As we sit around waiting for much needed relief from our government – primarily because the Democrats love the filibuster for some reason even though about 98% of the people in America don’t even know what that is – a lot of the debate has turned to increasing the minimum wage in the United States.
Why is this a thing people are talking about? Well, part of the reason is because we are all poor in this country (just some of us refuse to actually admit it), but it’s also because President Biden wants to increase the minimum wage to $15 an hour as part of his COVID relief plan. Mind you, that $15/hour wage won’t actually exist until 2025 because we can’t just immediately make people better off in this country.
But it’s being debated because the machination that the evenly divided Senate will be using to pass this relief bill requires us to think if increasing the minimum wage has a fundamental impact on the budget and blah blah blah this is all so boring. NOBODY CARES ABOUT PARLIAMENTARY PROCEDURE EXCEPT MODEL UN NERDS AND SIMILAR WEIRDOS. Just pass the stimulus, even if it means doing it over the objections of all that stand in the way for purely dumb reasons.
Let’s talk a bit about the minimum wage in this country, shall we?
The United States was fairly late to the idea of a minimum wage for its workers. The Fair Labor and Standards Act of 1938 was what established the federal minimum wage in this country. It was part of The New Deal under FDR after the Great Depression, and established the eight hour workday and a 40-hour workweek (this was only after the initial proposal of a 30-hour workweek was rejected). The minimum wage was established at $0.25/hour, which in today’s money would be around $4.60 an hour.
It has been adjusted since, obviously, and peaked at an adjusted value back in 1968, when it was nominally $1.60/hour, which is equivalent to $12.25 in today’s dollar. It has gradually declined from that point since, and was increased to its current $7.25 way back in 2009… which is only worth $8.25 in current money.
There have been attempts to move above this level since 2009, but there just hasn’t been any real movement. President Obama wanted to phase up an increase to $10.10 over two years in the 2014 Minimum Wage Fairness Act, but Republicans in Congress didn’t like that, probably claiming “states’ rights” and that the federal government shouldn’t be able to step in on “state” business like that.
Twenty-nine states have minimum wages that exceed the federal minimum wage, with the highest being paid to workers in Washington, DC ($15/hour). As for actual states, Washington leads the way at $13.69/hour. Sixteen states have set minimum wage at the federal level, while five states do not have an established minimum wage, though the positions covered by the FLSA have to pay the minimum of $7.25.
It’s a mix of states depending on political “leanings.” If we base it on electoral votes, the 29 states (and DC) paying more than the federal minimum wage would account for 315 Electoral College votes. But they are a mix of states with different politics at the local and state levels and not as easily defined as “red vs. blue.”
As I pointed out in a Twitter thread, my “junior” Senator, Mitt Romney, has proposed a laughable minimum wage of $10/hour, with an equally ludicrous provision that it somehow screens out illegal immigrants from payrolls (which is just racism and anti-poor with an extra step). The required e-Verify compliance he is seeking is not cheap, so of course if any small employers has to hire someone but has to screen them, guess what the default is going to end up being? They’ll hire the person that appears to pass the e-Verify check without the risk of failing the check, closing down hundreds, if not thousands, of jobs for folks with non-white skin.
But I digress.
A $10/hour minimum wage sounds good because it is more than the current, 12 year-old level. But it is not. If you look at just one aspect of what people spend money on (housing), $10/hour cannot rent the average apartment in all 50 states. In fact, only four states check in at less than $15/hour, and they are all barely under that threshold. The lowest state, Arkansas, would require a wage of $14.19/hour to rent the average two bedroom home, or 57 hours a week at the current minimum wage.
Contrast that with Hawaii, the state at the top of the rankings, or even California, the highest of the mainland. Hawaii requires 153 hours at the current minimum wage, leaving all of 15 hours the rest of the week for non-work time. Hawaii is beautiful, but unless you are making legit money, you are living in a tiny apartment or with multiple roommates to be able to afford it, which is sadly the story in a lot of high-cost places.
So does that mean that we should continue to leave the minimum wage question up to the states? No! As 29 states (+DC) have proven, they are willing to go above the minimum as necessary to their current market conditions. Hawaii’s minimum wage is only $10.10, but I imagine an increase to the federal minimum wage to $15 would lead them to increase it slightly. Would it be 40% higher like it is now? Probably not, but they’ll adjust as needed. The other states would follow suit.
As for the other 21 states, they need to be dragged kicking and screaming into caring for their people, apparently. Utah, the state that Romney represents, requires a wage of $19.83 to rent the average two bedroom home. And with the type of construction going on around here, those type of homes are going to be harder to find. Plus, not every household has two wage earners, or simply has to cover housing alone. I’m in a one-income household, and while I make much more than the minimum wage, if not for the VA loan that helped buy our house, we’d be in a much worse situation.
I’m not an economist, not even at an amateur level, but I feel like paying people more money at the bottom of the economy is a net positive for society as a whole. Multi-billion dollar companies like Walmart that employ millions of people would be forced to pay their employees more, hopefully reducing the burden on programs like welfare that they have to use to make ends meet. That would in turn make it better for every taxpayer in this country, and while poverty would not end overnight – sustained poverty is more than just making more money at a job – it would be immediately improved. Yes, prices would rise, but they are rising anyway and the minimum wage has not been increased for nearly 12 years! If the wage was the thing preventing inflation (spoiler alert: it’s not), costs of things wouldn’t be growing so much faster than wages in this county.
Overall housing prices have increased by over 26% since 2009, just under 2% a year. Basic commodities have increased by nearly 11%. Tuition, other school fees, and childcare have increased by over 42%, which seems low. All this while real wages (not just the minimum wage) has been all but stagnant since the late 1960s.
The real average wage (preliminary) for January 2021 was $29.96. A split of the difference between the current minimum wage and that number would be about $18.50, which would be a much better starting point for a minimum wage in this country. If it needs to be phased in, so be it, but it needs to be done quickly as whatever it ends at is going to be too little in a couple year’s time, especially if we wait another 12 years to raise it.
The $15 they are aiming for at the moment wouldn’t actually occur until 2025, by which time it will already be too little. If they accelerated it a bit, say by 2023 with increases pegged to CPI plus 0.5% (or so) every year after, it might actually catch up before my son enters the labor market in 10ish years.
Either way, if a country truly cares about poverty and caring for their citizens, a minimum wage is a good place to start. Thirteen countries in the OECD have higher minimum wages than the US when adjusted for purchasing power. While none are above $15/hour, they also have more robust social programs that allow for lower wages to be paid at the bottom. The United States decided that poverty was something that is inherent… and has not done anything to alleviate it. So while CEOs earn magnitudes over their lowest paid employee, the wage and wealth gaps continue to grow with no end in sight.
Would raising the minimum wage tomorrow fix these problems? No, not really. As I said earlier, true poverty is a multi-faceted issue that requires a lot more work than raising wages. But it would be a start, and it should be done sooner rather than later. Raise the minimum wage to $15 an hour effective January 1, 2022, and increase it by CPI every year thereafter forever. Businesses will adjust. Profits won’t shrink (by that much), and more money would enter the economy.
You could also reinforce the small employers out there that would see wage bills increase overnight, like a more gradual increase or even paying the difference between their current employees’ wages and the new minimum wage. Pay this difference by taxing the large employers that will simply eat the increased wages into their profit margins, or take it out of a tax on CEO compensation that is over 30 times larger than the average wage at the company. There are solutions to make things more equitable and sustainable long term.
So while I appreciate the effort from Senator Romney, he truly could do a whole lot better. He should look at the cost of living in his own state and realize that $10, while it would help, is not enough to truly make a difference. A minimum wage of $15 should truly be the minimum starting point, with gradual increases annually until we are paying a living wage. A rising tide floats all boats, and raising the minimum wage should not even be in question.
Unless, of course, you want to offer a universal basic income instead…
Until next time…