A senate vote to approve an amendment by Sen. Joni Ernst (R-Iowa) to “prohibit the increase of the federal minimum wage during a global pandemic” most likely means that a $15 federal minimum wage hike will not be in the Democrats’ final reconciliation bill.
The idea of a $15 minimum wage being passed, before or after the end of the pandemic for that matter, was most likely always fraught with hurdles. Would small businesses, which may not be able to produce the necessary margins, be exempt from the bill? Would there be any bipartisan support for the measure from the start? Is a doubling of the minimum wage in a matter of just five years a case of too much too soon?
Across the U.S. political spectrum, there are mixed feelings about even the existence of a minimum wage with more strident libertarians arguing such a measure creates a race to the bottom and serves to stagnate wages. Meanwhile, some who find themselves further left economically argue the minimum wage should be a living wage before arguing $15 itself is not a livable wage in some areas of the nation.
All of this to say, there is not an easy solution to this discussion. The minimum wage was last raised between 2007 and 2009 when it grew incrementally from $5.15 to $7.25 per hour over that period. I myself worked my first job during the midst of the increase at a rate of $5.85 at a local restaurant.
But while $15 per hour would potentially be too high of a mark for Pulaski, Tenn., there is a real argument to be made that with the increased cost of housing, education and health care over the last few decades in the U.S., the minimum wage should be increased by some measure.
According to a report from the publication, Business Insider, when adjusted to modern day standards based on inflation and cost of living, the effective minimum wage in the U.S. was above $10 per hour in purchase power for roughly 20 years from the early 60s to the early 80s. Other publications disagree on this exact number with some stating the number at closer to $9 per hour and some as large as $12.
The current minimum wage of $7.25 has lost roughly 15 percent of its purchase power since 2009, meaning it is now the equivalent of about $6.15 in that year’s currency.
So, if one does believe in the existence of a minimum wage, it may very well be time for an increase of some sort. Several states as well as the District of Columbia have minimum wages above the federal mark. Meanwhile some states have minimum wages below the federal mark such as Georgia and Wyoming, which each have a rate of $5.15 per hour. In the case of states where the minimum wage is lower than the federal mark, minimum wage defaults to the federal $7.25 per hour.
I personally would venture an increase to a $10 federal minimum wage over the course of two years may be a strong proposal. In the lead up to the 2016 election, candidates on both sides of the aisle toyed with the idea of a $10 minimum wage, though, the measure was never passed.
Many will argue that an increase in the minimum wage would result in rapid inflation, but this is not necessarily the case, and a modest increase to the minimum wage may even be good for the economy. Although the figures are different for every field, employees’ wages usually compose roughly 20-30 percent of the cost of goods and services in low wage industries. Thus, if the minimum wage was increased by roughly 38 percent as in this $10 proposal, the cost of goods would need only increase by around 8-13 percent to maintain a similar bottom line for businesses that employ minimum wage labor.
While this increase in the cost of goods in low wage industries would seem significant to some, the increase in wages of as much as 38 percent for millions of Americans would significantly increase their buying power, thus infusing money back into the economy through their expanded consumerism. It is important to remember that while minimum wage workers are often high school teens, more than half of all workers who are reported to receive the minimum wage or less are above the age of 25, according the U.S. Bureau of Labor Statistics.
If the minimum wage was raised, how then could we avoid it simply falling again as it has over the past 40 years?
The answer would most likely be found in tying the minimum wage to a metric estimating purchase power based on general inflation and more specifically the increase in costs for necessities such as food, housing and health care. The federal minimum wage would then be re-adjusted at the beginning of each budget year, and individual states and local municipalities would still be free to increase their minimum wage even higher if they deemed the federal number did not reflect the local economy.
Of course, such possibilities are far off and would most likely require at least some level of bipartisan support. However, once again, it’s important to note that recent presidential candidates from both parties have supported a comparable minimum wage increase, so an increase to $10 might not be as far off as it might seem.
In the meantime, it’s imperative we look out for those who may be struggling to make ends meet. Treat restaurant staff and other lower wage industries with patience and respect. Tip well when you appreciate the good service you have received and donate to local churches and food pantries that aid those less fortunate.
Low wage workers are an important part of an economy, filling roles in industries we could not function without. A modest minimum wage increase is one way we can thank and look after them.