Your thoughts on the new federal minimum wage?
The minimum wage went up from $6.55 to $7.25 per hour in July 2009 (source: U.S. Department of Labor). The measure affects 29 states while other states already have an equal or superior minimum wage (note that employers are required to pay whichever is the highest: Federal or State). This new federal minimum wage results in an income of $1,160 a month or close to $14,000 a year. Poverty guidelines established for 2009 indicate that for a family of two, $14,750 or less — or for a family of four, $22,050 or less — are indicators of poverty according to HHS (Health and Human Services). It’s even tougher for those in California, where the minimum budget and cost of living for a family of four is $77,069.
The minimum wage measure is supposed to combat poverty but we clearly see through the above numbers that our stalwart politicians in Congress have never and will never have to live on minimum wages. One cannot feed a family of four with this miserable salary so it stands to reason that the only people who might appreciate this latest wage increase are single persons such as students or low-skilled workers (although these days, it seems that more people are willing to work for minimum wage).
Federal Minimum Wage Through History
Let’s remind ourselves of what the federal minimum wage numbers have been throughout history. Here’s a table showing the actual minimum wage between 1939 up to the current year:
| Year | Wage | Year | Wage | |
|---|---|---|---|---|
| 1939 | 30 cents | 1976 | $2.20 / $2.30 | |
| 1945 | 40 cents | 1977 | $2.30 | |
| 1950 | 75 cents | 1978 | $2.65 | |
| 1956 | $1.00 | 1979 | $2.90 | |
| 1965 | $1.25 | 1980 | $3.10 | |
| 1967 | $1.00 / $1.40 | 1981 | $3.35 | |
| 1968 | $1.15 / $1.60 | 1990 | $3.80 | |
| 1969 | $1.30 | 1991 | $4.25 | |
| 1970 | $1.45 | 1996 | $4.75 | |
| 1971 | $1.60 | 1997 | $5.15 | |
| 1974 | $1.90 / $2.00 | 2007 | $5.85 | |
| 1975 | $2.00 | 2008 | $6.55 |
| Year | Wage |
|---|---|
| 2009 – Current | $7.25 |
There are two numbers for some years as these figures applied to different types of employees and work categories.
And here’s a chart showing the real value of the minimum wage (inflation adjusted) from 1938 and 2009 (source: Economic Policy Institute):
Why The Minimum Wage Is A Problem
So what do you think about an increase in the minimum wage? The only important caveat in this kind of political maneuver (done obviously to collect sympathy votes) is that the raise in minimum wages may have just the opposite effect of what Congress intended. There’s actually recent research that shows that higher minimum wages reduce teenage education levels and decrease workers’ long-term earnings.
Studies also show that the minimum wage does not reduce poverty. Granted, the Heritage Foundation is a very conservative think tank that regularly slams welfare proposals as too costly and ineffective. But they have a somewhat valid argument when they claim that high school students drop out at a higher rate if the pay is more attractive; they prefer paid work to study, believing erroneously of course that they’ll be able to survive with such low wages.
Why Not Implement a Real Minimum Wage?
For the sake of argument, let’s take a neutral position in this matter and base our opinion strictly on facts; as mentioned above, one single individual just might make it with the established wage of $7.25 per hour, although the task would be daunting. He or she would need a very cheap room somewhere with abundant public transportation.
But what about families? Of course, a family simply could not survive on such an amount. So why don’t our enlightened politicians offer a “real” (feasible) minimum wage of, let’s say, $25,000 a year? The reason is simple: businesses would not hire heads of households for such a price; it’s too onerous. Instead, they would hire illegal aliens, reduce the number of workers or simply outsource the job.
Main Street vs. Capitol Street
What do you think about retooling the minimum wage policies we already have? Well, it would certainly ignite a big political debate but here are a few ideas: as far as minimum wage workers, wouldn’t it be better to ask the government to differentiate between single workers under the age of 20 and the rest of the population? To help out families with children, how about making it easier for other family members to financially contribute to the household?
Perhaps we could lower the salary of school age workers to make it easier for them to be hired in temporary summer jobs without giving them the illusion of permanency. We could also lower the minimum age to 14, so as to help thousands of poor families who need the additional income. As it stands now, teens under 16 have serious restrictions regarding the hours and places they can work, while teens 16 or older can work as much as they want. For those worrying about their financial situation, here are some suggestions on what low-income earners can do to get off minimum wage.
Are We Eliminating More Jobs?
Many believe that the increase in minimum wage is not the social panacea that many people envision. It can really hurt the job market, especially now that the economy is still reeling from its dismal performance. I believe that our politicians have chosen the wrong measure and the wrong time to increase the minimum wage. Had it happened among general prosperity, few voices would have been heard against the measure. As it stands now, the raise will actually eliminate jobs instead of creating them and provoke a general outcry among the business world; and we can’t really afford that now, can we?
Copyright © 2009 The Digerati Life. All Rights Reserved.
{ 25 comments… read them below or add one }
The minimum wage issue is a thorny one, especially if you see what other people elsewhere in our world consider as a minimum living wage. In my opinion, a minimum living wage is an amount that should allow anyone the wherewithal to afford a home, food, medical care and the other necessities of life.
Our capitalist system is very cruel to the entry level creatures that are the worker bees, and I feel there has to be a certain amount of socialism embedded into the fabric of our society to take care of all of us.
This makes me think that becoming an entrepreneur could be the best choice. 🙂
Raising the minimum wage causes businesses to pay their employees more, sometimes, including those who aren’t on minimum wage. Businesses can’t print money like the government so if they want to maintain their profits at the same level, they either have to lay off people or raise their prices. They could decide to take a profit loss, but I don’t see most businesses doing that. I know I certainly wouldn’t want to. I just don’t see how raising the minimum wage ever helps since it leads to less jobs or higher costs for all goods because businesses don’t want to take the profit hit.
I have to agree with the original post, that raising the rate has been counterproductive. I’m seeing retail establishments, which typically employ min wage workers, shorten their hours, which means people are working less. We have to remember that when the min wage goes up, so do related payroll costs. Employers are in a real squeeze, and can’t pay more than they can pay no matter what the min rate may be. Either they’ll cut hours or they’ll cut jobs.
I wonder what a temporary elimination of the min wage might do for the economy? Would it cause a surge in hiring? If it sounds unfair, people just won’t work for the amounts offered.
What about employees who are marginally productive? They’re not really bad enough to fire, but they don’t really make an effort. How does it benefit society – or even those workers – to provide them a living wage when they aren’t working particularly hard? If you set the minimum too high, do you reduce the incentive for people to try to excel and move up the chain a bit?
Only about 2-3% of the nation works for the federal minimum wage. Half of those workers are under 25 years of age. Over half of the jobs are part time jobs. So changing minimum wage is much less of a big deal than some people think. The total net increase in wages is somewhere around $1.5-$2B per year. Roughly 0.1% of corporate profits. Or less than Microsoft clears in 2 months.
Minimum wage should be indexed to inflation. Then we’d see small gradual increases that would be easy to swallow rather than a decade of no growth then a large jump.
Great discussion of this issue. The politics of raising the minimum wage never changes though, and neither do the arguments against it. With the current nay-sayer minority, I wouldn’t be surprised if raising the minimum wage turns into an attack tactic against the Dems and against Obama. Sure raising the minimum effects change in the bottom line of many small businesses, but it’s likewise true that a very small percentage of people living in the US make the minimum.
@Goran Web Design: I agree with what you said, that minimum living wage is something that has to be agreed on. Workers must be well-taken care of in order to become more productive.
It is amazing how slowly minimum-wage is at catching up with inflation over the years. I suppose part of this has to do with the inflation that a sharp rise in wages would cause, but it makes living no less difficult for those trying to raise a family on minimum wage.
With wages as low as this, a solid health care reform package needs to be implemented! It’s not health care socialism as the right would have you believe. It’s about taking care of all of America’s needs, not just the social elite.
Lowering the minimum wage would mean more jobs for more people which is better than no jobs at unrealistic rates. Wage controls ( and price controls ) have never worked and have been tried for 40 centuries. Is the human mind stuck on trying something that has never worked or is it just too incomprehensible that supply and demand for labor works in spite of the wishes of politicians to have an un-keepable promise to offer to gullible voters?
The federal minimum wage in 1980 was $3.10 per hour. It is now $7.25 an hour. That same $7.25 today has the spending power that $2.58 had back in 1980. The inflation rate over that period was about 3.51%. Minimum wage workers have actually lost ground. In order for a minimum wage earner to have the same spending power that he had 30 years ago, today he would need to earn closer to $8.73 an hour. Yeah, good luck with that.
As big an SOB as Henry Ford was, he knew to pay his workers more because he wanted them to buy his cars. Our economy has grown more fragile as we’ve believed in “trickle down” economics, or voodoo economics as G Bush called it back in ’80. Since the rise of the Reagan stupidity 30 years ago the already-rich have gotten unbelievably richer, and it is now shown to be a fact that the money does NOT trickle down.
So, for 95%+ of the population who purchase the bulk of everyday goods and services, their incomes have stagnated along with minimum wages, and that’s far more serious. That means in order to make purchases (which is 70% of GDP) it’s been done on credit, or it must be cheap goods manufactured in China, or both. Rises in family income are tied to more hours worked and to more family members working. All this while productivity has skyrocketed. So, the tea-party folks complain about taxes when the real problem is wages, income, taxes and wealth distribution. It’s not taxation without representation, it’s wages and hours being set without representation since the decline of the unions. If anybody believes that haggling about the minimum wage is of any actual importance re: the true issues facing this capitalist economy, you are mistaken. And that’s meant as no disrespect to minimum wage earners, either.
This is nonsense. Has anyone ever bothered to look at the raw data on this? It’s very simple to follow. If you look at the month in which a higher minimum wage rate went into affect, and looked at the unemployment rate you get a base line reading. Look at where unemployment is one year later to the month, after the effects of the increase has had time to filter through the economy, and you see the result of the increase.
The fact of the matter is that two out of three times that minimum wage has been increased, unemployment has gone DOWN. Why does it go down? But the people who are buying goods and services have MORE MONEY IN THEIR POCKETS.
Minimum wage is a pain in the arse. It should be raised because i can’t support my kid who i don’t even live with, he lives with my baby’s momma. f**k da police.
Your minimum wage numbers are wrong. I haven’t bothered to check Wikipedia, but I know for a fact that at least by sometime in 1968 minimum wage was set at $1.60 per hour. I know that because I was being paid minimum wage at the time and it was $1.60.
I also know for a fact that the government inflation estimates are clearly understated, an intentional practice which began during the Reagan administration, was intentionally kept in place during the Clinton administration, and has been maintained as such ever since. My personal experience with house prices, new vehicle prices and food staples reinforces my opinion concerning the changes in inflation estimates. The U.S. government would have us believe that inflation from 1968 to 2010 has been about 535%, meaning that what was $1 in 1968 should be about $6.35 today (535% inflation plus the original cost). Comparable (and the definition of that word is what has been ‘adjusted’ to decrease inflation estimates) new vehicles today cost about 9 to 10 times more than they did in 1965. Comparable housing costs about 9 to 10 times as much today. Some items (primarily foodstuffs) do cost only a bit more than the statistics would have us believe, but others are simply far more expensive than statistics indicate. In general, most of the items which the government uses to determine that inflation since 1968 has been only about 535% are either agricultural (driven by corporate farming and far-less-than-minimum-wage migrant labor) or manufactured items imported from third world economies, the purchase of which eliminates American jobs and impoverishes the nation as a whole.
In short, a current minimum wage which would be in the same ball park as what was paid in the late 1960s would be a bit over $10 per hour even if we believe that the obviously understated government inflation statistics are correct. More likely inflation estimates since that time would require a minimum wage in 2010 to be at least $12.50 per hour. That would enable one person to live in a cheap one-bedroom apartment in an inexpensive part of this country, pay the utility costs for natural gas/electric/telephone/basic cable, drive a good but old vehicle, and clothe himself while avoiding starvation.
Of course, that $12.50 per hour would also be reduced significantly by payroll deductions for retirement and medical care (whether or not those deductions were used for a government run pension system and health care system, some variant of both of those – public or private – are absolute necessities unless you believe that your senior citizens should be sleeping in cardboard boxes and sweeping your driveways to clear the path for your Mercedes and BMW while they die of any number of maladies which could have otherwise been successfully treated).
I should also note that the $1.60 per hour which I earned in 1968 (luckily I was earning over $5 per hour by 1970) was not enough to live on in a 60 year old apartment building in a rundown area of the city of St. Louis in which I was renting a studio unit of less than 400 square feet. I ate a lot of beans and rice but I had a job; and eventually – building upon that experience – got a far better one and later moved to Silicon Valley where life was good. Now I’m back in St. Louis where life is cheap, but not everyone gets lucky…my stock options were worth nothing.
Just one more thing. A job does not, and should not, successfully convey the impression to the jobholder that he/she is the new master of the universe. However, when I was being paid minimum wage in the 60s, it wasn’t enough to enable me to buy meat or eggs. I bought mostly canned food (except for the rice) because that’s all I could afford. There was no possible way I could have saved any money at all. I was lucky to be able to get to work every day. I couldn’t buy clothes. I had to beg family members for some necessities. One would think that although the mere fact of having a job shouldn’t be a guarantee of wealth, health and happiness, it should at least provide something more than an exceptionally poor diet and a daily fervent hope that nothing bad would happen to the cheap old car or to the necessary clothing, since there was no possibility of replacement on the salary being paid.
Okay, I’m sorry but there is just one more of those one-more-things.
Where in the SF Bay Area is someone able to live on the $1257 per month (not $1160, there are 4 1/3 weeks per month) gross salary, before deductions, which a minimum wage of $7.25 provides? I am very familiar with housing prices there, having lived there for over 30 years, and I just can’t imagine how that could be done.
It can’t even be done here in the St. Louis area unless you share an especially cheap apartment and just don’t spend any money on anything but cheap food and transportation to and from work. How – or where – can it be done in the Bay Area without having 6 people sleeping in a cheap two bedroom unit?
@R. C.
Maybe this post will give you a bit more idea about Bay Area cost of living. The answer to your question: “Where in the SF Bay Area is someone able to live on $1,257 per month?” … is that you can’t. Unless you get paid at least $80,000 a year, you’d have to have multiple jobs or have a multiple income family if you live around here. And you are right. Those who can’t work it out with multiple incomes end up sharing a home with other families in a cheap two to three bedroom unit. I know, because I know families who live like this.
IMO, if you can’t swing it with a high salary or multiple income channels in the Bay Area, think hard about moving to a more affordable place. I’m already gearing myself (and my family) up for that possibility.
I started working in ’71 at a local burger joint then moved on to a manufacturing job both were at or just slightly above minimum wage. I was still at home so it wasn’t all that bad. However, about 18 months into that second job I finally said to myself “There has got to be something better than this.” Thus I went back to school to get a skill set. Those days in school were the pits financially but I managed to muddle through. I’ve never looked back and KNOW it was the best thing I could have done. The only other option would have been the military. And at that time would have probably been a one way ticket to Nam. Sometimes you have to hit bottom to motivate yourself for a better life.
Henry ford was a sob? Yes, mass producing the car and making it accessible to millions of people is a horrible thing to do isn’t it? If productivity really has skyrocketed then why haven’t the price of goods fallen to accommodate the increase in supply? You really are just pulling this out of your butt aren’t you. Money doesn’t trickle down? Of course it doesn’t, but money isn’t the issue here. Money is just a form of exchange, and money could be pine cones and still serve the same purpose. What actually has happened is the trickling down of quality of life. People’s quality of life has constantly and consistently improved during the history of civilization, all thanks to freedom of choice and CAPITALISM. You cant tax your way to prosperity, its like trying to fill a bucket with the water that’s already in it. There is a big difference between wealth and money, which many bone headed communists don’t understand.
If you can’t afford to live there under minimum wage, move somewhere where you can. No sense in complaining, beggars can’t be choosers.
Minimum wage laws deny the poor a chance to increase the value of their labor through on the job training / experience.
http://www.youtube.com/watch?v=ca8Z__o52sk
In fact, minimum wage has given those on it, a federally mandated pay raise of more than the Cost of Living or what Price of Goods percentages hold to be true.
In 1985 minimum wage was $3.35/hour. If you take C.O.L.A. into account and forward that level to 2011, the minimum wage would be $6.94.
If you add in the adjustments issued by law, you end up with a rate of $7.86/hour.
Therefore the truth is, the laws are forcing a pay raise on the employers. However, I truly feel that this isn’t the real problem when you raise minimum wages but in fact that these same types of raises were not given to those in the middle income bracket. The middle was hurt even farther as the upper income brackets shot through the roof. In the 1980’s, a CEO made four to five times what the middle manager made. Now they make over 100 times more and despite calls to correct it, it hasn’t corrected itself.
It would also be a mistake to think this issue doesn’t tie into immigration (more workers taking less of a wage means no pressures to increase wages) and the decline of Unions in America combined with an “every person for them-selves” mentality.
So, given all of this is there a solution. I for one would have thought the attacks of 9/11 would have brought us back together as a country, united for the betterment of all. Sadly, it didn’t happen – there was no push to sacrifice for others. We were allowed to continue to believe we could have “butter and bullets” which caused the first raiding of the Social Security Fund. Combined with the ending of long campaign (back to 1776) for the citizens of the United States to buy bonds and own American debt. Instead, we continue to allow other countries to buy us piece by piece. I again had hope that people would do the right thing when it came to the housing crisis but again we let our leaders shove a solution at us which clearly saved the day but spoiled the year.
As many of you will notice – I didn’t give an answer to the question posed in the last part because in truth as gifted as we all are – there isn’t one solution to this problem. We spent a generation getting here and it will take at least that long to get back. The solution has to be a whole package addressing the health and obesity crisis to learning to live below our budget, to buying back stock in America.
Stop hoping someone else will come up with a way to pay the check. It is our bill and we need to pay it. Start buying US Savings bonds – if your employer doesn’t allow for their purchase through payroll deduction then ask them too and keep asking until they allow it. Start a one day a week walk or public transport option to work. The gas saved here will help reduce our dependence on OPEC. BUY AMERICAN – not a made in AMERICA by a foreign company (sorry Target, Burger King and Honda) but it is about where the profits end up and how they are taxed. Eat a more healthy diet but a seasonal one. Strawberry’s in winter in North America aren’t real – so forgo them at that time and when they come in season eat them. A little denial and delayed gratification will do us good. You can always can them like they did in the past if you really like them – heck I can peaches and make jam every year. Helps the growers here and I enjoy a wonderful peach pie in February. Grow a garden and eat from it. Lastly, take your time back – turn off the cellphone and don’t accept calls from work away from work. We became a great nation working from 9 to 5 and that is all anyone needs. The rest of the time is your own – take it back and you’ll be surprised how much you can do at home. Join a UNION and band together with others to do what is best for all. The Founding Fathers noted UNITED WE STAND – DIVIDED WE FALL. Be it a King or a Captain of Industry – the same holds true. Moses noted strong works make strong bricks; no workers don’t make any. The CEO may chart the path and plan the battle but without sailors the ship never leaves the shore.
It isn’t going to be easy, but anything worth fighting for never is.
Please feel free to email if you like: JohnnyDaleAdams@yahoo.com