Pro: A $10 hourly minimum wage would narrow chasm between working poor and their bosses
There are numerous ways to address the issue of economic inequality—an issue that has gained traction as the Occupy movement has spread beyond Wall Street. I believe we can do something to raise the wages of our lowest-paid workers right now.
I recently saw a chart that demonstrates what’s been going on in the economy; the rich are getting richer, and the rest of us are getting poorer. It showed that the ratio of CEO pay to worker pay was 42 to 1 in 1980—with the average CEO making $1.6 million. That ratio climbed to 107 to 1 in 1990—with the average CEO making $3.3 million. By 2010 that ratio had soared to 325 to 1—with the average CEO making $10.8 million. With that kind of hindsight, 1980 doesn’t look so bad.
Raising the minimum wage is one of those lightning rod issues on which liberals and conservatives often disagree. But the division isn’t just ideological—it’s also mathematical and historical.
In 1968, the federal minimum wage stood at $1.60 an hour. If workers were earning the same amount in today’s dollars, adjusting for inflation, they would be paid over $10 per hour, not the current $7.25 per hour. During that same time, median household income has risen roughly 14 percent while the value of the minimum wage has fallen 30 percent.
The solution is obvious: Congress should restore the minimum wage to its historic purchasing power by raising it to $10 per hour. It would enable low-wage employees to be rewarded for their hard work. It would also help boost the economy by getting income into the hands of those most likely to spend it, thereby creating additional demand that businesses sorely need during this shaky economic recovery.
And it is also time to remove this issue from the whims of our whimsical Congress by indexing it to automatically increase to keep pace with inflation. Both Republican front-runner Mitt Romney and President Barack Obama have indicated support for this approach.
We know that some opposition to raising the minimum wage is rooted in the erroneous belief that it increases unemployment.
Yet we have real world experience of past federal increases, numerous increases at the state level and academic studies conducted by noted economists from every region of the country providing solid evidence that there is no corresponding increase in unemployment that accompanies modest increases in the minimum wage.
On Jan. 1, 2012, eight states raised their “indexed” minimum wages to adjust for inflation. The Economic Policy Institute estimates that more than 1 million workers benefited directly from these increases.
Additionally, as employers restructure their wage-scales, almost 400,000 more workers earning slightly more than minimum wage, will benefit. That is good for them, and that is good for our economy. Especially since these are not just teenagers working part time—the Census Bureau says they are only 12 percent of the workforce—but adults working more than part time.
Who benefits when the minimum wage erodes in value? Low-road employers, who compete by paying wages well below the federal poverty line. In addition, taxpayers end up subsidizing these low-road businesses because low-wage workers are forced to rely on Medicaid, food assistance and other safety net programs.
Finally, polling shows that the public overwhelmingly supports increasing and indexing the minimum wage. Lopsided margins across all demographic groups and both political parties understand that this would benefit the economy. It may not reach 99 percent, but it has higher support in the polls than the current Congress. Of course, it also has the advantage of being the right thing to do.
Don Kusler is the director of Working Families Win for Americans for Democratic Action. Readers may write to him at ADA, 1625 K Street NW, Suite 102, Washington, D.C. 20006; website: www.adaction.org.