Why Raising the Minimum Wage Won’t Solve Income Inequality

Who's winning, who's losing, and why.
June 26 2014 3:57 PM

The Ikea Illusion

It’s terrific that Ikea and other retailers are raising their wages. But it won’t matter to the millions of Americans who can’t get to where the jobs are.

Ikea.
Ikea says it will comply with proposed minimum wage hikes across the country, but its mostly suburban locations mean it will avoid those hikes in most areas. Above, an Ikea in Emeryville, California.

Photo by Justin Sullivan/Getty Images

Congratulations, Ikea workers—you're getting a raise.

“On Thursday morning,” writes Ned Resnikoff for MSNBC, “the Swedish furniture retailer IKEA announced that it would be adopting a new wage structure which is expected to increase pay for about 50 percent of its American employees.” Beginning next year, the company will link its base-level pay to the “minimum standards of living” in each area it is located. As a result, the average minimum hourly wage for all stores will jump to $10.59, or a 17 percent increase from the current minimum wage.

Jamelle Bouie Jamelle Bouie

Jamelle Bouie is a Slate staff writer covering politics, policy, and race.

What's more, notes Resnikoff, Ikea will work to comply with “proposed minimum wage hikes across the country,” including the $15 wage passed in Seattle and under consideration in San Francisco and Chicago. Indeed, in taking this step, Ikea joins other retailers (like Gap, Inc.) that have raised their pay or increased their benefits, likely in response to federal, state, and local pressure to increase minimum wages.

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With that said, it's worth noting that there's less than meets the eye to Ikea’s promise to hew to local and municipal minimum wage hikes. Most Ikea stores are located in suburbs, as opposed to urban centers. The Ikea near Charlotte, North Carolina, for instance, is located on the outskirts of the area, as is the Ikea near Seattle (in Renton) and the one in Dallas (near Frisco). By virtue of geography, these stores will avoid city-mandated wage hikes.

What's more, for as much as Ikea and similar stores might be good for workers, their overwhelmingly suburban locations make them isolated from large numbers of potential workers who lack employment opportunities in their own areas and neighborhoods.

A few months ago, I wrote about the challenges of economic mobility in a landscape governed by residential segregation. Millions of Americans—and blacks in particular—live in neighborhoods with concentrated poverty, poor schools, high crime, and underinvestment in key public services. Compounding all of this is a huge mismatch between jobs and housing.

When middle- and high-income whites left the cities for the suburbs—and then, for the exurbs—they brought a whole host of service jobs with them. Grocery stores, malls, big-box outlets, movie theaters—most are located in America's suburban and exurban areas, the defining features of our sprawling human geography. And while the proportion of blacks and Latinos living in suburban areas has rapidly increased over the last three decades, it's still true that—compared with other groups—black residential areas remain concentrated in older urban and suburban neighborhoods of our nation's metropolitan areas, away from the predominantly white outer suburbs where the majority of jobs are located.

The result is that, for both groups—but low-income blacks in particular—there is a “spatial mismatch” between neighborhoods and employment opportunities.

Put simply, the greater the sprawl of jobs in an area, the less likely it is that black residents will have easy and reliable access to them. Or, as UCLA professor Michael Stoll writes in a 2005 paper for the Brookings Institution, “Blacks are more geographically isolated from jobs in high job-sprawl areas regardless of region, metropolitan area size, and their share of metropolitan population.” And this isn't an accident: “Metropolitan areas characterized by higher job sprawl also exhibit more severe racial segregation between blacks and whites,” he writes.

All of this is exacerbated by our shoddy, car-centric transportation policy. To get to any job in a place like Virginia Beach, Virginia—where 10- to 15-mile drives are a fact of life—you need a car. Yes, there is a public transportation system, but it's irregular (the agency had a rate of 18 missed trips per day in March), limited in scope, and unreliable for most workers who need to be on time. But cars are expensive, and black and Latino households are much less likely to own cars than their white counterparts. What comes next is predictable: Plenty of low-income people can't find or keep jobs because they are isolated from opportunities.

Which brings us back to the minimum wage. There's no question its increase will help workers in the aggregate. For example, the Democratic proposal to hike the federal minimum wage to $10.10 from $7.25 would lift 900,000 Americans out of poverty and raise incomes for the 16.5 million Americans who make less than that amount.

At the same time, it's important to note the limits of the approach, namely, that higher-wage jobs don't mean much when you can't access them. It's great that Ikea and other stores are raising their base wages, but for, say, Detroit residents who can't reach the store in Canton, it doesn't mean much.*

If there's an immediate solution here, it's a concerted effort to improve public transit nationwide, and push against the anti-transit policies of Tea Party groups, which have opposed mass transit projects in places like Nashville and Indianapolis. Indeed, transportation equity should be at the forefront of any liberal plan for tackling income inequality.

More broadly, this underscores the critical importance of residential integration. The only way to significantly dent patterns of concentrated poverty and disadvantage in our metropolitan areas is to push policies—like land-use deregulation, housing vouchers, and relocation programs—that reduce segregation. As sociologist Mary Pattillo argues, “more strict desegregation laws would also open the door for low-income blacks to move to predominantly white neighborhoods, where jobs and resources are unfairly clustered.”

There's no improving the lives of low-income Americans without dealing with racism and its consequences for our cities and suburbs. We can raise wages and improve services, but if we can't improve transportation and mobility—if we can't break segregation—then we'll finish the battle without ever winning the war.

Correction, June 27, 2014: This article originally stated that the Ikea near Detroit is located in Westland, Michigan. The store is located in Canton, a nearby area. (Return.)