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Deflating Minimum Wage Costs Workers Billions of Dollars

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Co-authored by Jeff Musto

A single minimum wage worker who has worked continually for the federal minimum wage since 1968 has been deprived of over a quarter million dollars in wages over the course of those 45 years. $293,735.12 to be exact. A new white paper released last week, Lost Wages, revealed this fact.

The reason for these lost wages is simple: The minimum wage is not tied to inflation, which lowers its purchasing power every year. And far too many Congresses and presidents have failed to act to ensure that it increased with inflation since 1968. Today, the federal minimum wage stands at $7.25 per hour. Had it simply kept pace with inflation since 1968, it would be about $10.70 per hour, which would help better pay for necessities of life for workers and their children.

At nearly $300,000 in lost wages since 1968, the average annual wages lost in that time is over $6,500. To make up the total amount of lost wages in the past 45 years, a low-wage worker would need to work for over 13 years even at a $10.50 minimum wage. Lost Wages conservatively estimated that in 2012, with 3.6 million minimum wage workers, the total kept from these hardworking low-wage Americans last year alone was over $15.3 billion. This is cruel and unjust.

So where did these billions of lost wages go? In the 45 years that the minimum wage has lost nearly one third of its value, the compensation of large corporations' CEOs has shot up through the roof, increasing over 900 percent. Large corporations and their executives have been benefiting from and taking advantage of cheap labor and have achieved windfall profits in the past few decades.

The top 100 highest compensated CEOs all made over $15 million last year. That equates to $7,000 per hour. Walmart's CEO, Mike Duke -- one of the largest employers of low-wage workers in this country -- made $11,000 per hour, bringing home $23 million in 2012. And the highest compensated CEO, John Hammergren of McKesson Corp., persuaded his rubber-stamp board of directors to give him $131 million, or $63,000 per hour -- $10,000 more in a single hour than the median annualhousehold income in the U.S.

Meanwhile, the annual income of a minimum wage worker working full time is $15,080. This doesn't come close to the poverty line for a family of three. Minimum and low-wage workers are left struggling with ever deeper debts just to afford basic necessities such as food, housing, transportation and healthcare. Individuals and families are working more -- and paying more -- for less, often without health insurance or paid sick leave.

Seventy-five years ago this month, on June 25, 1938, President Franklin Delano Roosevelt signed the Fair Labor Standards Act into law, establishing, among other things, the first lasting federal minimum wage in the United States. Now is as good a time as ever to reflect on whether, in the following decades, the federal minimum wage law has lived up to President Roosevelt's vision.

Roosevelt wanted to provide "all our able-bodied working men and women a fair day's pay for a fair day's work," and pursued legislation to "end starvation wages and intolerable hours." Subsequent Congresses and presidents have left these admirable goals to languish at the expense of millions of hardworking Americans. Every year that Congress and the president fail to raise the minimum wage (as they raise their own salaries), its value declines further due to inflation. They are effectively telling low-wage workers that their time and hard work aren't worth as much as they were the year before.

History has shown that large multinational corporations who care solely about ever-greater profits won't take care of their workers on their own. They would pay slave-wages if they could. FDR knew that large corporations would resist these changes and warned Congress and the public not to be frightened by their fear-mongering, exclaiming, "Do not let any calamity-howling executive with an income of $1,000 a day, ...tell you...that a wage of $11 a week is going to have a disastrous effect on all American industry."

So, much like FDR did 75 years ago, Congress needs to stand up for the millions of low-wage workers everywhere and catch back up to 1968's federal minimum wage. These detached legislators need pressure from people in their state and districts.

For the public, the polling data are clear -- 70 percent or more of this country supports increasing an inflation-adjusted minimum wage. But because many in Congress are reliant on the campaign contributions from the corporate suites, they won't act unless they fear for their jobs and hear from the grassroots -- the voters. They need to feel the heat.

It is time for low-wage workers everywhere, and others who care about how we, as a country, treat the downtrodden in society to stand up and say enough is enough. Go to your member of Congress and demand a higher minimum wage. If you are an elderly low-wage worker, go lay a bill on their desk for the nearly $300,000 in wages you've lost over 45 years due to Congress' inaction and give them a copy of the Lost Wages white paper.

Americans in every district should demand a public meeting during the August recess to discuss the minimum wage with your member of Congress. To obtain a copy of a sample "summons" you can circulate and send to your representative, go to TimeForARaise.org.

( Autographed copies of my new book Told You So: The Big Book of Weekly Columns areavailable from Politics and Prose, an independent book store in Washington D.C.)

Jeff Musto is a Public Interest Advocate and Researcher at the Center for Study of Responsive Law.