Minimum Wage Wars


By Veronica Chavez

Photo courtesy of The All-Nite Images.

Two dollars and 85 cents; that’s how much the hourly pay increase for minimum-wage earners in the US would be if Congress passed the Fair Minimum Wage Act.

Introduced in 2013 by a group of Democrats, the Fair Minimum Wage Act proposes to increase the minimum wage for federally funded workers from $7.25 an hour to $10.10. The wage would rise in increments from $7.25 to $8.20 in the first year, to $9.15 the year after, and $10.10 in the third. The proposed act would also raise the hourly base for workers paid in tips.

As reported by CNN, the Economic Policy Institute believes that in addition to minimum wage workers, millions more could indirectly benefit from employers adjusting pay scales in proportion to a wage increase.

In 2014, 600 economists signed a letter addressed to President Obama and key Congress officials urging them to pass the Fair Minimum Wage Act. These signers also urged the politicians to index the wage to protect it from inflation. Despite the strong backing by these economists–a group that includes seven Nobel laureates and several former Obama and Clinton Admministration economists–the proposal has not garnered adequate traction within Congress to pass.

Those against increasing wages identify a number of reasons why they believe the change would negatively affect businesses. For one, the extra expense may discourage employers from hiring more people. Employers might feel influenced to reduce the hours of their existing staff members. Additionally, prices may rise for consumers when employers try to compensate for the additional expenditure.

Advocates for a higher wage see the situation in a different light. They argue that boosting wages will actually lower turnover and increase employee morale, ultimately leading to a higher level of productivity. Supporters also point out that increasing payment for minimum-wage earners will not only make it easier for them to make ends meet, but essentially give them more spending money to put back into the economy. Their additional spending would increase demand and job growth.

On Jan 1, 2014, wages increased in 13 states and four cities in the US. New York and Rhode Island raised their wages by 75 cents to $8 an hour while New Jersey raised their wages by $1 to $8.25 an hour. Most of the other increases were less than 15 cents per hour.

A notable wage increase took place in Seattle. Voters approved a raise to $15 per hour for many workers in SeaTac, a small town in Washington in which the focal point is the Seattle-Tacoma airport. In addition to increased wages in the tiny town, Seattle’s mayor-elect said he also plans to raise the city’s minimum wage.

Across the country, fast food workers from places such as McDonald’s, Wendy’s, and Burger King are demanding $15 per hour. Currently, workers at fast food institutions make an average of $9 an hour. Full time minimum-wage earners claim they are not earning enough to make ends meet without enrolling in public aid programs such as food stamps and welfare. The University of California Berkeley Labor Center and University of Illinois published a study which measured that 52 percent of families of fast food workers receive assistance from public programs. Such programs include Medicaid, food stamps, the Earned Income Tax Credit, and Temporary Assistance for Needy Families.

The study also estimates that it costs the country almost $7 billion per year to pay for public assistance programs for the families of fast-food workers. More than half of this money ($3.9 billion per year) is used to fund Medicaid and the Children’s Health Insurance Program.

Although Republicans and critics of the minimum wage hike often fight to lower the spending on entitlement programs such as food stamps, they often overlook the solution that a minimum wage increase can provide. Arguably, if these workers could make ends meet with their salary alone, they would be relying less on public aid.

Some argue that low-wage jobs–such as those in the fast food sector–are usually just “starting jobs.” It’s assumed that these workers will only be earning low wages for a short period of time before they advance their careers. While this assessment may have been true before the economic collapse, the reality has since changed. Seventy percent of the jobs created in the recovery have been in low-wage sectors such as fast food and retail. Additionally, large portions of the jobs lost during the recession were ones with salaries ranging from $30,000 to $68,000.

While the minimum-wage tug of war seems far from over, economists predict that the topic will become a pivotal part of politics in the upcoming election.