me that all work has value and that there are people and families behind the numbers.”

As a professor, Rodgers aims to teach his students both “content and confidence,” recognizing that many have to work full- or part-time while studying, perhaps keeping them from a full academic experience. In addition, Rodgers also encourages confidence in young people on the playing field as coach of a youth soccer team. He holds the third highest soccer license available in the European system and coaches a team in New Jersey. He also enjoys running and volunteering in his community.

In the future, he would like to work on research to help all American households and families to have a balance of family time and work. He sees secure retirement as a future policy priority. “For me now the big issue that I am seeing, and it’s only going to grow, is ‘how do we provide a secure retirement to our parents and to our grandparents?’ and that translates into economic security for ourselves.”

IWPR is proud to have Rodgers serving on its board of directors.

IWPR President’s Message: Reflecting on 2013, Looking Ahead to 2014

by Heidi Hartmann, Ph.D.

This message originally appeared in IWPR’s Fall 2013-Winter 2014 newsletter. For an archive of IWPR’s newsletters, visit the Newsletter section of IWPR’s website.

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IWPR President Heidi Hartmann

The lessons learned from IWPR’s 25th anniversary event in May have continued to echo in our offices and I hope in yours as well.  New cracks in the glass ceiling for women appeared this year and should be celebrated, but many gaps remain to be closed.  IWPR’s 25th anniversary event provided some perspective on the ways women’s and men’s lives have changed, the areas where women have advanced, and the areas where we have not.  It was also most gratifying to hear speaker after speaker at the event talk about the contributions IWPR’s work has made across the years in achieving policies such as the Family and Medical Leave Act and the Lily Ledbetter Fair Pay Act on the national level, and paid sick days for workers in cities and states across the country. 

This year brought many women leaders into the spotlight.  Most recently, Mary Barra was named the next CEO of General Motors, the first woman to head a major automobile manufacturer in the United States or anywhere in the world.  But perhaps the most important first for me as an economist—and as a woman in a male-dominated field—is the confirmation of President Obama’s choice for Chair of the Board of Governors of the Federal Reserve System, Janet Yellen.  She will be the first female head of a central bank of any major industrial nation.

While there was ample media discussion of a “gender battle” for several months leading up to Prof. Larry Summers’ withdrawal from consideration and Yellen’s nomination, it seemed to me to be a case of her qualifications trumping considerations of gender, as she emerged as the most qualified individual for the position.  Her confirmation hearing was portrayed as “smooth sailing” in the media; the donnybrook some were anticipating simply didn’t happen. I like to think that the letter that I circulated with Prof. Joyce Jacobsen of Wesleyan University, and which was signed by 505 U.S. economists—men and women alike—urging President Obama to nominate Yellen, contributed to that outcome. 

Despite these exciting firsts, there are still many ways in which women’s progress has lagged.  After substantially narrowing in the 1970s and 1980s, the gender wage gap in the United States has remained stuck at 23 percent for more than a decade.  Women’s progress in getting into non-traditional jobs has also slowed, coming to a virtual standstill. Taken together, this means that many women are concentrated in female-dominated jobs and are still being paid less than men. Too few women are cracking the glass ceiling in STEM fields, a growing area of the economy that is expected to provide good, high-paying jobs in the coming decades. Many “women’s jobs” center on caregiving work, an occupation that is also projected to grow as more careworkers are needed.  That demand could fuel much needed increases in benefits and wages for work that is surely not paid what it is worth. 

Hence, we have much to do at IWPR in our next 25 years and I hope you will continue to support our work.  IWPR frequently breaks new ground in identifying overlooked areas and exposing them to light: the role of women immigrants in caregiving and the barriers they face; men’s roles in both family and market-based caregiving; women’s roles in environmental, economic, and political leadership; the need for increased educational opportunities for students who are parents, the vast majority of whom are single mothers; and challenges to women everywhere in achieving basic safety and healthcare.

These are the issues that will shape the future status of women, and IWPR’s research will be there to ensure that policy change is informed by credible research.

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