Minimum Wage and Living Wage

The federal minimum wage was set at $5.15 per hour from 1997 to 2007. Because of inflation, $5.15 in 2007 was equivalent to only $4.23 in 1995 — lower than the $4.25 minimum wage level before the 1996–97 increase. In 2009, the minimum wage was finally increased to $7.25. Analysis by the Economic Policy Institute shows that increasing the minimum wage raises the wages of low-income workers in general, not just those below the official poverty line. Many families move in and out of poverty, and near-poor families are also beneficiaries of minimum wage increases.

RESULTS and the Minimum Wage

Our goal is economic security for everyone in the United States. Even when raised to $7.25 an hour, the minimum wage does not support a family. The increase was a step in the right direction, but we continue to urge higher wages for the lowest-income workers.

Recent Increases in Minimum Wage

On May 25, 2007, President Bush signed an emergency war funding bill that included a three-level increase to the federal minimum wage to $7.25. This was the first increase to the minimum wage since September 1997. The first step of the three-level wage increase (to $5.85 per hour) took effect on July 24, 2007. The second step (to $6.55) took effect July 24, 2008. The third and final step (to $7.25) took effect on July 24, 2009.

Leading up to this victory, in January 2007, the House of Representatives passed the Fair Minimum Wage Act (H.R.2) 315-116. On February 1, the U.S. Senate passed its version of H.R.2 by a vote of 94 to 3. The Senate bill included an $8.3 billion package of business tax breaks. The minimum wage provisions in the Senate bill were the same as in the House bill. The minimum wage of $5.15 per hour would be raised in steps up to $7.25 an hour by 2009.

In late April, a bicameral, bipartisan agreement was reached on increasing the minimum wage to $7.25 an hour by 2009. The compromise included the small business tax breaks of the Senate version. This agreement was attached to the war spending supplemental appropriations bill.

Faith Groups Call for $10 an Hour by 2010

In July 2007, the Let Justice Roll Living Wage Campaign, a nonpartisan coalition of more than 90 faith, community, labor, and business organizations, launched the “$10 in 2010” campaign to raise the federal minimum wage to $10 an hour in 2010. They point out that even $7.25 an hour, when adjusted for inflation, is low by historical standards. A minimum wage of $7.25 is still far below the minimum wage of 1968, which is worth $9.86 now.

More Reasons to Increase the Minimum Wage

Total wages paid by American businesses grew at an inflation-adjusted annual rate of 1.8 percent between 2003 and the end of 2005, according to a Commerce Department report released in July 2006. That is the slowest growth in real wages in any post-World War II recovery. With the workforce growing about 1.3 percent per year, real wages per worker were up about 0.5 percent per year. Total compensation grew at a rate of 2.3 percent.

More than 650 economists, including five winners of the Nobel Prize for Economics, called for an increase in the minimum wage, saying the value of the 1997 increase had been “fully eroded.” Economists including Nobel prize winners Kenneth Arrow of Stanford University, Lawrence Klein of the University of Pennsylvania, Robert Solow of the Massachusetts Institute of Technology, Joseph Stiglitz at Columbia University, and Clive Granger of the University of California, San Diego said in a statement released October 11, 2006, that the real value of the federal minimum wage was less than it has been at any time since 1951.

A report by the Center on Budget and Policy Priorities showed that the minimum wage equaled only 32 percent of the average wage for private sector, non-supervisory workers. This is the lowest share since 1949.

Living Wage Campaign

During the time that federal minimum wage legislation was stalled, many cities and counties took action to require a “living wage” be paid to employees of government contractors.

There are several ways to compute a living wage. One way is to multiply the cost of housing by some factor to compute a monthly wage. Some sources use federal standards for fair market rents within each metropolitan statistical area or MSA.

A brief history of the national living wage movement, background materials such as ordinance summaries and comparisons, drafting tips, research summaries, talking points, and links to other living wage-related sites can be found on ACORN’s living wage website.

Today, more than 75 living wage campaigns are underway in cities, counties, states, and college campuses across the country. Taken collectively, these impressive instances of local grassroots organizing is now rightfully dubbed the national living wage movement, which syndicated columnist Robert Kuttner has described as “the most interesting (and underreported) grassroots enterprise to emerge since the civil rights movement . . . signaling a resurgence of local activism around pocketbook issues.”

Also see the Living Wage Campaign site, Let Justice Roll.

The union-sponsored Universal Living Wage Campaign mobilizes members in mid-April for its annual Tax Day event. On the day that income tax returns are due to be mailed, volunteers go to post offices to demonstrate for a Universal Living Wage.