Make the Minimum Wage a Living Wage

During his State of the Union Address to Congress on February 12, 2013, President Obama stated,“Tonight, let’s declare that, in the wealthiest nation on Earth, no one who works full time should have to live in poverty – and raise the federal minimum wage to $9 an hour.”

The idea that people working full time should not have to live in poverty is not new. It has been put forth for many years, including by FDR. President Obama went on further to say, “Let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.”  This approach of using automatic cost-of-living-adjustments has been in place for Social Security benefits for years, and negates the necessity to pass new laws every time the minimum wage becomes so outdated in purchasing power that it is no longer a living wage.

If the minimum wage were adjusted for inflation to reach the purchasing power it attained in 1968, it would now be $10.52 per hour. If it had increased to keep pace with worker productivity, the minimum wage would be $21.72. Apparently, the productivity gains have not gone primarily to the workers. That it is currently $7.25 per hour attests to the fact that Congress has not seen fit in the past to make the minimum wage reflect the realities of our economy. An immediate raise to $9 per hour would not be sufficient to remedy the hardships experienced by many workers due to past inaction on the part of Congress, but it would be a start in the right direction.

Tying future increases to changes in the cost of living would also help to insure that the minimum wage would not lag so far behind in the future.A major reason that the current gap between the minimum wage and the cost of living exists is the fact that the wage was frozen at $3.35 from January 1981 to April of 1990, then again at $5.15 from September 1997 through July 2007. To allow such lapses in the future by not tying the wage to the cost of living would be counterproductive as well as morally reprehensible. Millions of people make that wage. Imagine what it would be like if Social Security recipients received no cost-of-living adjustments to their benefits for ten year stretches. Since the last increase in the federal minimum wage, a number of states have passed legislation raising their minimum wage above the federal minimum wage. This is highly commendable but does not excuse the federal government from ensuring that all workers receive a livable wage, not only those living in certain states.

Raising the minimum wage would have many benefits, some of which would include cost savings to the government. The number of people meeting eligibility requirements for food stamps and other forms of public assistance would drop dramatically if the minimum wage was a livable wage that would enable them to support themselves and their children. Unlike the economic situation in recent years, especially during the recovery from the most recent recession, the rise in wages for lower income workers would infuse purchasing power in those most likely to increase demand in the economy. The money would be used to provide food, clothing and shelter to families rather than invested in luxury items benefitting far fewer people or sheltered in tax havens abroad.

The arguments against raising the minimum wage are often advanced by those who feel that no minimum wage should exist to begin with. This group, not coincidentally, also often includes those who do not feel we should have a social safety net to protect the interests of those among us who for whatever reason reside at the bottom of our socio-economic totem pole. The arguments are oft-repeated versions of the same economic arguments advanced in recent decades in defense of lowering tax rates on the wealthy at the expense of caring for the sick and elderly or providing opportunities for others to advance.

Raising the minimum wage, some say, will decrease employment opportunities for less-skilled workers and increase unemployment, becoming a drag on the overall economy. Businesses would be forced to layoff workers because they would not be able to afford to pay them the higher wages. The argument has been used throughout time ever since the minimum wage was brought into existence. They provide no examples of this having taken place upon institution and raising the minimum wage in the past.

FDR is quoted as saying, “No business which depends for existence on paying less than living wages to its workers has any right to exist in this country.” I agree with that statement. No job that fits that description should be allowed to exist. If I want to go to a restaurant to buy a meal, the price should include having to pay the person who prepares the meal and serves it enough for them to be able to survive without depending on my generosity in tipping them. Thus, I favor expanding the jobs covered by minimum wage laws as well as increasing the wage itself to a livable one.

Like the lowering of tax rates on the rich which began in earnest under the supply-side economics of Ronald Reagan and continued more recently by George W. Bush, the arguments against raising the minimum wage have not been borne out in the real world. Economic downturns have not been tied to minimum wage increases any more than jobs have been miraculously created by giving higher income earners more lavish tax breaks.Keeping wages depressed for those at the bottom of the pay scale while allowing seemingly infinite pay increases for those at the top has resulted in a degree of economic inequality in this country since before the Great Depression. Their increased wealth has obviously not been used to invest in creating new employment opportunities to the degree we were led to believe by the proponents of these policies. I see little evidence that this increase in wealth of the already wealthy has improved the lives of most of us at all.

This inequality is a larger drag on our economy than raising the wages of our poorest workers could ever be. During the recovery from our most recent recession (2009-2011) for instance, the top one percent of earners saw their incomes rise 11.2%, while the bottom 99% saw theirs continue to fall by –0.4%. No wonder the recovery has been so anemic, when most people saw their real earnings decline while the very few saw an economic windfall. Large corporations are also making huge profits, as reflected in the stock market surge.

The major argument for raising the minimum wage, in my opinion, is one of moral fairness. It is simply not right to expect people to work hard on a fulltime basis at jobs that our economic structure dictates need to be done for less money than is required for them to survive, let alone thrive, while others do nothing and make millions. The time for the reverse Robin Hood economic and tax policies currently in existence in this country to end is now. Creating a minimum wage that is also a livable wage is an excellent place to start.