By David Cooper
Economic Policy Institute
A version of this commentary originally appeared on U.S. News and World Report.
There’s a sense today that we, as a country, are dividing into two Americas. In one, corporate stockholders and owners of capital become increasingly wealthy as profits and dividends continue to rise. In the other, ordinary workers gain more education, work longer hours and improve their productivity, yet often struggle to make ends meet.
We see this divergence in the economic data. Since the 1970s, productivity has risen dramatically, along with corporate profitability and pay for the highest earners. Yet middle- and low-wage workers’ incomes have barely changed. In fact, for the lowest-paid workers, incomes have actually fallen – partially because of the erosion in value of the minimum wage.
The minimum wage was first enacted in 1938 to ensure that even the lowest-paid workers would still receive an adequate level of pay. Through the ’60s and ’70s, Congress made regular increases that kept the minimum wage equal to roughly half the average wage of production workers. At its peak in 1968, the minimum wage was close to $10 per hour in today’s dollars. Yet after decades of delayed and inadequate increases, today’s minimum wage of $7.25 is about 37 percent of the average wage. We have let the lowest-paid workers fall considerably behind.
A minimum wage of $7.25 is not enough to live on. Full-time minimum-wage workers today earn about $15,000 a year. In 1968, they earned about $20,000 per year in today’s dollars. While certainly not enough for a life of luxury, it is enough for a family of three to stay above the poverty line – which can’t be said for today’s minimum-wage workers.
Many of these workers have to rely on public assistance such as food stamps or the earned income tax credit, because their wages are simply too low. Programs like the EITC are important protections against poverty, but we shouldn’t let them act as subsidies to low-wage employers, who currently pay lower wages because the American taxpayer will make up the difference.
We need to re-establish the basic labor standard that if you work full time, you’ll earn at least enough to get by. If we raised the federal minimum wage to $10 per hour, nearly 30 million American workers would get a raise, nine million of whom are parents. And contrary to popular misconception, most of these workers are not teenagers working part time: 88 percent are at least 20 years old, and 55 percent work full time.
Opponents will argue, as they always have, that raising the minimum wage will kill jobs or make it harder for businesses to hire new workers. Economists have studied these claims to death and the best research shows that minimum-wage increases have little to no effect on employment. In fact, there is ample evidence that labor market conditions can improve after a minimum-wage increase because low-wage workers have more money to spend, and they’re less likely to be scrambling to find higher-paying jobs. That’s why 85 percent of small businesses already pay wages higher than the minimum, and some big corporate entities are following suit.
If we’re going to live in one unified America, we need an economy that works for all Americans. For too long, low-wage workers have not seen the benefits of a growing economy. Raising the minimum wage is one step toward fixing that. There are 19 states that already have minimum wages higher than the federal minimum, and 73 percent of Americans support raising the minimum wage. It’s time for Congress to act.