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Minimum Wage Increases Today—10 Million See More Pay |
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Today, nearly 10 million workers in 31 states get a raise when the federal minimum wage increases by 70 cents to $7.25 an hour.
AFL-CIO President John Sweeney says the raise will act as a significant economic stimulus “at a moment when it is critically needed—one that will lift all boats so Americans and businesses can stay afloat and ride out this economic storm.”
The raise will put an extra $2,000 a year into the paychecks of a full-time minimum wage worker. According to the Economic Policy Institute (EPI), that increase will generate $5.5 billion in consumer spending over the next year—providing a boost to the economy without any increase in government spending. This is money that will be spent, Sweeney says, on basic necessities such as groceries, electricity, rent and transportation.
This is not money that will be saved for a rainy day or spent on lavish vacations overseas. Now, that’s not a bad return on a 70-cent-an hour investment. Indeed, a 2008 study by the Federal Reserve Bank of Chicago confirmed that minimum wage increases boost consumer spending substantially more than tax cuts do.
The pay hike is the last of the three-step minimum wage increase Congress passed in 2007, which was the first such increase since 1997. Congressional Republicans and the Bush administration had blocked a raise for the nation’s lowest-paid workers for a decade.
Labor Secretary Hilda Solis says the increase is an “important step in the right direction” to improve the lives of working families.
This well-deserved increase will help workers better provide for their families in the face of today’s economic challenges. I am especially pleased that the change will benefit working women, who make up two-thirds of minimum wage earners.
Corporate lobbyists long have argued that raising the minimum wage will result in job losses. But repeated studies show that’s not true. In 2006, more than 650 economists, including five Nobel laureates and six past presidents of the American Economic Association, found that raising the minimum wage:
significantly improves the lives of low-income workers and their families, without the adverse effects that critics have claimed.
The Center for Economic and Policy Research (CEPR) estimates that some 10 million workers—those at the minimum wage or slightly above it—will benefit from the increase. Workers in 19 states and the District of Columbia, where minimum wage rates are already at $7.25 an hour or higher, will not be affected.
According to EPI’s Minimum Wage Issue Guide:
- The average minimum wage worker brings home more than half (54 percent) of his or her family’s weekly earnings.
- 76 percent of workers whose wages will be raised by the minimum wage increase are adults.
- 63 percent of workers who will benefit from an increase to $7.25 are women.
- A disproportionate share of minorities will benefit from a minimum wage increase. African Americans represent 11 percent of the total workforce, but are 18 percent of workers affected by an increase. Similarly, 14 percent of the total workforce is Hispanic, but Hispanics are 19 percent of workers affected by an increase
But even with the raise, the purchasing power of the minimum wage remains below its value during the 1960s and 1970s, according to EPI. After adjusting for inflation, the value of the new minimum wage is 17 percent lower than in the peak value year of 1968.
Because of the declining value of the minimum wage compared to other workers’ wages, today the minimum wage is 39 percent of the average hourly wage of production and non-supervisory workers, well below the ratio of the 1950s, 1960s and 1970s.
EPI also notes that minimum wage earners today are more educated, which is a good measure of productivity and “higher productivity—the capacity to produce more per hour worked—should allow these workers to earn higher wages.”
But the same corporate lobbyists that swarm Capitol Hill whenever minimum wage legislation is on the radar don’t speak for all business owners.
Margot Dorfman CEO of the U.S. Women’s Chamber of Commerce (USWCC) CEO says:
Now, more than ever, it’s imperative that employees are paid a fair minimum wage. It is an unsustainable and dangerous downward spiral to push American workers into poverty and expect taxpayers to pick up the bill for the consequences.
The coalition Business for a Fair Minimum Wage says a higher minimum wage is a “sound investment in the future of our communities.”
Higher wages benefit business by increasing consumer purchasing power, reducing costly employee turnover, raising productivity, and improving product quality, customer satisfaction and company reputation.
Says Sweeney:
In today’s economy, nearly everyone deserves a break. As we bail out banks and corporate CEOs to the tune of billions of dollars, it’s time for those at the bottom of the pay scale to get a fair shake. The minimum wage is still far below what it takes for families to survive, but today’s increase moves us closer to a healthier economy that works for everyone.
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HEADLINE: 2007 MINIMUM WAGE UNDER PERFORMED MALTHUS!
LBJ’s 1968 minimum wage was $10/hr ($1.60 adjusted*). Since then US population has grown 50%; meaning — if Malthus had not been tripped up by industrialization — that the minimum wage should have dropped only 33%. But by 2007 it had dropped almost 50%! *http://www.minneapolisfed.org/ (I should throw in that the 2007 fed min under performed F.D.R.’s 1939 min, $4.75 w/no taxes (.30 adjusted).)
Malthus was caught off guard by industrialization. I wonder what caught the US minimum wage off guard?
PS. That we have trouble coming up with the 15% of GDP for our health care even while we have 135% of other modern economies’ per capita should point our suspicions in the direction of massive power imbalance in our labor market.
A minimum needs (poverty) line for a family of four based on $5/day per person for food, $12,000 for health care, no entertainment, etc., etc., is about $45,000 for a family of three (not $20,000, based solely on three times the price of an emergency diet: the Micky Mouse federal line) — which is about the 37 percentile line on the Census charts if none had paid health insurance — make that 30 percentile if you subtract those on the top end with insurance (not on the bottom with Medicaid). About double LBJ’s poverty rate…
…DOUBLE THE AVERAGE INCOME LATER!
Check out this “http” for a study showing that raising the minimum has no effect on employment if kept to half the median wage. Of course in the US the median wage may be way under priced itself growing only 20% since 1968 as average income grew 100%. http://worthwhile.typepad.com/worthwhile_canadian_initi/2006/11/when_the_minimu.html
PPS: none of our economic “philosophers” (can you call them “scientists” if they miss what is so obvious) seem to recognize that labor can make more money selling fewer hamburgers for a higher price, just like business.
Double the minimum wage from (yesterday’s) $6.55 (was $1.45 short of Eisenhower’s 1956 min!) to $13.00 and a $6.00 fast food meal goes to $7.00 — and 40% of America gets a raise to a paltry $500/wk; the fast food buying 40%.
My neighborhood McDonalds enjoyed a noticeable up tick in business after the Illinois minimum wage jumped pretty quickly from $5.15 to $8.00 — noticeably all in the imported labor end. Minimum wage earners finally able to afford the product of their own labor? My neighborhood owner’s closed closed both their stores — one at a time — for 6 months to beautifully rebuild each for $1 million dollars apiece — right in the teeth of an almost 50% minimum wage jump — which apparently did not phase them at all.
My local Ronald’s has even begun to attract a few (very few) American born workers.
While raising minumum wage is good…watch out for another wave of lay-offs, because companies do not want to increase wages since it will cut into their profit line and unless consumer’s start spending monies on “wanted” items not “needed” things the economy will continue on the decline.
Obama talked about raising the minimum wage to $9+ an hour–when is that going to happen? the minimum wage needs to be a “living wage”–it should be raised to what the average national wage is–and subject to COLA every january 1.
[...] Original post by USA: Minimum Wage Increases Today—10 Million See More Pay [...]
Recently, in Chile, the Santiago Sanitation Workers went out for 3 MONTHS when the government balked at their request for a 10% minimum wage hike. After 3 months of garbage on the corners of the capital city, the minimum wage was raised 10%.
We should consider the same tactic here in the US.
Obama wanted to raise the minimum wage to over $9? Why not raise it to $15 or even $20 an hour? Then at least everyone working would be above the poverty line!
J.O.B. (just over broke!) The solution isn’t raising minimum wage jobs but creating more manufacturing jobs that are double that rate. You used to start a job at nineteen and work there for life. The starting rate was rather low, but it worked out because you were young and single and didn’t have the responsibilities of a family.
Today, American factories are being shuttered so rapidly, millions are being thrown out of work. Most union starting rates should be doubled because you’ve got a man or woman thirty five or forty five starting instead of a teen age kid. Eight, nine and ten dollar starting rates are too low to support families.
The UAW in Fenton has the right idea. We need more rallies to be more visible and vocal. We need the work in America. We should boycott foreign made trucks like Ram and Silverado until they return to the U.S. then we won’t have to worry about making a partial living on the minimum wage. I have always been partial to Chevrolet but my next truck will be a Ford made in Kansas City. If the Fenton, Mo. plant reopens I’d buy a Ram truck. The Union boycott works, bring it back and the work with it!
I agree with Zebra that we need to create more jobs! But we also have to remain competetive with other countries and if our wages are higher than the global market can sustain, this will mean less jobs for us.
Also, we have (I think) the highest corporate tax rate in the world, which should come down some. Then put that money into workers’ pockets instead of Federal government fat cats and their endless, centralized, ever growing and ineffecient programs!
I want to thank the pro-union Congressmen and Senators who supported raising the minimum wage to $7.25 an hour and I pray it will be increased to $10 an hour in the not-so-distant future. As unionists, we work to raise all the boats, not just our own. I will always be grateful to Senator Ted Kennedy. He is the best friend labor ever had.