Robert A. Levine 12-9-13
Over the last several months, politicians on the left appear to be awakening to the fact that there is great inequality in America, with an increasing percentage of the nation’s wealth in the hands of a fortunate few. As President Obama noted, half of the national income goes to the top 10% of Americans, up from one third in 1979, among the most unequal wealth distribution of all the developed nations. Politicians have also become aware that numerous citizens are impoverished and that working Americans have great difficulty subsisting on the minimum wage with a forty hour week (if they are lucky enough to be employed). Why is all of this suddenly news? Politics, of course. Even though the concerns are valid and need to be addressed, the Democrats want to change the focus away from problems with the Affordable Care Act (Obamacare), to a place where they appear to hold the moral high ground (and an advantage in the polls)..
The current minimum wage is $7.25 per hour which translates into a person working full time earning $290 every week, or $15,080 annually. Given inflation, wages in the retail trades have dropped 30% over the last forty years, though the nation as a whole is much richer. With the help of food stamps, Medicaid, and possibly subsidized housing, some individuals may be able to survive on this income. But often it requires overtime or working at two or even three jobs. Trying to support a family on the minimum wage is even more difficult, unless both partners work. Of course, that entails child care at an additional cost.
Only 12% of minimum wage workers are teenagers, working either part-time or full-time, and generally not having to worry about a family. The vast majority are adults employed in the food service industry or sales. These jobs cannot be off-shored to other countries if wages are increased, as the work has to be done here. Indeed, studies have shown that raising the minimum wage has little impact on employment while significantly improving the lot of workers. Unions have not been able to get a foothold among these workers and individuals have little bargaining power with their corporate bosses in a time of high unemployment. Interestingly, Congressional studies have shown that over 72% of minimum wage worker have at least graduated from high school and 8% have earned a bachelor’s degree.
A federal minimum wage of 25 cents an hour was first established by Congress in 1938 in the Fair Labor Standards Act under President Roosevelt’s direction, with the idea that workers should be paid a fair wage for the work they were performing. Taking inflation into account, the minimum wage was at a maximum in 1968 when it was $10.60 an hour in today’s dollars, 55% of the median full-time wage. Today, it stands at 37% of the median full-time wage, having last been raised from $6.55 per hour to $7.25 per hour in July of 2009. The U.S. minimum wage currently is among the lowest of all the industrialized countries and has been a major factor in the growth of economic inequality in America.
Though recent polls have shown support across the political spectrum, with over three quarters of Americans (including Republicans) favoring raising the minimum wage as high as $10.10 per hour, this has not resulted in federal legislative action due to pressure from the restaurant and food lobby. When voters in both red and blue states have had to decide whether to raise the minimum wage on ballot measures, they have passed overwhelmingly.
Raising the federal minimum wage substantially and tying further increases to inflation would seem to be a no-brainer politically. With more workers making a living wage, public welfare programs could decrease, as the private sector would be providing the income for those at the bottom of the economic ladder. There would also be growth in consumption which would stimulate the economy, as these minimum wage workers would have more money to spend. But aside from the economic rationale for raising the minimum wage, it is also the fair thing to do, and Congress should move forward with this.