Minimum Wage and Living Wage
Background and History
Reasons to Increase the Minimum Wage
Common Myths and Objections
With the fourth anniversary of the last federal minimum wage increase to $7.25 an hour, the drum beat for increasing it is gaining strength. The President has asked for an increase as part of his economic recovery plan and polls of American citizens support it. The Fair Minimum Wage Act of 2013 has been introduced in Congress. There’s a compelling reason driving this effort: the federal minimum wage has lost more than 30% of its value and would be more than $10.74 per hour today if it had kept pace with the cost of living over the past forty years. Raise the Minimum Wage website.
In the President’s 2013 State of the Union address, he called for raising the minimum wage. During the summer, he launched an economic recovery plan aimed at creating jobs and strengthening the middle class. In part of the plan, the President is calling on Congress to raise the minimum wage from $7.25 to $9 in stages by the end of 2015 and index it to inflation thereafter, which would directly boost wages for 15 million workers and reduce poverty and inequality.
This is what the American people want and would support. In a February 2013 poll conducted by Pew Research, 71 percent of Americans supported a federal minimum wage increase to $9.00 per hour, including 87 percent of Democrats, 68 percent of Independents, and 50 percent of Republicans. In an earlier 2012 poll by Lake Research Partners, nearly three-quarters of likely voters supported increasing the minimum wage to $10 and indexing it to inflation (73% support, 20% oppose) in 2014, including a solid 58% majority who felt that way strongly. Voters supported raising the minimum wage regardless of gender, age, education level, race, region, and partisanship. Intense support among Democrats (91% support overall and 79% strong support, 5% oppose) and Independents (74% support overall and 55% strong support, 18% oppose) was complemented by robust support from Republicans (50% support, 41% oppose) as well.
Senator Tom Harkin (D-IA), Chair of the Senate Health, Education, Labor and Pensions Committee, and Representative George Miller (D-CA), the top Democrat on the House Workforce Committee, have introduced The Fair Minimum Wage Act of 2013 – S. 460 and H.R.1010. It would:
Raise the federal minimum wage to $10.10 per hour by 2015, in three steps of 95 cents each.
Adjust the minimum wage to keep pace with the rising cost of living starting in 2016 - a key policy reform known as "indexing," which ten states are already using to prevent the minimum wage from falling in value each year.
Raise the minimum wage for tipped workers - which has been frozen at a meager $2.13 per hour for more than twenty years - to 70% of the full minimum wage.
Background and History
"It is but equity...that they who feed, clothe and lodge the whole body of the people,
should have such a share of the produce of their own labor
as to be themselves tolerably well fed, clothed and lodged."-Adam Smith, The Wealth of Nations, 1776
The federal minimum wage was signed into law in 1938 by President Franklin Roosevelt, at the height of the Great Depression. Its purpose was to keep America’s workers out of poverty, and increase consumer purchasing power in order to stimulate the economy.
The current federal minimum wage has been $7.25 since 2009. This level was embedded in an emergency war funding bill signed by President Bush in 2007, following a period of ten years when the level had not been adjusted. The bill put in place a three-level wage increase that went from $5.15 an hour to $5.85 in 2007, to $6.55 in 2008, and to $7.25 since July 24, 2009.
An individual working full time at $7.25 an hour would earn $15,080 a year. On that salary there is no state where a worker – for example, a single working mother - could afford a two-bedroom apartment. For more facts about the minimum wage, see the National Employment Law Project’s “Raise the Minimum Wage” campaign pages.
In addition, more families than ever are relying on low-wage and minimum wage jobs to make ends meet. Many jobs lost during the recession were in higher-wage sectors like construction, manufacturing and finance. But 58 percent of all jobs created in the post-recession were low-wage occupations, according to a 2012 report by the National Employment Law Project. This is not a short term trend – six of the top ten growth occupations projected by the U.S. Bureau of Labor Statistics for next decade are low-wage jobs, including home health aides, customer service representatives, food preparation and service workers, personal and home care aides, retail salespersons, and office clerks. Raising the minimum wage would boost pay scales in these types of jobs where millions of Americans today spend their careers.
Has the minimum wage has kept up with inflation? Hardly. This graph reveals the sad facts which most Americans know from their daily lives and those of relatives and friends who have suffered from the recession and not yet recovered. The recession severely worsened what was already a decades-long diminishment of the buying power of the minimum wage. The federal minimum wage has lost more than 30% of its value and would be more than $10.74 per hour today if it had kept pace with the cost of living over the past forty years.
Reasons to Increase the Minimum Wage
Raising the wage level to the $10.10 level would help 30 million working Americans and their families make a decent living. Those people are not teenagers - 88% are adults over the age of 20, 56% are women, nearly half are workers of color, and over 43% have some college education. More than 17 million children have a parent who would get a raise under the bill introduced. See more analysis of Census data by the Economic Policy Institute. The median worker age is close to 40 for home health care workers, one of the nation’s top-growth low-wage occupations. Especially after the recession, more and more Americans are spending their careers in low-wage jobs where the minimum wage helps set pay scales.
As people’s wages rise, it follows that their need in accessing safety net programs like the Supplemental Nutrition Assistance Program or SNAP, or low-income housing would diminish. By keeping the minimum wage low, businesses have increased the need for government support systems. It’s time for businesses to pay a living wage again that is part of a healthy economy, especially since research is clearly showing that a higher minimum wage would not impact job creation.
Raising the minimum wage right now in a sluggish economy is more important than ever. Minimum wage increases stimulate the economy by increasing consumer spending, without adding to state and federal budget deficits. Consumer spending drives 70 percent of the economy, and increasing demand is key for jumpstarting production and creating more jobs. Yet wages and salaries now make up the lowest share of national income since 1966, while corporate profits are now the largest share of national income since 1950. The Economic Policy Institute estimates that The Fair Minimum Wage Act of 2013 would generate more than $32 billion in new economic activity, translating to 140,000 new full-time jobs as higher sales lead businesses to hire more employees.
“The biggest problem Main Street businesses face is lack of customer demand,” says Holly Sklar, director of the Boston-based Business for Shared Prosperity, a network of progressive business owners and investors. “With the federal minimum wage stuck … workers now have less buying power than they did a half century ago in 1956, and far less than they had at the minimum wage’s $10.55 high point in 1968, adjusted for inflation. We can’t build a strong economy on downwardly mobile wages. It’s time to raise America by raising the minimum wage.”
An increase in the minimum wage is supported by both Republican and Democrat business leaders. Two out of three small business owners (67%) support increasing the federal minimum wage and adjusting it yearly to keep up with the cost of living. The strong support for a minimum wage raise is particularly striking since the small business owners are predominately Republican. The poll was conducted March 4-10, 2013 by Greenberg Quinlan Rosner Research on behalf of Small Business Majority. View the poll findings summary. The poll shows 65% of small business owners agree that “increasing the minimum wage will help the economy because the people with the lowest incomes are the most likely to spend any pay increases buying necessities they could not afford before, which will boost sales at businesses. This will increase the customer demand that businesses need to retain or hire more employees.”
"Paying your employees well is not only the right thing to do but it makes for good business."
-Jim Sinegal, CEO, Costco
Raising the minimum wage causes job loss.
Not true. The best economic research, and real world experiences with minimum wage increases, confirms that raising the minimum wage does not cause job loss. The decade following the federal minimum wage increase in 1996-1997 ushered in one of the strongest periods of job growth in decades. Analyses of states with minimum wages higher than the federal floor between 1998 and 2003 showed that their job growth was actually stronger overall than in states that kept the lower federal level. The most sophisticated minimum wage study to date, published in November 2010 by economists at the University of Massachusetts, University of North Carolina, and University of California, compared employment data among every pair of neighboring U.S. counties that straddle a state border and had differing minimum wage levels at any time between 1990 and 2006, and found that minimum wage increases did not cost jobs. A companion study published in April 2011 found that these results hold true even during periods of recession and high unemployment. Read more research on the effect of the minimum wage on employment here.
Raising the minimum wage hurts teenage workers.
Not true. A recent rigorous study by economists at the University of California examining the impact of minimum wage increases on teen unemployment found that even minimum wage increases implemented during times of high unemployment – such as the recessions of 1990-1991, 2001 and 2007-2009 – did not result in job losses for teens or slow employment growth.
Critics like to suggest that the last increase in the federal minimum wage in 2009 caused a spike in teen unemployment. But as a NELP report demonstrated in 2011, teen unemployment rises faster than adult joblessness during every recession – whether or not the minimum wage goes up. This is because teens are the last hired, and so are always the first fired when the economy shrinks and adults compete with them for scarce jobs.
Employers may go out of business if they have to pay a higher minimum wage.
Not true. While opponents frequently make this claim, research and experience demonstrate otherwise. In fact, many of the loudest minimum wage opponents are the country’s largest and most profitable companies. A 2012 report by NELP found that two-thirds of all low-wage workers are employed by large companies rather than small businesses, and that the vast majority of the largest low-wage employers in the country are earning strong profits and can afford higher wages.
It’s also important to remember that since the minimum wage has lost so much value over the last several decades, employers today are actually being allowed to pay less – in real dollars – than they were in the late 1960’s.
Nineteen states, including the District of Columbia, have raised their minimum wage above the level set by federal law. The state of Washington has the highest state minimum wage at $9.19 (with the future level indexed to inflation). Oregon follows closely behind at $8.95 (also indexed). Ten of the 19 states have also linked their state minimum wage to the consumer price index, so that the rate automatically keeps pace with inflation each year (AZ, CO, FL, MO, MT, NV, OH, OR, VT, and WA). For more information, see the map at the Center for Economic and Policy Research.
Legislation to raise and/or index the minimum wage has been introduced in several states. In some of those states, activists are organizing campaigns to support the increase. In other states, the minimum wage has come under attack and worker justice advocates are fighting back. Read more here to see what’s going on in your state or to discover that your state needs action to raise the minimum wage!
From the Economic Policy Institute: The Economic Impact of Raising the Minimum Wage to $10.10 per hour, and the Demographic Profile of Affected Workers; Lagging minimum wage is one reason why most Americans’ wages have fallen behind productivity (7/11/13)
From the National Employment Law Project: How Does Raising the Minimum Wage Impact Job Growth and the Economy?
From the Center for Economic Policy Research: Why Does the Minimum Wage Have No Discernible Effect on Employment?
Let Justice Roll
Universal Living Wage Campaign
Business for a Fair Minimum Wage