< /head > Colorado Coalition for Human Rights: Minimum Wage in the United States

Tuesday, July 04, 2006

Minimum Wage in the United States

The following Op-Ed appeared in the July 3 edition of the New York Times, it is about the minimum wage and is definitly worth reading:

July 3, 2006
Op-Ed Columnist

Working for a Pittance

"We can no longer stand by and regularly give ourselves a pay increase while denying a minimum wage increase to the hardworking men and women across this nation."

— Hillary Rodham Clinton, to her fellow senators.

The federal minimum wage, currently $5.15 an hour, was last raised in 1997. Since then, its purchasing power has deteriorated by 20 percent. Analysts at the Economic Policy Institute and the Center on Budget and Policy Priorities jointly crunched the numbers and determined that, after adjusting for inflation, the value of the minimum wage is at its lowest level since 1955.

For those who don't remember, Eisenhower was president in 1955, the Dodgers were still in Brooklyn, and Barack Obama hadn't even been born.

If you're making the minimum wage, you're hurting. If Congress and the president don't raise the minimum wage by Dec. 2, it will have remained unchanged for the longest stretch since it was established in 1938. (The longest period previously was from January 1981 to April 1990 — a span that saw the entire Reagan administration come and go.)

Senate Republicans recently blocked a Democratic bill, sponsored by Senator Edward Kennedy, that would have raised the minimum wage to $7.25 an hour over the next two years. Jared Bernstein, a senior economist at the Economic Policy Institute, noted that while Republicans in Congress are standing like a stone wall against this modest increase in the poverty-level wage, "they are working as hard as they can to repeal the estate tax."

"That," he said, "is just vicious class warfare."

The most important pay increases for most members of Congress are their own, and they are diligent in that regard. Senator Clinton, in a floor speech supporting the minimum-wage hike, said, "During the past nine years, we've raised our own pay by $31,600."

Mrs. Clinton has introduced a bill that, in addition to raising the minimum wage to $7.25, would link Congressional pay raises to hikes in the minimum wage. Under the bill, the minimum wage would be increased automatically by the same percentage as any increase in Congressional pay.

Polls have shown that Americans overwhelmingly favor an increase in the minimum wage. But the low-income workers who would benefit from such an increase are not part of the natural G.O.P. constituency. Thus, the stonewall.

A separate study by the Economic Policy Institute found that in 2005, with the pay of top corporate executives up sharply, and with the minimum wage falling further and further behind inflation, "an average chief executive officer was paid 821 times as much as a minimum wage earner."

That C.E.O., according to the study, "earns more before lunchtime on the very first day of work in the year than a minimum wage worker earns all year."

"The reality," said Senator Clinton, "is that a full time job that pays the minimum wage just doesn't provide enough money to support a family today. We have to acknowledge that fact and do something about it. As a country, we cannot accept that a single mother with two children who works 40 hours a week, 52 weeks a year earns $10,700 a year — let me say this again: $10,700 a year. That is almost $6,000 below the federal poverty line for a family of three."

During the 1950's and 60's, the minimum wage was roughly 50 percent of the average wage of nonsupervisory workers. It has now fallen to 31 percent — less than a third — of that average.

As the Economic Policy Institute and the Center on Budget pointed out in their study: "Each year that Congress fails to raise the wage floor, its purchasing power erodes. The fact that the minimum wage has remained the same for nearly nine years means that its real value has declined considerably over that period. As inflation has accelerated recently due to higher energy costs, the real value of the minimum wage has fallen faster."

There is no justification — none — for condemning the nation's lowest-paid workers to this continuing slide into ever deeper economic distress. "No one who works for a living should have to live in poverty," said Senator Kennedy.

It's very telling that in the most prosperous nation in the world, that kind of comment actually sounds radical. We have a very long way to go.

(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)

--Tom Hayes


Blogger Internet Esquire said...

How would you respond to the position that expanding the Earned Income Tax Credit would be a much more effective and equitable way of helping the working poor than raising the minimum wage?

4:33 PM  
Blogger Colorado Coalition for Human Rights said...

I don't know enough about the Earned Income Tax Credit to argue for or against it, but I have asked one of this blogs contributors (JB) to respond to your question, as he knows more about economic issues than I do. While I look into this issue a little more, you are welcome to submit a post or suggestions of where to find more information for readers to see. Thanks for the comment.

--Tom Hayes

10:57 PM  
Anonymous Anonymous said...

I believe the Economic Policy Institute presents a pretty convincing argument as to why we need BOTH the Earned Income Tax Credit and the minimum wage to address poverty in America:

The minimum wage and Earned Income Tax Credit: Partners in making work pay
The Earned Income Tax Credit (EITC), one of the most substantial and popular federal anti-poverty programs, is an important piece of the ongoing strategy to make work pay, but its effectiveness in raising the incomes of the working poor above the poverty line depends in part on regular increases in the minimum wage.

One reason for the EITC’s popularity is that it is based on family income and is therefore well targeted to poor families. In addition, EITC encourages work because the wage subsidy increases with earnings until it reaches the maximum ($4,204 for a family with two children in 2002). The amount of the maximum credit is adjusted for inflation each year.

Consider a single mother of two children working 40 hours per week year-round at the minimum wage of $5.15. In 1997, this worker would have earned $9,893 after Social Security and Medicare taxes—only 77% of the poverty line. But, as shown in the figure below, because this worker would have been eligible for the maximum EITC of $3,656, her family income would have surpassed the poverty threshold (which is adjusted annually for inflation).

"The poverty threshold rises each year to reflect the rising cost of living. The federal minimum wage, however, does not. As a result, a single mother with two kids working the same number of hours each year at the minimum wage would be further away from the poverty line each year the minimum wage is not increased. By 2003, her earnings would equal 67% of the poverty line and the EITC would no longer push her income above the poverty line (as illustrated by the second bar in the figure). To make matters worse, as the purchasing power of the minimum wage falls each year that the minimum wage does not rise with inflation, the amount of EITC for which this family is eligible will also start to fall."

11:29 PM  

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(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)