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Economy will improve in 2014; inequality needs action

2014 is set to be a tipping point in which we either institutionalize poverty, hunger and a struggling economic recovery, or we make changes.

It is imperative that the Legislature raise the Minnesota minimum wage to at least $9.50 an hour, and index it to inflation.
Courtesy of Minnesota House Public Information Services

In both Minnesota and at the federal level, 2014 is set to be a tipping point in which we either institutionalize poverty, hunger and a struggling economic recovery, or we take steps to stimulate the economy further and assure more equitable growth for all.

Lee Egerstrom

We’ve arrived at this point while Minnesota’s economy is outperforming the nation’s. As recently as last week, the Minneapolis Federal Reserve Bank released surveys showing a generally upbeat outlook for the state’s economy and for the Fed’s entire Ninth District that stretches from Michigan’s Upper Peninsula to Montana.

That is little comfort for people and communities, still struggling with great inequality, widespread poverty, homelessness and hunger.

Minimum-wage action is imperative

Minnesota has an immediate need to fight poverty and its companions. This makes it imperative that the Legislature raise the Minnesota minimum wage to at least $9.50 an hour, and index it to inflation, as advocated by faith, labor, nonprofit and service organizations collaborating in the Raise the Wage Coalition.

This would add $470 million annually to the state economy from improved purchasing power of the working poor, and start the task of lifting low-paid workers and their families out of poverty.

This won’t eradicate poverty. The Jobs Now Coalition Cost of Living Calculator shows that two working parents in a family of four would both need to make $13.55 per hour to meet basic family living expenses. But it would nudge upwards salaries and wages paid to workers across the lower wage ranks, it would stimulate Minnesota’s economy through increased purchasing, and it would begin to lower public social welfare costs for public programs that now subsidize companies’ low wages.

21 states have higher minimums than federal rate

The Pew Research Center notes four New England states raised their minimum wage rates on Jan. 1, meaning 21 states now have higher minimums than the federal $7.25 per hour rate. Minnesota is among a handful of laggard states where state policy doesn’t equal the federal mandate for workers at certain companies.

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Further, the nonpartisan Pew researchers found 71 percent of Americans would approve a federal minimum-wage increase to $9 per hour, including 50 percent of Republicans who were polled. Though it will be proposed and debated, no one expects the current Congress to act on raising the wage this year – lower-income workers don’t have big lobbies and PACs as we approach congressional elections.

On the homes and housing front – a big part of the basic living expenses for the unemployed and working poor – partner organizations in the Homes for All alliance are asking the 2014 Minnesota Legislature authorize $100 million in state bonding for affordable housing, preservation and foreclosure recovery.

The Minnesota Housing Partnership said this proposal breaks down with $80 million to increase the supply of affordable housing and $20 million for rehabilitation of public housing. The Minnesota Housing Authority would award the funds competitively.

Regarding hunger, Minnesotans can only hope recalcitrant members of Congress, especially in the House of Representatives, encountered enough “Tiny Tim’s” and their families during the holiday break to have a change of heart, return to work, and restore significant Supplemental Nutrition Assistance Program (SNAP, formerly know as food stamps) provisions to pending federal farm bill legislation. As of this past fall, more than 536,000 Minnesotans were receiving SNAP. The House version of the long-stalled bill would ask the hungry to tighten their belts by cutting $40 billion from that program.

Congress could begin to rectify some of the economic disparities by extending long-term unemployment benefits for the 1.3 million Americans who lost an estimated $400 million per week at the end of the past year. Professor Lawrence Katz, a Harvard economist, told the Guardian newspaper in the U.K. that multiplier-effect economic analysis shows these austerity cutbacks are draining up to $1 billion a week from the U.S. economy.

So where are we Minnesotans at the start of a new year and at the precipice of a tipping point on basic questions of poverty, homelessness and hunger?

Three measures for officials

We can stress to our local and state elected officials that we want to eliminate severe poverty in our communities and state. And we must weigh our representatives and candidates for federal public office on three basic measures: Are they problem solvers, problem makers, or simply go-along, enablers of the second category that is institutionalizing poverty and inequity in America and Minnesota.

Yes, the Minnesota economy is improving. Our unemployment rate is dropping, but salaries, wages and household incomes aren’t rising fast enough to lift fellow Minnesotans out of poverty, and for many families they’re actually falling.

That old Minnesota axiom, “It could be worse,” isn’t good enough for a civil society.

Lee Egerstrom is an Economic Development Fellow at Minnesota 2020, a nonpartisan, progressive think tank based in St. Paul. This commentary originally appeared on its website.


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