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Increasing Kentucky’s Minimum Wage Would Help One in Four Workers Make Ends Meet

Wages for Kentucky workers at the bottom of the income scale have been eroding, leading to growing inequality and contributing to persistent poverty in the state. The decline in the real value of the minimum wage has been a major contributor to this erosion. Increasing the state’s minimum wage to $10.10 an hour, as proposed in House Bill 2 in the 2015 Kentucky General Assembly, would lift the wages of one in four Kentucky workers, stimulate consumer spending and strengthen communities by allowing families to better meet their basic needs.

Minimum Wage Brief

Minimum Wage Fact Sheet

low wage erosion

Kentucky Workers Left Behind as Majority of States Lift the Wage Floor

As momentum to increase the minimum wage grows around the country, Kentucky’s $7.25 minimum puts the Commonwealth in the unfortunate minority of states that haven’t boosted workers’ pay above the outdated level of the federal minimum wage. Sixty percent of American workers now live in a state that has lifted its minimum wage above the federal floor.

The current federal minimum wage of $7.25 was set in 2009 and has not been increased since to keep up with the cost of living. But erosion goes back farther: if the minimum wage had kept up with growth in productivity since the late 1960s—when it was enough to keep a family of three with one full-time worker out of poverty—it would be over $18 today.

To varying degrees, 29 states have addressed the need for a higher wage floor by legislating their own increases. These states include Kentucky’s neighbors Ohio, Illinois, Missouri and West Virginia. Twenty states raised their wages on January 1, 2015 by amounts ranging from 12 cents to $1.25 per hour for wage rates that start at $7.50 in Arkansas and rise to $9.47 in Washington State. The Economic Policy institute estimates that these increases will put an additional $1.3 billion in 3.2 million workers pockets in 2015.

Some of these changes were the result of legislation that incrementally lifts states’ wage floors over the next couple years; by 2017, for instance, Arkansas will have an $8.50 minimum wage, and beginning December 31, 2015, workers in West Virginia will make $8.75 per hour. Other increases were automatic in nine states where the minimum wage is tied to inflation, including Florida, Missouri and Ohio. Nevada, the 10th state with an indexed minimum wage, adjusts its wage in July. Five more states including Michigan as well as the District of Columbia have passed laws to begin indexing by 2019.

In addition to the 20 increases that took place on January 1, New York raised its minimum wage on December 31st, 2014 and Minnesota and Delaware are scheduled to increase wages later in 2015. All counted, state minimum wage increases from December 31, 2014 through August 2015 will put an estimated $1.7 billion more into workers’ pockets this year.

Kentuckians deserve decent pay for a hard day’s work just like the rest of Americans do. While 45,000 workers in Louisville/Jefferson County stand to benefit from the recently-passed metro government ordinance that will lift the city’s minimum wage to $9 an hour by July 2017, 10 times that many workers would benefit from a statewide increase to $10.10, as proposed by House Bill 2.

Minimum Wage Laws in the U.S. – January 1, 2015

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Source: United States Department of Labor, Wage and Hour Division.

More Support for Family Caregivers Good for Seniors and State

Last year Kentucky ranked worst in the nation on the AARP Public Policy Institute’s scorecard on long-term care services and supports. A recent report by the Legislative Research Commission (LRC) provides some ideas about ways Kentucky could better support family caregivers of elders in order to improve long-term care.

Although the majority of seniors want to age in their homes, the state programs that provide related supports in Kentucky are seriously underfunded. Thus many seniors find themselves in nursing homes instead.

State funding for the Department for Aging and Independent Living (DAIL) programs has decreased 27 percent since 2009, according to the LRC report—and there are currently waiting lists for almost all of the programs, which include: Adult Day Care And Alzheimer’s Disease Respite Program, Homecare Program, Nutrition Program for the Elderly, and Personal Care Attendant Program. The number of Kentuckians waiting for a DAIL program or service was more than 13,000 in 2014. Kentucky ranks 30th—out of 39 states providing data—in total expenditures for the aging, disabled and caregiver population.

According to the AARP scorecard report, improving overall state performance in long-term care requires “shifting funds away from an overreliance on nursing homes to support more funding of home- and community-based services.” Nursing home care is typically much more expensive than in-home care—and not preferred by most seniors. According to the LRC report, the annual median rate for nursing home care is $73,000 for a semi-private room ($80,300 for a private room); in contrast, full-time private in-home care costs $44,370 a year. Kentucky’s Medicaid program pays approximately $48,000 per year for a nursing home bed compared to $15,000 for in-home supports.

The state currently spends about 81 percent of all long-term care dollars on nursing home care, while the remainder goes to supports to help seniors age at home. The Medicaid Home and Community Based Waiver is available to states to permit them to use Medicaid funds for some nonmedical services and supports to elderly people so they can remain in—or return to—their homes. However, the use of this option in Kentucky is limited. According to the LRC report, the top two states for using the waiver, Minnesota and New Mexico, allocate only 35 percent of Medicaid spending on long-term institutional care.

Unless needed changes are made, Kentucky’s long-term care problems are expected to increase as the elderly population grows. The LRC report warns that “The growth of the senior population may outpace available Medicaid funds without a redistribution of spending.” Twenty percent of the state’s population is projected to be age 65 and older in 2030—an increase of 321,415 seniors—meaning an increased need for long-term care.

Among the report’s recommendations are to:

  • Increase support for the state’s 15 Area Agencies On Aging and Independent Living (AAAIL): According to the report, not only are there waiting lists for many services available through the AAAILs, the same services are not available through all AAAILs. This has to do with funding for the programs coming from several sources, including federal, state and local dollars as well as consumer contributions—so the ability of each AAAIL to provide services varies.
  • Enhance employment policies for caregivers: The federal Family and Medical Leave Act (FMLA), which guarantees up to 12 weeks in a 12-month period of job-protected unpaid leave for a worker’s or family member’s serious health needs, is an important resource for caregivers—although the federal policy does not apply to businesses with fewer than 50 employees and many family members. Some states have expanded eligibility for family and medical leave to businesses with fewer than 50 employees and expanded the definition of “family member” to include grandparents, in-laws, domestic partners or siblings. Without these and other supplemental provisions, the FMLA only covers about 60 percent of workers. Some states also offer paid family and medical leave to workers, which they often fund through an employee-paid tax.
  • Change the allocation of Medicaid funds spent on long-term care: One way to increase the number of Kentucky seniors and their caregivers who can be assisted under the Medicaid Home and Community Based waiver is to implement presumptive eligibility for services that help seniors stay at home; this means those who seem to qualify would be temporarily enrolled while officially eligibility is still being determined, reducing waits for services.
  • Reduce shortages of home health and personal care aides: Kentucky ranks 44th in the number of home health and personal care aides per 1,000 population aged 65 and older. There are 22 per 1,000 compared to a median of 33 per 1,000 for all states.

The LRC report shows that increased support for caregivers of elders in Kentucky would not only be good for the state’s seniors and their families, it would also be less costly for the state. These savings could then be applied to further strengthen supports and serve more elderly Kentuckians and their caregivers.

Who Stands to Benefit from Louisville’s New Minimum Wage

An estimated 45,000 workers in Louisville/Jefferson County who would otherwise make less than $9 an hour will have higher wages once the new metro government minimum wage ordinance—the first such local law in the South—is fully implemented in two and a half years.

In addition to the workers who will directly benefit, another 13,500 who make slightly above $9 an hour could also receive a small raise when wage scales are adjusted upward, based on the experience of minimum wage increases elsewhere.

Of the workers affected, an estimated 88 percent are at least 20 years old and more are over the age of 50 than are teenagers. Fifty-seven percent are women, 60 percent work full-time and 28 percent have a child in the household.

Fifty-nine percent of those workers with family income below the poverty line will benefit. Forty percent of affected workers are employed in either restaurants and food services or retail trade. See the table below for more detail.

Those workers benefitting will get smaller increases than the estimated 62,500 who would’ve received a raise from the original $10.10 proposal. But because the final ordinance also added a clause to adjust the minimum wage annually by growth in the consumer price index in the years after 2017, those workers affected are assured that their wages will not become stuck.

The final ordinance did not increase base pay for tipped workers from the current $2.13 an hour, where it has remained since 1991. The ordinance does require that tipped workers’ total wages including tips plus base pay be at least equal to the new local minimum wage. The original ordinance had increased the base pay for tipped workers to 45 percent of the new minimum wage, or $4.55 an hour for a $10.10 minimum wage.

louisvillebreakdownSource: KCEP analysis of 2013 American Community Survey data. See here for details on methodology.

 

 

Kentucky’s Economy Continues to Reflect National Trends