The history of the minimum wage begins under President
Roosevelt during the Great Depression with the passage of the Fair Labor
Standards Act of 1938. It was passed in response to the failure of the free
market system to provide a minimum standard of living for the working labor
forces. The first minimum wage was a modest twenty five cents an hour. Since
its’ beginning, the minimum wage has fluctuated with its real dollar value simply because
of the mood of politics.
There are renewed claims that increasing the minimum wage
would result in job losses now that the President has put raising the minimum
wage to $9.00/hr from $7.25 on his agenda. In recent years, republican have
advocated for the elimination of the minimum wage so it no surprise that they
are opposed to an increase. However, historically there has been bipartisan
support for the increases including one such increase under Bush Jr.
The argument republicans are making against raising the
minimum wage is that it will result in a loss of jobs. It reminds me of the
argument that cutting taxes creates economic growth which was disproved by an in-depth
study provided by the Congressional Research Service CRS Report R42020
published last year. The republicans were so upset by the findings and
conclusions of this report, they ordered it be taken out of public view or face
possible defunding for their agency.
There are new studies coming out of our educational
institutions that have examined the effects of minimum wage increases. They
conclude there is no evidence of any loss in jobs. In fact, there is strong
evidence that increasing the minimum wage results in a strong reduction in
employee turnover which adds a cost savings to the employer in replacement cost
savings. An increase in pay can lead to increases in productivity as well.
There is also no evidence that the increase in wages is offset by passing it on
to customers when our free market system has a far greater influence on
consumer prices. By raising the minimum wage, there is a ripple effect to those
who previously sat just above the minimum wage. This money reaches the
population that is most likely to spend it thus stimulating the economy. We are
lulled into believing that it is only the teenage worker who is affected by the
minimum wage when they only represent 16% of the minimum wage workers.
The raising of the minimum wage is a part of the movement we
hear about called ‘making work pay’ concept. It works in tandem with the
federal Earned Income Credit as well as some of the living wage mandates
scattered throughout the country. The concept is to create an environment where
it pays to work at lower wages as long as those wages can translate into
something you can live on. The Political Economic Research Institute did a
study on living wage mandates throughout the country in 2004. They concluded “the
weight of the accumulated evidence indicates that living wage laws have an
important impact on the living standards of a modest number of beneficiaries,
while diffusing the costs broadly among city service contractors and the
general public.”
I have frequently discussed the taxpayer being forced to
subsidize poverty wages of the working poor by government programs such as Food
Stamps and Medicaid. We the taxpayers are paying for companies who are
reluctant to pay their employees a living wage. It is a back door subsidy while
companies like Walmart and Tyson Foods reap record profits. There are those who
hate government pushing for an increase in the minimum wage and yet they are
the same who condemn government for helping the working poor.
As the disparity of wealth in our country continues to grow,
it is important to understand the value and necessity of establishing minimum
standards of living for the working poor. There needs to be a bottom line to
keep companies from cost shifting standard of living cost onto the taxpayer in
the form of government assistant programs. Between 1973 and 2007, the value of
the minimum wage fell 22% while at the same time corporate profits rose more
than 50%. We can surmise that from 2007 to present that the gap has only
widened. As our country’s economy moves forward at a slow pace and we witness the
American Dream dying in front of us, we should consider those who struggle to
meet the basic essentials of living as our most vulnerable workers.
Brenner, Mark D. The
Economic Impact of Living Wage Ordinances. 2004. Political Economy Research
Institute, UMass Amerst. Retrieved from www.peri.umass.edu/fileadmin/pdf/working_papers/.../WP80.pdf
Jeannette Wicks-Lim and Robert Pollin. MAKING WORK PAY: COMBINING
THE BENEFITS OF THE EARNED INCOME TAX CREDIT AND MINIMUM WAGE. April 2012. Political
Economy Research Institute University of Massachusetts, Amherst. Retrieved from
http://www.peri.umass.edu/fileadmin/pdf/published_study/PERI_WorkPay.pdf
