Americans Need a Raise!
Photograph by Nathaniel St. Clair
Workers are stuck in a low wage, high cost, rut. We’ve been here before. During the Great Depression labor frequently was paid too little. Franklin Delano Roosevelt responded by establishing a wage floor in 1938 by passing the minimum wage. Since being introduced it was then raised 22 times up to 2009, on average roughly every 3 years. To punctuate this point, let’s list those years when it was increased to keep up with labor productivity and household costs for American workers: 1939, 1945, 1950, 1956, 1961, 1963, 1967, 1968,1974, 1975, 1976, 1978, 1979, 1980, 1981, 1990, 1991, 1996, 1997, 2007, 2008, 2009.
And then history stopped. Since 2009 the minimum wage has been locked down. That’s 16 years, soon to be 17. Just how low is today’s minimum wage? Adjusting for inflation, today’s minimum wage is slightly lower than it was in 1945. That’s right. Our minimum wage today is lower than it was 80 years back! Moreover, our labor productivity is over 3 times greater today than in 1945. And 50 years ago in 1975, inflation adjusted, the US minimum wage as $13.09. Meanwhile, today it sits at a paltry $7.25 and has lost a full third of its inflation-adjusted value since being raised to that level 16 years back.
Regardless of numbers, some still defend America’s current abandoning of minimum wage increases. Arguments generally take these 7 forms:
1) “Nearly everyone earns more than the minimum wage anyway, why raise it?” When the minimum wage “rung” sits so low, it works to keep wages (“rungs” on the bottom half of the ladder) down. Increasing minimum wages pushes wages up through the wage ladder as many expect to earn more than the minimum wage. In short, it increases the “expected minimum” several rungs up the wage ladder.
2) “If you raise minimum wages too much, the wage ladder will be too high to get on.” To mix metaphors, there is a Goldilocks temperature that needs to be just right for maximum benefit to labor and the economy. But presently, as seen from history, the “porridge” (wage) is ice cold. We are from the wage being too “hot” and by historical comparisons with past minimum wage levels, we see it needs to be significantly increased to get the temperature “just right.”
3) “The minimum wage was never meant to be a living wage.” People are entitled to their opinion, but on the score of facts, the minimum wages’ creator, FDR, was emphatic it was to be a living wage. FDR declared, “By living wages, I mean more than a bare subsistence level — I mean the wages of a decent living.” And further, “It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country.”
4) A variation of #3 is, “minimum wage jobs were meant for teenagers.” In fact, they are not. Several categories of workers are exempt from minimum wages, among them, often teens working summers in tourism, etc. In the past we had a baby boom, this indeed created many “boomers” that quickly cycled through low-paid jobs flipping burgers, etc., as teens. That demographic boom ended long ago. Just as factory jobs before 1930’s unionization were “low-skilled and badly paid,” so-called “low-skilled” service jobs should provide a living wage now. Moreover, standing over a hot grill splashing scalding grease for several hours is anything but easy or pleasant regardless.
5) “Let the market sort it out.” Markets confer many benefits, but they are not magic cures. In the 19th century we let markets sort wages. This led to ruinous cycles of economic booms and busts. For more than a century, the Federal Reserve has increased or decreased interest rates in response to economies getting too hot or cool. The downside is, the economy is never allowed expansions long enough to drive wages up to levels matching increases in productivity, thus the need for minimum wage increases to do the job.
6) “Big Macs will double in price.” Labor comprises less than 20% of fast-food business costs. Thus, modest wage increases won’t deliver significant price spikes.
7) “Minimum wage increases lead to technology replacing jobs.” True, but also good. Modest cost pressures are good when the “temperature is just right.” They lead business to improve organization and/or technology that raises productivity and lowers costs. Productivity increases make us more prosperous. They reduce sloth in enterprises while increasing output. But here’s the catch: to make this work we need minimum wage increases and regulation on number of hours worked so that the wealthy don’t hoard all the productivity gains for themselves, such as they mostly have done the past half century.
America needs a raise. An inflation adjusted minimum wage slightly below 1945 levels is a disgrace. A minimum wage that is less than half its inflation-adjusted 1968 level is scandalous. Stuck since 2009 and having lost a third of its value, the minimum wage is bad for American workers and productivity. With Congressional mid-term elections less than a year out, the Democrats should run on affordability issues. There’s no better place to start that with the long past due need to dramatically raise our minimum wage.
This column first ran in the Milwaukee Journal-Sentinel.
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