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The Minimum Wage Increase Debate is Heating Up. What’s your Take (poll)?

Last updated by on 20 Comments

The minimum wage increase debate is starting to heat up.

I highlighted the pros/cons of a federal minimum wage increase last year, after President Obama focused a spotlight on minimum wages in his State of the Union as he declared,

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 $9.00 an hour.”

A year has passed and many new developments have happened since:

  • A July poll on increasing the minimum wage to $10.10 per hour found 80% of Americans support increasing the minimum to $10.10, including 92% of Democrats, 80% of independents, and 62% of Republicans – proving broad public support.
  • 21 states and Washington DC now have minimum wages higher than the federal minimum wage and five states have passed increases in the past year. Last fall, California passed a law that will raise its minimum wage to $10 an hour by 2016, and New Jersey voters approved a constitutional amendment that raises the minimum wage to $8.25 per hour and ties it to inflation.
  • Restaurant workers across the country have gone on strike and are pushing for $15/hr. wages (wishful thinking, but I give them credit for aiming high).
  • The President once again made minimum wage a major focus in his 2014 State of the Union speech.
  • The President then signed an executive order that will require businesses with new or renewed federal contracts to pay a minimum wage of $10.10 an hour by 2015. It’s predicted that this will impact about half a million workers.

But the minimum wage still sits at $7.25 per hour. A federal minimum wage hike requires Congressional voting approval.

To that end, Senate Democrats have introduced a bill, the Fair Minimum Wage Act (aka the Harkin-Miller Bill), that would increase the federal minimum wage from its current $7.25 an hour to:

  • minimum wage increase$8.20 on the first day of the third month after signing.
  • $9.15 one year after
  • $10.10 two years after
  • Indexed to inflation, starting three years after, and each subsequent year

Those may seem like big jumps (and they are), but comparatively, the current rate has not kept up over the years. Had minimum wage been indexed to inflation over the past 40 years, it would currently be at $10.74/hr. Is there any doubt that today’s minimum wage is not a livable wage?

The impact of a raise to $10.10? It is estimated it would raise wages for 19 million Americans, many of whom are living in poverty.

The Case for Indexing the Minimum Wage

Looking back, the history of minimum wage increase frequency has been sporadic, at best:

  • 1938: $0.25 (the first national minimum wage is set)
  • 1956: $1.00
  • 1974: $2.00
  • 1980: $3.10
  • 1990: $3.90
  • 1997: $5.15
  • 2007: $5.85
  • 2008: $6.55
  • 2009: $7.25 (last increase)

If you’re going to set a minimum wage, why not tie it to inflation so that you can keep it consistent? Most developed countries have done this already. And it avoids the political wrangling that happens every few years.

Speaking of those developed countries, what are their minimum wages set at (in USD)?

  • Australia: $16.88/hr.
  • Canada: $9.95/hr.
  • France: $12.22/hr.
  • UK: $10.02/hr.
  • Japan: $8.32/hr.

The U.S. has lagged behind.

But guess what – it’s an election year.

The last round of minimum wage increases in 2007 (signed by President Bush) resulted in a bi-partisan 94-3 senate and 315-116 house approval when tax cuts were added in for small business.

Has the political climate changed so significantly that a similar proposal would not pass this time? It’s quite possible. And I’m thinking that we’re about to find out.

So… debate away in the comments on if you think the minimum wage should be increased and indexed and why or why not.

And here are two polls for good measure:

Would you vote to approve a min. wage increase to $10.10/hr, indexed to inflation?

View Results

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Do you think the Fair Minimum Wage Act will be approved by Congress this year?

View Results

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20 Comments »
  • JoeTaxpayer says:

    There are a few points that have no agreement. Some say this increase will raise unemployment. The question is whether the total good is increased. If 16 million are brought out of poverty, I think we can find a way to help the 300K who they say will lose their jobs. What’s tough to measure is the effect of having 16 million people who can now afford to buy things they couldn’t before. This money isn’t saved, but spent immediately, having a high velocity. I suspect this factor will increase demand for workers, not decrease.

    The fact that workers at stores like Walmart are also on the government dole means that my taxes aren’t helping those in need, (which I am happy to do) but are, in effect, subsidizing Walmart, which is half owned by the founding family. This is not natural capitalism, but stores that put mom and pop businesses out of business, and then offer subpar wages to those who work for them. A crazy cycle.

    The pundits say “educate and get a better job.” Now, I think it would be a remarkable experiment to go into the inner cities, find the high school kid who had good grades, but can’t afford college because he needs to work. Send him to college and pay his family $10/hr as long as his grades keep up. Fantasy. I know. The reality is the person working 60 hours a week to pay her rent and support a child, with no time to go back and get an education. Those debating this on TV have no idea what life is like. They may as well be telling the single mom, “you can save money by quitting your country club membership or selling your sky box seats at the CitiBank Center.” Yes that clueless.

  • Clint says:

    I think that we should not increase the minimum wage because I believe that will cause the costs of basic goods (fuel, groceries, other essentials) to increase as well.

    That being said I think that the increase will still happen even though minimum wage paying jobs should be for college and high school kids, not used to provide for a family on. If you really are having a hard time work full time at McD’s and part time delivering newspapers or delivering pizzas while putting yourself through school or working towards another job.

    If the minimum wage does pass, I sure hope that someone sneaks in a repeal to Obama care along with the bill. That way my health insurance wouldn’t go up because I have to support someone else.

    • Ginger says:

      “That being said I think that the increase will still happen even though minimum wage paying jobs should be for college and high school kids, not used to provide for a family on” Why do you think this? Minimum wage originally was enough to support a single person, it now is not.
      And given that college students are adults, shouldn’t they be able to work 40 hours and take a night class without giving up their needs?

      • John says:

        I guess the argument then becomes, “define ‘needs.’” Is a cell phone a need? Is cable a need? Is a car needed? You are absolutely able to LIVE off minimum wage. You aren’t going to starve; you simply won’t have many of the “luxuries” that the average person enjoys.

  • Matt says:

    There will be a big shift with the increase. If you worked your way up to $10hr and now you can make that pay else where will there be a big shift as other options are now available and increase the applicant per job ratio? How will this relate to the subsidies doled out for health care? As far as the number of jobs,I really think it would be a toss up. On one hand fast food may all be touchscreen at the counter and more self check outs will appear but as mentioned there will be more money in hand for those employed at that level and drive the economy. For those in debt. I would think this is may make debt collectors quite happy.

  • Michelle says:

    I actually would support a minimum wage higher than $10.10/hour just to make up the ground that the minimum wage has lost to inflation. I wrote about this at the end of last year, just as the minimum wage debate was starting up. The fact of the matter is that minimum wage does not keep pace with inflation at all, and that for every year inflation rises, but minimum wage doesn’t, it’s the equivalent of a pay cut for people that earn at minimum wage. (The same is true at all levels of pay, but people earning min. wage are in the most precarious position of everyone.)

    Here are my original thoughts on the min. wage from December. My opinions are largely the same now: http://www.michelledunlap.com/2013/12/17/inflation-and-minimum-wage/

  • DigitalGalaxy says:

    The minimum wage increase is long overdue. It’s impossible to subsist on $800 a month. It’s literally a slave wage.

    High schoolers/college kids don’t need it, since they don’t have to meet basic needs. They are at home or in the dorm. They can stay on slave wages until they graduate, it’s no big deal.

    Small business would be killed by a increase, so there’ room for compromise there. Let them keep their slave wages…it’s more a border line “volunteer” thing to work in small business, like a restaurant or as a small business cashier, at this point. High schoolers can do it.

    The problem is Wal Mart, McDonalds, and all the big employers. They won’t go bankrupt over a minimum wage increase, they will just raise the cost of goods and services marginally. And, the investors will lose a measly 5% at the most, according to estimates. Who cares, nobody investing in big corporations is losing their shirt over a minimum wage increase.

    The $10 across the board is paltry. It needs to be $15, not applicable to anyone in school, and not applicable to businesses with under 50 employees.

    Yes it’s true that 99% of people are either a) in a dual-income situation, or trying to be in one. If you have $800 a month *2 you have $1,600 a month ,which can scrape by with basic bills. But are we going to say that if you are single you just can’t make it? That doesn’t make much sense.

    Sorry for rambling, I was just recently in a minimum wage situation myself and it’s criminal. Your monthly income is $800. Your rent is $600. Do the math.

    • Lillian Karabaic says:

      In what sort of place do you live that you think that 99% of workers are in a dual-income situation? Ninety-nine percent?!

      Those that are most likely to work minimum wage jobs (as adults, I am excluding suburban teenagers) are the least likely to have the privilege and protections of a dual-income, nuclear family situation. Of minimum wage job holders over the age of 24, 41 percent are unmarried*. I have trouble believe that except for <.5%, all those unmarried minimum wage earners have some unmarried source of dual income.

      Lastly, that statistic seems to ignore the idea that even in dual-income situations, it's unlikely that both earners will work full-time and that there will be no other dependents to support. 54% of minimum wage earners work part-time, often kept at part time by employers that would like to make sure they don't receive costly health care benefits or other benefits of full-time employment.

      Even in a dual-minimum-wage income situation, there are often multiple non-wage-earning dependents (some call them children, but they can also be elderly/disabled/non-earning relatives, etc). So $1600 for 2 people might seem fine, but $1600 for four people is quite a stretch, and often involves subpar living conditions.

      *BLS 2013

    • Lillian says:

      I think I may be the *only* reader of 20somethingfinance that would actually be impacted by this minimum wage increase. Here’s my situation, though I am not offering a solution:

      I don’t make the federal minimum wage because I live in a state with a higher state minimum wage, but I do make less than $10.10 an hour. And no, I don’t work full-time at that job, because those hours aren’t available at this business. I work part-time at that job, and 3 other jobs, so that I can pay my bills and continue to work my way towards financial independence. I do not receive health care through any my jobs, or paid time off, retirement contributions, paid holidays (even when required to take 2 weeks off when we’re shut down) or sick days. That all comes out of my pocket.* It’s true that being poor is more expensive day-by-day.

      And guess what? I get taxed at 30%, because at two of my jobs I’m an independent contractor so I pay both my and my employer’s taxes for me. This is the new way to deny basic protections of employment to your workers: employ them as an independent contractor even though they fit the definitions of an employee. Most people I know that are stuck in this position don’t speak up because they are too scared they’ll lose their job if they ask to be a regular employee (myself included) I work in too small of places to be able to feel safe to file an anonymous claim to the labor bureau, so it continues.

      This means if I get injured at my place of work, I won’t even be covered by worker’s compensation. Once again, being poor costs more out of pocket.

      I’m unusual for someone that earns this wage: I have no debt of any sort, I am very privileged in my background, and I lived in intentional poverty as a radical social worker for many years and then while serving in AmeriCorps. However, that doesn’t mean I don’t imagine the lift of what just a small increase in my wage would do for me. It would mean I’d be able to buy $40 more of groceries a month or put $40 more in my Roth IRA every month.

      I also have a BA in economics and worked for a macroeconomist, so I understand the macroeconomic implications of raising the wage (though we haven’t seen it demonstrated in practice, just in theory, but hey! it’s macroeconomics.)

      *Changed since Jan 2014, I now qualify for Medicaid! Yay! But it still hasn’t gone through properly so I don’t have access yet.

    • Lillian says:

      Also, because I am a stickler for macro comparisons, I thought it was important to talk about the purchasing power in each country, not just the conversion to USD. While Australia looks like it is quite high hourly, remember that your basic basket of goods in Australia is very expensive compared to here. I’ve used the OECD’s US’s Purchasing Power Parity Real Minimum wage chart for 2013 here*:

      Australia: $16.88/hr – PPP $10.20
      Canada: $9.95/hr – PPP $7.90
      France: $12.22/hr – PPP $10.60 (2012 data – the french are always late getting their data in)
      UK: $10.02/hr – PPP $7.90
      Japan: $8.32/hr – PPP $6.60

      Despite the look of this, I’d like to note that all of these above countries have universal health care systems, so the poor are at least not bearing the burden of their healthcare costs. (Japan’s system has a national health care system for those that don’t have employer-sponsored insurance, but most job contract in Japan are “for life” and include employer-sponsored coverage.)

      All of those countries also have, unlike us, mandatory time-off laws (30 in france, 28 in UK, 20 in Australia, 10 in Japan & Canada) and mandatory paid maternity leave laws (unlike the US.) Once again, lack of paid time off most adversely effects those relying on a low wage.

      *http://stats.oecd.org/Index.aspx?DataSetCode=MIN2AVE

      • Shaun says:

        Lillian,

        Very interesting data that no one ever look at. I was born and raised in Canada and now living in the US for 8 years and I still struggle with understanding how such basic human needs such as health care and education are a purely for profit system. Multiple people have told me that there is no innovation in education or health care in those countries. This is an argument for another time and place. Last I heard though none of those countries were having a innovation dilemma.

        I struggle with the PPP data for Canada, and especially Ontario. For one, go out for fast food there. 2 ‘meals’ will run you between $16 and $24. To go out to eat at a average national chain and have a alcoholic beverage or two and you are lucky if you spend less than $60.

        In my opinion, its closer to $9.95 Canadian is $6-6.50 USD. Yes, health care is universal, but consumer goods are significantly more expensive. The effective tax rates are essentially the same but the sales tax is 13% in Ontario. This makes the cost of doing anything or buying anything significantly more expensive.

  • Tom says:

    I have not been keeping up with this issue, so I appreciate GE and the various commenters time as I’ve learned a lot just from reading this page.

    I do have one question that I’d like to pose, what about differences in cost of living in different areas? It seems kind of strange to put a blanket solution across the whole country. Would it make more sense to legislate such that states or even municipalities are forced to set their own minimum wage based on a local index?

    Thoughts?

    • G.E. Miller says:

      I think the goal with a fed. min. wage is to set a min. bar across the country. $10/hr. might be a livable wage in some midwest or southern states (whereas $7.25 is not livable anywhere in the country), but definitely not on either coast. It’s up to the states (or even cities) then to set appropriate minimums per cost of living in their geo.

  • Ryan D. says:

    I have no idea, but would raising the minimum wage result in an inflation of the cost of goods and services? In other words, will the result be a zero net gain for most minimum wage workers?

    I also wonder how this plays out for other workers (I wasn’t in the full time workforce during the last minimum wage increases). Does everyone making more than minimum wage also feel like they deserve an increase? For example, if you started at minimum wage and earned a promotion of minimum wage + $3, and now minimum wage for everyone is about at the same level as what you make, your promotion has essentially gone away. You would want new minimum wage + $3. I wonder if this potential domino effect is included in all the analysis?

  • Dustin says:

    If you think you deserve $15/hr for flipping burgers then I see why that individual lives in poverty. Clearly not that intelligent.

  • Mike says:

    Freedom and free markets beat a government mandate every time. Why shouldn’t an individual and an employer be allowed to agree on a price of labor that is beneficial to both? Even if that price is lower than the arbitrary government mandated price. Can you see that a minimum wage is a loss of that freedom?

    Don’t forget that employment must benefit both the employer and the employee. If an employee’s worth to the employer is less than the minimum wage, the job disappears. With the stroke of a bureaucrat’s pen – Poof!

    Remember your first job? You probably didn’t get much money, right? But what did you get – experience, a proven work ethic, a step on the first rung of the job ladder. Each time the minimum wage is raised, so too is that first rung. Making it harder for the poor and the under educated to climb up. The minimum wage benefits those that are already skilled, by keeping the unskilled from learning on the job. It certainly is not a mechanism to help those in poverty.

  • Amanda M. says:

    I’ve had a job since I was 10 (paper delivery) with only about 2 months total off. I’m now 30. I started my first hourly job at minimum wage when I was 14, and got raises about every 6 months (small but there). I moved from a restaurant to retail at 16, and was hired at $2 over minimum. This was seasonal, so I started working at a movie theater (at minimum wage, but with free movies) and book store (at $2 over) later on. When the leather store opened again, I became an assistant manager at 17. I worked at Walmart when they closed again, was hired above minimum wage, and had performance reviews on a pretty regular basis, which led to pay increases. I didn’t need it at the time, but I was also told that I was eligible for heath coverage while I was there. I saw the “who’s on welfare” video focusing on Wal-mart as well, and it didn’t really make much sense to me. I think the thing effecting most people now is that they aren’t able to find one single job that will allow them to work a full time load (or I believe over 30 hours) because of the insurance requirement. I have a close friend who works for a medium sized national retail chain, and she was told in no uncertain terms that she can never work over 28 hours a week to ensure that she never accidentally gets labeled as full time. Even if she made $10/hr, she would still have to figure out her health care and find a second job to make up for the time she can’t work.

    At every one of my jobs, there were chances for moving up. At all but one (the movie theater), I got raises on a normal basis. Not huge, but $0.50 here and $1.00 there make a big difference in the long run. I chose to go to school for engineering because of my love of math and chemistry. While in school, I became a teachers assistant as a freshman, a math tutor within the department at $10/hr (in 2004), and tutored on the side one-on-one for $20. From there, I just moved up with student work opportunities within companies that paid over $20/hr.

    Before college, I didn’t have an issue finding a job that would pay above minimum wage and challenge me as I wanted to be. I just had to start making nothing and show that I was willing to fill in just about anywhere.

  • Jamie says:

    Minimum wage laws force employers to pay people a wage that they may not be worth. Is a janitor as valuable as a cashier? I don’t know but because of the minimum wage law, you can’t distinguish. This disrupts free markets and worst of all causes the prices of everything to rise for consumers because business have to pass on the rising costs to us.

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