Some minimum wage myths
May 14, 2014
Once again Congress has blocked an increase in the minimum wage from its current abysmally low $7.25/hour ($14,500/year). President Obama advocated an increase to $10.10/hour ($20,200/year), which was opposed by you know who, in spite of the fact that more than 70 percent of Americans support it.
What are the arguments being spouted against increasing the minimum wage, most of which are more fiction than fact? There are claims that it would kill jobs, especially for teenagers, that it would be bad for the economy, especially for small businesses, and that it would backfire on low-wage workers because it would raise the cost of the goods and services they need to purchase by more than their wage increase. Let's look at these myths, one by one.
Numerous impartial studies, including one in 2011 by economists at the University of Massachusetts, University of North Carolina and University of California, one in 2013 by the Center for Economic Policy Research, and a recent Texas study by the University of California, have found little if any job losses as a result of state increases in minimum wages. As for teenagers, 88 percent of minimum-wage workers are older than 20, many with families, and teenage unemployment rises and falls with the economy, independently of the minimum wage.
The health of the economy is primarily dependent on the purchasing power of the middle class. The Great Recession eliminated millions of middle class jobs, and more than half or their replacements have been low-wage jobs, insufficient to provide any discretionary spending. More money in the pockets of low-wage earners will show up immediately in purchases that will boost the economy. Between 1963 and 1979 (a period of prosperity), the minimum wage ranged from $9.30-$10.70/hour in current dollars, compared with the present $7.25/hour, and gave millions of Americans the purchasing power that played an important part in that prosperity.
An in-depth analysis of the increase in costs resulting from raising the minimum wage to $10.10/hour shows that it would vary widely from industry to industry. The increase in general retailing would be 1-2 percent, except for furniture and appliances, for which it would be 5-7 percent. For Walmart, where most low-income people shop, it would be well below 1 percent. Grocery prices would go up 4 percent, and apparel 16 percent. The cost increase of manufactured goods would generally be in the 2-6 percent range, with luxury products going up as much as 16 percent. The cost of restaurant meals would increase 10-15 percent, with the increase in fast-foods generally below 10 percent. Minimum-wage workers, whose incomes would rise 39 percent, would definitely see a welcome improvement in their standard of living.
One of the "Four Freedoms" for mankind espoused by President Franklin D. Roosevelt in 1941 is "freedom from want." For our country to live up to that goal, employers will need to pay a living wage for a fair day's work, which is currently $10-14/hour, depending on the cost of living in the area where one lives, and in the future increases in the minimum wage need to be tied to the Consumer Price Index to keep up with rises in the cost of living. Employers paying less than a living wage are padding their profits on the misery of others and at the expense of the government (and that means us, the shrinking middle class) to cover the cost of food stamps, child care, and earned income credits for the underpaid, running into hundreds of billions of dollars every year.
How in the name of a government created for all of the people, can a major element of Congress (and again, you know who) expound that in the wealthiest nation in the world, it is necessary to maintain a perpetual underclass of millions of impoverished people, subsidized by the taxpayers, for our economy to survive? Must 40 million Americans live in virtual serfdom to keep multi-billion dollar profits flowing to the wealthy? It is a national disgrace that 10 million working poor in the United States of America are not being paid enough to feed and meet the rest of the needs of their families.
"As I See It" appears on the first and third Thursdays of the month. Hal Sundin lives in Glenwood Springs and is a retired environmental and structural engineer. Contact him at email@example.com.