Why The Minimum Wage Should Be Raised
August 16, 2012 7:39 am
On July 25th, a chorus of voices called for the minimum wage to be raised.
A new report from the Economic Policy Institute advances their position considerably, and seeks to dispel the misconception that workers making minimum wage are teenagers working part-time for pocket money.
The report, by Doug Hall and David Cooper, studies the real effects of proposed legislation recently introduced in the House and Senate:
On March 29, Sen. Tom Harkin (D-Iowa) introduced the Rebuild America Act, which includes an increase in the federal minimum wage from the current $7.25 (where it has been for three years) to $9.80 via three incremental increases of $0.85, after which it would be indexed to inflation. The tipped minimum wage (the minimum wage paid to workers who earn a portion of their wages in tips) would also be increased in $0.85 increments from its current value of $2.13 per hour, where it has languished since 1996, until it reaches 70 percent of the regular minimum wage. On July 26, Sen. Harkin introduced a stand-alone minimum-wage bill containing these provisions, S. 3453, The Fair Minimum Wage Act of 2012. On the same day, Rep. George Miller (D-Calif.) introduced legislation in the House of Representatives, H.R. 6211, mirroring Harkin’s minimum-wage legislation.
The study’s surprising statistics make a strong case for the proposed bills. Specifically, the wage will provide an economic shot-in-the-arm by giving money to low-wage workers who are likely to spend it immediately. Using accepted methodology, Cooper and Hall determine that a wage increase wouldn’t kill jobs, and instead would be responsible for the creation of 100,000 new positions. That number may appear to be a six-figure drop in the bucket against America’s 13 million unemployed, yet the report states that these same tough economic conditions would allow employers to continue to keep wages low should lawmakers not intervene.
The key findings are as follows:
- Increasing the federal minimum wage to $9.80 by July 1, 2014, would raise the wages of about 28 million workers, who would receive nearly $40 billion in additional wages over the phase-in period.
- Across the phase-in period of the minimum-wage increase, GDP would increase by roughly $25 billion, resulting in the creation of approximately 100,000 net new jobs over that period.
- Those who would see wage increases do not fit some of the stereotypes of minimum-wage workers.
- Women would be disproportionately affected, comprising nearly 55% of those who would benefit.
- Nearly 88% of workers who would benefit are at least 20 years old.
- Although workers of all races and ethnicities would benefit from the increase, non-Hispanic white workers comprise the largest share (about 56%) of those who would be affected.
- About 42% of affected workers have at least some college education.
- Around 54% of affected workers work full time, over 70% are in families with incomes of less than $60,000, more than a quarter are parents, and over a third are married.
- The average affected worker earns about half of his or her family’s total income.
The average minimum wage worker, according to the report, is an educated, white, female adult, who works full-time and earns a large portion of her family’s total income. This profile stands in stark contrast to the stereotype of the teenager working a fast-food job for the summer.
The powerful service and retail lobbies have vested interests in keeping wages low. But with jobs and the economy positioned as the central issues for Election 2012, the question is not whether we can afford to raise the wage — it’s whether we can afford not to.