Mary Takgbajouah
Professor Raleigh
Rhetoric and Critical Inquiry
18 October 2016
Minimum Wage
Minimum wage is the lowest wage an employer can legally pay any one of their employees. The notion of a minimum wage was created in 1938 during the depression when the Fair Labor Standards Act was passed by Congress. The goal of the act was to ensure that workers would be able to support themselves and maintain a certain standard of living that was deemed appropriate and healthy by the government. The first federal minimum wage for workers engaged in interstate commerce was twenty-five cents an hour. It rose in 1950 to seventy five cents an hour, and again in 1956, 1963, and 1968. In 1974, when the federal minimum wage was approved to be raised to $2.30 an hour, Congress passed a bill that extended the rules of minimum wage to reach an additional eight million people, some of whom were government, chain, and domestic workers. In 1989, legislation passed stated that the rules surrounding minimum wage applied only to businesses that take in more than $500,000 yearly. Since the first federal minimum wage was established seventy-eight years ago, it has risen only seven dollars and has not increased in the last nine years (“Minimum”). The federal minimum wage was established to keep workers out of poverty and ensure that they could live a healthy and comfortable life.
After taking into account the massive inflation the United States’ economy has experienced over the past seventy-eight years, today’s federal minimum wage of $7.25 an hour is only 1.8 times larger than the first federal minimum wage of twenty-five cents an hour (Wihbey). Having a federal minimum wage is a concept that has been around for nearly a century, yet it continues to evolve as society grows and changes. Raising the federal minimum wage to around ten dollars an hour would roughly equate the original federal minimum wage after factoring in the inflation the economy has gone through since then. While this may have some small negative affects on the economy and job force, the benefits would greatly outweigh these minute losses. Since the cost of living is so high and is continually rising, the federal minimum wage should be raised to ten dollars if not a higher amount.
Whether the federal minimum wage should be raised or not is a controversial topic that has been debated for decades. Historically, people who support raising the minimum wage have been liberal while critics tend to be conservative. Today, around eighty-five percent of democrats support raising the federal minimum wage while less than fifty percent of republicans do. In 2014, Democratic Congressmen introduced legislation to increase the federal minimum wage to $10.10 an hour. Despite having the support of current President Obama and a large portion of Americans, this proposed increase received a lot of backlash. Some business groups oppose this or any raise, saying that raising the minimum wage will only raise prices for consumers and force employers to eliminate low skill jobs. They believe this would just send more people below the poverty line and negatively impact the economy. Opponents also believe that raising the minimum wage would mainly just benefit teenagers working part-time jobs for spending money instead of the millions of low income families living in poverty. Supporters of a higher minimum wage believe that it would actually boost the economy because it would give more people more money to circulate back into the economy (Mantel). In recent elections, the topic of minimum has been increasingly popular as working Americans demand a hike from the $7.25 an hour federal minimum wage that was set in 2007 and implemented in 2009. The value of the federal minimum wage is a topic that continues to be argued and debated back and forth by workers, economists, politicians, and employers.
While there is of course a chance that an increased minimum wage could lead to companies cutting jobs to save money, the nonpartisan Congressional Budget Office (CBO) reported that it is likely that raising the minimum wage to $10.10 an hour would only terminate 500,000 jobs nationwide while significantly increasing the earnings of at least 16.5 million low wage workers. According to the CBO, the amount of people who would benefit from a raised minimum wage would greatly outweigh the few jobs that would be lost (Wihbey). Economists also say that when the minimum wage is raised, employees have a tendency to stay with a company for longer. This reduces employee turnover and therefore saves employers recruitment and training costs, which counterbalances the cost of paying employees the higher salaries (Mantel). And, although employers may raise prices to offset a raised minimum wage, a Purdue University study showed that raising the federal minimum wage to $15 in fast food restaurants would increase prices only by 4.3% (Wihbey). Therefore, it is probable that raising the minimum wage to the proposed $10.10 an hour would result in an even smaller price increase while greatly increasing the income of millions of workers.
Inflation is constantly devaluing the minimum wage. Since the federal minimum wage was last raised to $7.25, it’s true value has fallen to where it was in 1998 due to inflation (Neuman). Considering inflation but not taking into account the changes in standards of living between 1938 and today, the federal minimum wage would have to be increased to around $10 an hour in order to be equal to the first minimum wage deemed livable (Wihbey). Because of this, the current federal minimum wage of $7.25 an hour is widely believed no longer to be the equivalent of a living wage. In 2012, 1.6 million Americans earned the federal minimum wage, most of whom are female and worked part time (Mantel). Yet, if the proposed $10.10 minimum wage were adopted, liberal economists believe that a “ripple effect” would occur and instead of only the 1.6 million people making minimum wage receiving an increase in pay, it is estimated that nearly thirty percent of the American workforce would receive a raise (Wihbey). In addition to the 1.6 million workers at minimum wage receiving an increase, the seventeen million people making between $7.25, the current federal minimum wage, and $10.10 would also receive a raise. Employers would then have to alter their pay scales, and the eleven million people who make slightly more than $10.10 would also receive raises as a result of the minimum wage being raised (Mantel). Based on this ripple effect, raising the minimum wage would benefit a lot more than just the majority teenagers who work minimum wage jobs for pocket money.
According to a study done at the University of Illinois, roughly forty-four percent of workers in the food industry have a family member receiving at least one type of public aid, thirty-five percent of agricultural workers, and thirty percent of retail workers. Each year, American taxpayers pay about $243 billion to provide public aid to low income families. While the majority of minimum wage workers are teenagers, the vast majority of workers receiving just over the minimum wage are over twenty five and more than half are working full time (Mantel). Based on the ripple effect, these low income people and families would receive raises as well, which in theory would reduce the amount taxpayers have to pay each year for public aid. Because of this, raising the minimum wage would not only help low income families, it would also decrease the amount taxpaying americans have to pay each year to provide public aid to said low-income families.
On the other hand, opponents of a higher minimum wage say that the issue is not the salary of the eleven million workers earning slightly more than $10.10, it is the amount of hours they work each week. Richard Burkhauser, an economist at Cornell University in Ithica, New York, says that the number of employees who have had their hours cut or who cannot find full time work has doubled since 2007 (Mantel). It is also believed that since sixty percent of people considered poor in the United States don’t work, raising the federal minimum wage would do nothing to help the poverty that is plaguing America (Dunkelberg). People who are against raising the minimum wage also say that many of the workers who earn less than the proposed $10.10 minimum wage belong to middle class families. An economist from the center on Budget and Policy Priorities analyzed that only twenty-six percent of the benefits from the proposed $10.10 an hour minimum wage would go to the bottom ten percent of working families with a net income of $20,000 a year. However, supporters of a raised minimum wage believe that the poverty threshold in America, set at $14,937 a year for a family of two, is much too low considering the standard of living in America today (Mantel). If the poverty threshold were to be adjusted to factor in the current standard of living, some of these “middle class families” would actually be considered poor.
It has been heavily debated whether raising the minimum wage would benefit the economy and lift people out of poverty, or cut jobs and end up hurting low wage families that fall below the poverty line. While five states have no minimum wage, twenty-nine states and Washington D.C have established a minimum wage that is higher than the current federal minimum wage. California recently became the first state to raise their minimum wage to $15 an hour in increments over the next six years, a salary that has been extremely controversial in recent minimum wage debates. New York and Washington D.C were quick to follow and both will raise their minimum wage to $15 by 2020 (“State”). Fifteen states have adopted a process that automatically raises the minimum wage each year according to inflation to match the increase in prices (Kimball). Although it’s been two years since the Democratic Congress proposed the $10.10 an hour federal minimum wage raise, many states have taken the initiative and raised their minimum wage above the federal minimum wage.
In the time since the two year Great Recession ended in 2009, shortly after the federal minimum wage was raised to $7.25 an hour, the United States’ economy as a whole has grown. As minimum wages have increased across the nation, unemployment has decreased to five percent, half of what it was in 2009 (Price).
On January1, 2014, thirteen states raised their minimum wage. The number of jobs in the thirteen states that raised their minimum wage grew an average of .24 percent more than the number of jobs in the thirty-seven states that didn’t raise their minimum wage (Neuman).
At the beginning of 2016, fourteen states raised their minimum wage. This directly increased the salary of 2,760,000 workers and indirectly lifted the wages of over 4.6 million workers across the country as a result of the ripple effect (Kimball).
As the economy keeps on fluctuating and the standard of living in America continues to increase, the value of the minimum wage will keep changing and continue to be debated. America’s federal minimum is notoriously low by international standards and equals just thirty-eight percent of the 2011 median wage (Neuman).