The New Year has brought movement in a
long-time financial barometer in the United States – the mandatory minimum
wage. As of January 1, 2014, legislation
took hold in 13 states and the District of Colombia, raising the minimum wage
for those citizens anywhere from $7.50 in Missouri to $9.32 in Washington. But there’s even more debate on a Federal
level about raising the Fed mandatory minimum wage to $10.10 an hour, up from
it’s current plateau at $7.25, where it’s sat since 2009. Congressional Democrats and President Obama
are backing the measure but it’s finding no support among the Republican-led
House.
Even though a Fed mandatory
number exists, states can have their own minimum wage standards, as long as
they don’t fall below the Fed level.
Right now 19 states plus District of Columbia have their own higher minimum
wage legislation, and even cities and counties have the option of raising it. The highest in the country is San Francisco
at $10.74. Washington leads the way for
states with a $9.32 minimum wage, followed by Oregon at $9.10. Vermont is at $8.73, Connecticut, $8.70, and New
Jersey pays at least $8.25. More states
are expected to enact wage standard legislation.
We first saw statutory minimum wage regulations in New
Zealand in 1894 and the Australian colony (not yet a state) of Victoria in
1896. Attempts to effect wage uniformity
had been present since trade unions were decriminalized during the 19th
century, but this was the first time actual laws or binding agreements were on
the books. Now, such measures exist in
90% of all countries around the world, ostensibly to stop sweatshop labor and
exploitation of workers.
In the United States, the Federal
Mandatory Minimum Wage was created in 1938.
It rose regularly and significantly until 1968, a high point of $1.60 an
hour (that is $8.56 in inflation-adjusted 2012 dollars.) But since then it has lagged behind the cost
of living and inflation.
In fact, after adjustments
for inflation, the Federal Minimum Wage dropped 20% from 1967 to 2010. In that time it has climbed from $1.40 to
$7.25 an hour in real numbers, a 418% gain. But even since the increase in 2009
it’s lost about 5.8% of its purchasing power, a huge chunk for workers and
families already existing on a minimum wage income.
The push to increase the Fed Minimum Wage comes from
two groups that are unlikely allies – low wage workers, themselves, and economists. Recently,
fast food workers, rallying for a $15 an hour “living wage,” organized in about
100 cities for protests. Similarly, WalMart
workers have called attention to their inadequate wages and demanded fair wages. While employment numbers dangle and dance,
the problem of low wages was exacerbated by the recession. As our economy started to rebound, about 60%
of the new jobs created during the recovery were low-wage positions, according
to a 2012 study by the National Employment Law Project. They went on to report that a combination of
unemployment and these low wages increased the national poverty rate by 3.4%
during the recession, and that has not abated.
A subsequent
study by the University of Massachusetts-Amherst economist Arindrajit Dube
found that an increase of the Fed mandatory minimum wage to $10.10, as proposed
by some lawmakers, would lift nearly 6.8 million Americans out of poverty in
the long term, or 4.6 million directly. Other economists predict that nearly 21.3
million U.S. workers, a whopping 16.4% of the workforce, would be affected by
raising the Federal minimum wage to $10.10 by July 2015.
17.8% of all wage and salary
workers – about 23.2 million Americans - worked in the nation’s lowest paid
jobs last year. Of those, 4.3 million
were retail salespeople 3.3. million cashiers, 2.9 million food
preparers/servers (including fast-food workers) and 2.3 million waiters or
waitresses. The age split is interesting
– dooming the young. 50.6% of the U.S.
workers at or below the minimum wage last year were 16-24 and 20.3% were
25-34.
This feeds the perception
that minimum wage jobs are usually held by teenagers or college kids at fast
food joints, where a low salary is not as much of an issue. However, we see that’s not the case - 85.5%
of those workers, according to the EPI report, are 20 or older, and therefore
have full financial obligations – households to support and families to
feed. 57.3% are female; and 39.4% are
black or Hispanic, compared to 26.8% of the workforce as a whole.
The debate rages on whether
raising the minimum wage legitimately pulls people out of poverty or hurts
business and decentivizes people from seeking better careers, with the outcome of
new legislation impacting millions of Americans.
***
So what do you think about
the Federal minimum wage? Should it be
raised to $10.10? Or is it best left up
to states to set? Does it encourage
people to seek low-level jobs and hurt business? Or is it our social responsibility to pay a
living wage?
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