News Intro Text
Raise the minimum wage.
Date
News Item Content
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);"><span class="pb-byline" itemprop="author" itemscope="" itemtype="http://schema.org/Person" style="box-sizing: border-box; font-family: FranklinITCProBold, sans-serif; display: inline-block; padding-right: 5px; font-size: 16px; line-height: 17.6px;">By <span itemprop="name" style="box-sizing: border-box;">Valerie R. Wilson</span></span><span style="font-family: FranklinITCProLight, HelveticaNeue, "Helvetica Neue Light", "Helvetica Neue", Helvetica, Arial, "Lucida Grande", sans-serif; font-size: 16px; line-height: 17.6px;"> </span><span class="pb-timestamp" content="2016-07-01T12:00-500" itemprop="datePublished" style="box-sizing: border-box; font-stretch: normal; font-size: 14px; line-height: 1.1em; font-family: FranklinITCProLight, HelveticaNeue, "Helvetica Neue Light", "Helvetica Neue", Helvetica, Arial, "Lucida Grande", sans-serif; color: rgb(170, 170, 170); white-space: nowrap; padding-right: 5px; display: inline-block;">July 1</span></p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);"><strong style="box-sizing: border-box;"><em style="box-sizing: border-box;">Each week, </em></strong><strong style="box-sizing: border-box;"><em style="box-sizing: border-box;"><a href="http://www.washingtonpost.com/news/in-theory/" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">In Theory</a> takes on a big idea in the news and explores it from a range of perspectives. This week we’re talking about payday lending. Need a primer? Catch up <a href="https://www.washingtonpost.com/news/in-theory/wp/2016/06/27/whats-the-alternative-to-payday-loans/" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">here</a>.</em></strong></p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);"><em style="box-sizing: border-box;">Valerie R. Wilson is an economist and the director of the Program on Race, Ethnicity and the Economy at the Economic Policy Institute.</em></p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">Payday loans are advertised as a quick and easy solution to temporary cash flow problems. In reality, for most borrowers, the payday lending experience rarely ends up being easy or temporary.</p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">Most take out these small-dollar loans to meet monthly or recurring expenses, which don’t go away after the initial loan. Because few borrowers experience a change in economic circumstances before the loan is due, most have to take out another loan or incur fees to postpone repayment. Research from the <a href="http://files.consumerfinance.gov/f/201403_cfpb_report_payday-lending.pdf" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">Consumer Financial Protection Bureau</a> says that 82 percent of loans are renewed within 14 days.</p>
<p channel="wp.com" class="interstitial-link" style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);"><i style="box-sizing: border-box;">[<a href="https://www.washingtonpost.com/news/in-theory/wp/2016/07/01/the-problem-is-bigger-than-payday-loans/" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">The problem is bigger than payday loans</a>]</i></p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">By severely limiting the payday loan industry, the CFPB’s <a href="https://www.washingtonpost.com/news/get-there/wp/2016/06/02/what-consumers-need-to-know-about-the-rules-proposed-for-payday-loans/?tid=a_inl" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">proposed new rules</a> are intended to put an end to the “debt trap” far too many economically vulnerable borrowers struggle to escape. This is a responsible and appropriate response from the agency charged with protecting the best interests of American consumers, but Congress has responsibilities as well.</p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">In addition to direct changes to industry rules, economic policies that broadly help to promote full employment and higher wages would go a long way toward reducing demand for payday loans in the first place. This includes policies such as raising the minimum wage and eliminating the tipped wage. Increasing the federal minimum wage to $12 by 2020, for example, <a href="http://www.epi.org/publication/raising-the-minimum-wage-to-12-by-2020-would-lift-wages-for-35-million-american-workers/" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">would lift wages for as many as 35 million workers</a>and increase incomes by roughly $2,300 a year for the average affected worker.</p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">Other policies that will help to boost wages for low- and moderate-income earners include strengthening rights to collective bargaining, regularizing undocumented workers, ending forced arbitration and securing workers’ access to sick leave and paid family leave, as well as eliminating race and gender inequities in employment and pay. One of the best ways to provide a boost for low-wage workers is to pursue full employment by <a href="http://www.epi.org/nominal-wage-tracker/" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">keeping interest rates low until wage growth picks up</a>, or even by enacting employment programs targeting the hardest-hit communities. Public and nonprofit employment programs, for example, support full employment by creating jobs that are accessible to those facing significant barriers to employment and improving the quality of life and physical infrastructure in local communities.</p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">Congress could also act by setting a non-predatory APR cap, similar to the 36 percent cap set for members of the military in the <a href="http://www.responsiblelending.org/payday-lending/research-analysis/Summary-of-MLA.pdf" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">Military Lending Act of 2006</a>. They could also pass legislation making the government a provider of emergency finance for the poor through the U.S. Post Office, as some have suggested.</p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">Yet the continued proliferation of payday lenders makes clear that there is demand for the services they provide. The chronically cash-strapped clientele that payday lenders thrive on disproportionately includes those making less than $40,000 per year — often people with less than a bachelor’s degree and African Americans. Imposing stricter regulations on the market or directly entering the market as a provider are both examples of how the government can intervene in the way in which these loans are supplied. Raising wages, on the other hand, would actually reduce demand for payday loans.</p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);"><a href="https://www.washingtonpost.com/news/in-theory/wp/2016/07/01/want-to-eliminate-payday-lending-raise-the-minimum-wage/?tid=a_inl">Full Article>></a></p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);"><strong style="box-sizing: border-box;"><em style="box-sizing: border-box;">Each week, </em></strong><strong style="box-sizing: border-box;"><em style="box-sizing: border-box;"><a href="http://www.washingtonpost.com/news/in-theory/" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">In Theory</a> takes on a big idea in the news and explores it from a range of perspectives. This week we’re talking about payday lending. Need a primer? Catch up <a href="https://www.washingtonpost.com/news/in-theory/wp/2016/06/27/whats-the-alternative-to-payday-loans/" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">here</a>.</em></strong></p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);"><em style="box-sizing: border-box;">Valerie R. Wilson is an economist and the director of the Program on Race, Ethnicity and the Economy at the Economic Policy Institute.</em></p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">Payday loans are advertised as a quick and easy solution to temporary cash flow problems. In reality, for most borrowers, the payday lending experience rarely ends up being easy or temporary.</p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">Most take out these small-dollar loans to meet monthly or recurring expenses, which don’t go away after the initial loan. Because few borrowers experience a change in economic circumstances before the loan is due, most have to take out another loan or incur fees to postpone repayment. Research from the <a href="http://files.consumerfinance.gov/f/201403_cfpb_report_payday-lending.pdf" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">Consumer Financial Protection Bureau</a> says that 82 percent of loans are renewed within 14 days.</p>
<p channel="wp.com" class="interstitial-link" style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);"><i style="box-sizing: border-box;">[<a href="https://www.washingtonpost.com/news/in-theory/wp/2016/07/01/the-problem-is-bigger-than-payday-loans/" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">The problem is bigger than payday loans</a>]</i></p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">By severely limiting the payday loan industry, the CFPB’s <a href="https://www.washingtonpost.com/news/get-there/wp/2016/06/02/what-consumers-need-to-know-about-the-rules-proposed-for-payday-loans/?tid=a_inl" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">proposed new rules</a> are intended to put an end to the “debt trap” far too many economically vulnerable borrowers struggle to escape. This is a responsible and appropriate response from the agency charged with protecting the best interests of American consumers, but Congress has responsibilities as well.</p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">In addition to direct changes to industry rules, economic policies that broadly help to promote full employment and higher wages would go a long way toward reducing demand for payday loans in the first place. This includes policies such as raising the minimum wage and eliminating the tipped wage. Increasing the federal minimum wage to $12 by 2020, for example, <a href="http://www.epi.org/publication/raising-the-minimum-wage-to-12-by-2020-would-lift-wages-for-35-million-american-workers/" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">would lift wages for as many as 35 million workers</a>and increase incomes by roughly $2,300 a year for the average affected worker.</p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">Other policies that will help to boost wages for low- and moderate-income earners include strengthening rights to collective bargaining, regularizing undocumented workers, ending forced arbitration and securing workers’ access to sick leave and paid family leave, as well as eliminating race and gender inequities in employment and pay. One of the best ways to provide a boost for low-wage workers is to pursue full employment by <a href="http://www.epi.org/nominal-wage-tracker/" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">keeping interest rates low until wage growth picks up</a>, or even by enacting employment programs targeting the hardest-hit communities. Public and nonprofit employment programs, for example, support full employment by creating jobs that are accessible to those facing significant barriers to employment and improving the quality of life and physical infrastructure in local communities.</p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">Congress could also act by setting a non-predatory APR cap, similar to the 36 percent cap set for members of the military in the <a href="http://www.responsiblelending.org/payday-lending/research-analysis/Summary-of-MLA.pdf" style="box-sizing: border-box; color: rgb(46, 109, 157); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(213, 213, 213); zoom: 1; margin-bottom: 18px; line-height: 1.8em;">Military Lending Act of 2006</a>. They could also pass legislation making the government a provider of emergency finance for the poor through the U.S. Post Office, as some have suggested.</p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);">Yet the continued proliferation of payday lenders makes clear that there is demand for the services they provide. The chronically cash-strapped clientele that payday lenders thrive on disproportionately includes those making less than $40,000 per year — often people with less than a bachelor’s degree and African Americans. Imposing stricter regulations on the market or directly entering the market as a provider are both examples of how the government can intervene in the way in which these loans are supplied. Raising wages, on the other hand, would actually reduce demand for payday loans.</p>
<p style="box-sizing: border-box; font-size: 20px; font-family: Georgia; line-height: 1.8em; margin: 0px auto 18px; max-width: 100%; color: rgb(17, 17, 17);"><a href="https://www.washingtonpost.com/news/in-theory/wp/2016/07/01/want-to-eliminate-payday-lending-raise-the-minimum-wage/?tid=a_inl">Full Article>></a></p>