Federal minimum wage hike is long overdue
The minimum wage was designed to ensure that anyone who worked a full-time job could earn enough to meet the basic needs of shelter and food.
We should frame today’s federal minimum debate with the same objective — to create a tool that allows employees to provide basic needs for themselves and their families.
Some argue that raising the federal minimum wage will further stress businesses in today’s pandemic-stricken environment and result in the loss of jobs. I don’t buy it.
The current consideration to increase the federal minimum wage dates back to 1938, when Congress passed the Fair Labor Standards Act (FLSA). This comprehensive law introduced many protective components in today’s labor environment, from banning oppressive child labor to enacting a federal minimum hourly wage to stabilize the country from another crisis — the Great Depression.
The proposed legislation recently introduced in the Senate seeks an increase in the federal minimum wage from $7.25 per hour ($15,080 annually) to $15 per hour ($31,200) over four years. That would give at least 17 million people a wage increase while lifting 900,000 people out of the federally defined poverty level.
This staggered, phased-in approach — akin to the path to $15 an hour in Seattle — allows businesses a long runway to plan for the increase in labor cost, most of which will be passed along to consumers, while actually lowering employers’ costs (training, turnover, etc.) per employee.
In a five-year analysis on the impacts of minimum wage increases at state and local levels, a Princeton economist focused on more than 10,000 McDonald’s locations across the U.S. Orley Ashenfelter’s research found that the business closures, job loss and increased automation often predicted in this debate did not materialize. Instead, and not surprisingly, increased labor costs get passed on to you and me.
Ashenfelter’s research found that a 10% increase in wage, causes a 1.4% increase in a Big Mac — a small price to pay to support a living wage for an individual or family.
The current proposed legislation eliminates the tip-wage credit, which allows employers to pay less than the federal minimum wage when tips are present (currently $2.13 per hour). This may not seem substantial on the surface, but research indicates this measure would create a more equitable living wage.
More than 3 million Americans work in a tip job, but not all tips are created equal. Recent reporting from Marketplace explained that tip workers who are Hispanic or Latino earn 30% less than tipped non-Hispanic men. If the federal minimum wage is a tool to ensure that the most vulnerable people can meet their basic needs, it must acknowledge and address this disparity.
Embracing the minimum wage as a living wage reinforces the very American idea that hard work begets opportunity and stability. Those who toil at the current federal minimum wage of $7.25 per hour often need public assistance. The Economic Policy Institute, a progressive think tank, found that a $15 minimum wage would decrease expenditures on public assistance programs up to $31 billion annually with less nutrition assistance and fewer tax credits.
In order to bring about meaningful, lasting change, we must approach this issue thoughtfully. Employers must realize that it’s our job to raise wages so people can live independently of government assistance, not to keep them oppressed and trapped on the edges of poverty. Those proposed increased wages would be plowed back into our economy.
The government must realize its role to protect and support its people, and we must have the conscience to do what is right. Amazon, Target and Starbucks have taken the lead on this issue. Congress would do well to do the same.