At Work

Is the problem the minimum wage?

Olivia Pac, a 24-year-old wheelchair assistant, came to O’Hare on her day off to protest. She said the airport was understaffed to the point where she often ends up pulling two customers in wheelchairs at a time — a practice she said has hurt her wrist and is unsafe for customers.

“We do provide our sweat, blood and tears for these companies, and we do not get the respect, thanks and proper wages we deserve,” she said. “The way these companies treat us on a daily basis is horrendous.”

Kisha Rivera, a 41-year-old cabin worker who moved to Chicago from Puerto Rico four months ago, said her $10.50 hourly wage was “a slap in the face.”

“With what you’re earning, you’re not able to buy food for your family, or take them to the hospital, she said.

Source: New York Times 11-29-16

Looking at the history of the minimum wage throughout the years and applying the CPI to those numbers, a minimum wage of $11.11 is the highest that can be justified in 2016. That is the measure from 1968 when the minimum was $1.60. 

Here is an interactive chart from CNN MONEY that allows you to pick any year and see the impact of inflation. 

Isn’t the essence of the matter whether the Olivia’s and Kisha’s of America will be better off earning $15.00 an hour in the same job after the impact of that wage on prices and other wages currently above $15.00 is fully felt in the economy? 

Bernie Sanders calls for a living wage. There are two components to that, the wage and the cost of living and if you are going to arbitrarily raise the former without productivity gains, you are going to also raise the latter. 

No matter what the minimum wage may be, you will not be better off unless you work in a job that deserves to be paid above the minimum. 

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8 replies »

  1. In 2014, 1.3 million workers earned the federal minimum wage of $7.25 an hour, according to Labor Department data. That was just short of 4% of all hourly workers (less than 1% of all workers). The number of workers earning the federal minimum wage declined from 1.82 million, or 6% of hourly employees in 2010, after the last federal increase was phased in.

    Yesterday, the Bureau of Labor Statistics announced that unemployment nationally was down to 4.7%, and that the labor force participation rate (individuals ages 16+) was down to 62.7 – the lowest level since December 1977 – it was lower in prior years as women had started to increasingly enter the workforce starting in the 1950’s and accelerating throughout the 1960’s with the first of the baby boomers.

    Bottom line, something approaching 100 MM Americans age 16+ don’t have a full time job today. And, something approaching 70MM Americans, ages 16 – 64 don’t have a full time job. Sure, maybe 20MM of those folks are in school, but… that still leaves almost 50MM or so who have given up on work.

    So, why waste time talking about 1 – 2 MM American workers who are paid < $8 an hour? That issue is dwarfed by the lack of growth in the US economy. Remember that Bush II inherited a recession from President Clinton, and people used to call his recovery a "jobless recovery". But, when Bush II left office in January 2009, in the middle of the "Great Recession", the workforce participation rate was 67.3% – so, nearly 5% of working age Americans left the workforce – just gave up – during the Obama Administration. Remember that the "Great Recession" ended in June 2009, when workforce participation was 65.9%! So, it is clear why the DOL and Democrats want you to focus on minimum wage, they don't want people to talk about the destruction of jobs and the regulatory effect that restricted economic growth.

    Or, perhaps you would prefer to talk about the national debt, which has all but doubled in the less than 8 years that President Obama has been in office – doubled the debt he inherited from each and every one of his 43 predecessors. Yes, in Fargo, ND, on August 24, 2011, President Obama called President Bush II "unpatriotic" for adding nearly 4 Trillion in 8 years. President Obama has added 9+ Trillion in his not quite 8 years. On January 20, 2009, when President Obama was sworn in, the debt was $10.626 trillion. Today it's $19,929 billion, and, as we are adding almost $10,000 a second, President Obama will leave office on January 20 just before the debt reaches $20 Trillion! And, no, the debt additions wasn't the result of the Bush tax cuts. President Obama raised tax receipts from $2.1 Trillion (2009) to $3.5 Trillion (2016) in his 8 years. Spending increased that much faster – in part because, since 2010, the R's and the D's in Congress, along with President Obama, have not shown any ability to agree on a budget nor to apply any budget discipline.

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  2. $11.11 is the highest to equal inflation. Why should there be no improvement in minimum wage.
    CEO pay, US Military Pay, Teacher Pay, Police Officer pay, and many other jobs have increased above inflation, if you count the benefits package that many receive. Lower minimum wage has kept many working jobs just above minimum wage with very few increases. Is any one really trying to tell me, in the worlds richest country we cannot afford a $15 minimum wage. I’ am not buying it.. That is only 26,000 after State, Federal, SS taxes. Lower minimum wage is the reason 51% of workers make less than $30,000 per year. Every worker who is providing a service to their employer and contributing to the overall profit stream of the company should be paid well.

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    • Among those paid by the hour, 1.3 million earned exactly the prevailing federal minimum wage of $7.25 per hour. About 1.7 million had wages below the federal minimum. Together, these 3.0 million workers with wages at or below the federal minimum made up 3.9 percent of all hourly paid workers.

      BenefitJack, So, let us go with the 3.9 % number, please tell my why these workers should not be paid a higher wage? Since it affects so few workers there should be no problem giving them an increase. I am not saying it needs to be $15 per hour, but come on this is 2016. The real reason business does not want to see minimum wage increase, is it will push up the wages of workers being paid just above the minimum wage. .

      Minimum Wage Mythbusters from The Dept Of Labor

      Myth: Raising the minimum wage will only benefit teens.

      Not true: The typical minimum wage worker is not a high school student earning weekend pocket money. In fact, 89 percent of those who would benefit from a federal minimum wage increase to $12 per hour are age 20 or older, and 56 percent are women.

      Myth: Increasing the minimum wage will cause people to lose their jobs.

      Not true: In a letter to President Obama and congressional leaders urging a minimum wage increase, more than 600 economists, including 7 Nobel Prize winners wrote, “In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front.”

      Myth: Small business owners can’t afford to pay their workers more, and therefore don’t support an increase in the minimum wage.

      Not true: A July 2015 survey found that 3 out of 5 small business owners with employees support a gradual increase in the minimum wage to $12. The survey reports that small business owners say an increase “would immediately put more money in the pocket of low-wage workers who will then spend the money on things like housing, food, and gas. This boost in demand for goods and services will help stimulate the economy and help create opportunities.”

      Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would hurt restaurants.

      Not true: In California, employers are required to pay servers the full minimum wage of $9 per hour — before tips. Even with a 2014 increase in the minimum wage, the National Restaurant Association projects California restaurant sales will outpace all but only a handful of states in 2015.

      Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would lead to restaurant job losses.

      Not true: As of May 2015, employers in San Francisco must pay tipped workers the full minimum wage of $12.25 per hour — before tips. Yet, the San Francisco leisure and hospitality industry, which includes full-service restaurants, has experienced positive job growth this year, including following the most recent minimum wage increase.

      Myth: Raising the federal minimum wage won’t benefit workers in states where the hourly minimum rate is already higher than the federal minimum.

      Not true: While 29 states and the District of Columbia currently have a minimum wage higher than the federal minimum, increasing the federal minimum wage will boost the earnings for nearly 38 million low-wage workers nationwide. That includes workers in those states already earning above the current federal minimum. Raising the federal minimum wage is an important part of strengthening the economy. A raise for minimum wage earners will put more money in more families’ pockets, which will be spent on goods and services, stimulating economic growth locally and nationally.

      Myth: Younger workers don’t have to be paid the minimum wage.

      Not true: While there are some exceptions, employers are generally required to pay at least the federal minimum wage. Exceptions allowed include a minimum wage of $4.25 per hour for young workers under the age of 20, but only during their first 90 consecutive calendar days of employment with an employer, and as long as their work does not displace other workers. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive the current federal minimum wage or the state minimum wage, whichever is higher. There are programs requiring federal certification that allow for payment of less than the full federal minimum wage, but those programs are not limited to the employment of young workers.

      Myth: Restaurant servers don’t need to be paid the minimum wage since they receive tips.

      Not true: An employer can pay a tipped employee as little as $2.13 per hour in direct wages, but only if that amount plus tips equal at least the federal minimum wage and the worker retains all tips and customarily and regularly receives more than $30 a month in tips. Often, an employee’s tips combined with the employer’s direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage. When that occurs, the employer must make up the difference. Some states have minimum wage laws specific to tipped employees. When an employee is subject to both the federal and state wage laws, he or she is entitled to the provisions of each law which provides the greater benefits.

      Myth: Increasing the minimum wage is bad for businesses.

      Not true: Academic research has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs.

      Myth: Increasing the minimum wage is bad for the economy.

      Not true: Since 1938, the federal minimum wage has been increased 22 times. For more than 75 years, real GDP per capita has steadily increased, even when the minimum wage has been raised.

      Myth: The federal minimum wage goes up automatically as prices increase.

      Not true: While some states have enacted rules in recent years triggering automatic increases in their minimum wages to help them keep up with inflation, the federal minimum wage does not operate in the same manner. An increase in the federal minimum wage requires approval by Congress and the president. However, in his call to gradually increase the current federal minimum, President Obama has also called for it to adjust automatically with inflation. Eliminating the requirement of formal congressional action would likely reduce the amount of time between increases, and better help low-income families keep up with rising prices.

      Myth: The federal minimum wage is higher today than it was when President Reagan took office.

      Not true: While the federal minimum wage was only $3.35 per hour in 1981 and is currently $7.25 per hour in real dollars, when adjusted for inflation, the current federal minimum wage would need to be more than $8 per hour to equal its buying power of the early 1980s and more nearly $11 per hour to equal its buying power of the late 1960s. That’s why President Obama is urging Congress to increase the federal minimum wage and give low-wage workers a much-needed boost.

      Myth: Increasing the minimum wage lacks public support.

      Not true: Raising the federal minimum wage is an issue with broad popular support. Polls conducted since February 2013 when President Obama first called on Congress to increase the minimum wage have consistently shown that an overwhelming majority of Americans support an increase.

      Myth: Increasing the minimum wage will result in job losses for newly hired and unskilled workers in what some call a “last-one-hired-equals-first-one-fired” scenario.

      Not true: Minimum wage increases have little to no negative effect on employment as shown in independent studies from economists across the country. Academic research also has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs.

      Myth: The minimum wage stays the same if Congress doesn’t change it.

      Not true: Congress sets the minimum wage, but it doesn’t keep pace with inflation. Because the cost of living is always rising, the value of a new minimum wage begins to fall from the moment it is set.

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      • You raise one point that is critical. That is salary compression. Going too high say $15.00 an hour bumps up against millions of workers earning between $7.25 and say $18.00 to $19.00 an hour now. Some unions have already stated their intention to renegotiate contracts if the rate gets to $15.00

        Raising pay without productivity gets us nowhere except price inflation. Raising the minimum while people remain in the same jobs is treading water and nothing more for these people.

        It’s also a myth that raising the MW will help struggling households as Sanders says. The vast majority of MW workers are not heads of households.

        Search minimum wage on this blog and you will see some stats.

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      • At least with a raise in wages, even if prices go up, workers will have more money and they can chose what to spend it on. Low prices with low wages gets us nowhere. I read where at $15 per hour at McDonald’s, the increase could be covered with a $1 increase in the value meal. We have to look at what does the worker provide to the company in profit, per hour worked. Most fast food workers do not even work 40 hours per week. I have 2 friends that work 2 fast food jobs 7 days per week just to get in 40 hours. We are really not talking about a lot of workers or money. One guy owns all 3 McD’s in my town and has a very high turn over rate, I wonder why. Low wages and poor working conditions, my son worked there for 3 days back in 1998, walked out, never looked back and joined the USAF. He is now in College and will graduate with a degree in engineering next year.

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      • Your son appears to be a good example. Those jobs are not intended to be careers. At $31,200 for 40 hours that MW bumps up against some starting salaries for teachers and police officers. I just can’t see it.

        I started in my first job in 1961 at $1.49 an hour slightly above MW. Adjust that for inflation to 2016 and you only get $12.05.

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      • That’s the problem, $7.25 is not $12.05. Also, in a rich nation like ours, is it fair to keep minimum wage this low. If minimum wage was $12.05, I am not sure we would have people protesting low wages in the numbers we see today. .

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  3. I am not a fan of $15hr for minimum wage. But since the middle class is disappearing we only have high tech, high skill wage jobs and no tech low wage skill jobs. I have been questioning what the correct wage should be. There can only be so many high skill jobs and our economy is becoming more and more service and retail based.

    So, what are the costs to live and work? First there are taxes, income, social security, Medicare, etc. You will need access to the internet if you want to find a job, do banking, fill out government and or insurance forms. Mandatory medical insurance which can cost $5k, $10K, and over $25K/yr for a family. The worker making $10 hr pays the same premium as the worker making $50 hr at my employer. You can see the low skill worker is going to be paying a much higher percentage of their wages for mandated health insurance leaving little for other expenses. Workers do not get a choice on buying insurance like they do with tattoos.

    Then there is food, shelter, transportation. If these workers give up their tattoos they would be able to fund their retirement but I know very few who get weekly tattoos. You may say they these
    people should not have started families until they have that high skill job. But maybe they had that middle-class job and were down size and they do not have the right skill set anymore but still have the family. In the inner cities, its seem that families are downsized leaving one parent to raise the family.

    Now you say that there are subsidizes for health insurance, student loans, job training programs (not too many high-tech ones), free school lunches, and etc but my question is; how high must the wage be so that the government (as in me, the taxpayer with a good job) doesn’t have to make up the wage difference? It is clear to me if we pay them more then less taxes can go to welfare and social programs and more to paying down the debt (I can dream about paying down the debt).

    How come dinners can hire waitresses at $2.13 (federal min wage for waitresses) and keep them? Are all the waitresses on welfare? Why don’t they quit for a better paying job? This kind of proves that $15hr is not necessary. The law of supply and demand has kept their wages low.

    Minimum wage jobs should be the entry level job, jobs for high school students and a like. But retail jobs at Walmart or Home Depot, or even pushing wheel chairs are full time permanent jobs in today’s economy. These companies follow the law and keep hours low enough so that they do not have to provide health insurance and if they do they keep wages low to help pay for benefits. I do not blame the companies, it is smart business if they want to stay in business, keeping thousands under employed.

    I know that $15hr is not the right answer, but in New Jersey, the current minimum wage might be too low. I agree raising the minimum wage will raise the cost of living too and it is an endless cycle. There is not a one size fit all solution but at the same time if there is not a national solution, jobs that can move will move from state to state or even out of the country.

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