The Meaning of Increasing the Minimum Wage

Today, more than two million American workers will get a raise.

The reason for the raise is that last year the minimum wage was increased from $5.15 to $7.25 in three steps over three years. The second step, from $5.85 to $6.55, goes into effect today. A year from now, the minimum wage will be increased again, to $7.25.

The increased minimum wage means a pay raise for those who need it most: the working poor, disproportionately women and minorities. Just as important, it will also put money into local economies, especially timely at the start of a recession.

This small bit of good news is easily lost in the avalanche of reports of an economy falling into recession, unemployment climbing, the bursting of the housing bubble, record levels of housing foreclosures, rising oil prices, and inequality at levels not seen since the robber barons.

The long overdue increase in the minimum wage -- before 2007 the last increase was 10 years earlier -- does not obscure the fact that for decades workers have not been sharing in the growth of the American economy. Misguided policies have produced an unbalanced economy. Productivity has increased by 67 percent since 1980 but wages have been flat. CEOs get, on average, 364 times what workers earn. The current economic expansion will be the first one since World War II in which average family incomes failed to recover the losses of the previous recession. If this is how workers experience the "good times" what will happen when the recession really hits?

It is no wonder that a new Time Magazine/Rockefeller poll shows that 85% of the American people believe that the country is on the wrong track. Among blacks and Latinos the dissatisfaction levels are a staggering 96% and 88% respectively.

In this context, an increase in wages for the poorest workers takes on special significance -- it is a very small first step of what should be a different approach to economic policy.

While we celebrate the increase, it is important to keep in mind that the minimum wage is still too low. Even after the increase next year to $7.25 the inflation adjusted value of the minimum wage will be well below what it was throughout the 1950s, 1960s and 1970s.

Most Americans, liberals and conservatives, believe that if you work, you and your family should not live in poverty. Yet even after the increase, workers who earn the minimum wage and work full-time year-around will still not earn enough to lift a family of three out of poverty. And almost everyone agrees that the official definition of poverty falls well short of what most Americans would consider a decent living.

This does not mean the increase in the minimum wage is not important -- just the opposite. It is so essential that we need more policies to compliment it -- that increase the living standards of workers. We can do that by restoring the freedom of workers to organize unions and bargain collectively (that means passing the Employee Free Choice Act ), by making a commitment to full employment, by enacting a trade policy that puts the interests of workers first, and by increasing the minimum wage even more - to one half the average wage and then indexing it. Today, that would mean a minimum wage of $9.00 an hour. All of these things would allow workers to share in the prosperity that they help create.

The bubbles have burst. Our economy is sinking. Americans are looking for a new approach. The increase in the minimum wage points the way forward. We need to create growth from the bottom up.

Comments

[RightWingMarine]

why not raise the minimum wage to $50/hour? Why not $100?

[23000Days]

As behind the times as western NC is, even here I would be ashamed to ask someone to work for $6.55hr, and I would find no takers. So far, the increases are only baby-steps in the right direction.

[cramey]

Thanks for a great post, Bruce. This minimum wage increase is long overdue, especially considering the current state of the economy.

[gretchenart]

By increasing the minimum wage for all States, apparently they lowered it for states like California, since Arnold is now proposing lowering state worker's compensation from that state's higher minimum wage to the new minimum wage level, plunging large numbers of state employees potentially into poverty!

[UnbiasView]

The min wage does nothing but put a strain on small business and create inflation.

[Cathexis]

Not true, "Unbias"View, as has been repeatedly demonstrated, over the years.

For one thing, you view "profit" as a "constant," and you also conveniently focus merely on small business. The average small business can accommodate. Those few who can't ... well, that is just your vainted Market Forces at work.

[Pdubya]

"Just as important, it will also put money into local economies, especially timely at the start of a recession"

yes, it will PUT money into the economy, devaluing the dollar even more. man, some folks just don't get it. we're putting novacaine on a festering puss wound. you can't feel it, but it continues to rot.

http://www.ronpaullibrary.org/document.php?id=878

[jvarga]

So the best way to fix the economy is fire everyone so no money is being introduced into the economy? Businesses aren't creating money, they're recirculating money. It's not the same as the government printing an extra $600 per person and mailing it out.