The New Minimum Wage

Welcome to an ever so slightly better today. The first phase of the minimum wage increase passed by this Congress takes effect today, raising the minimum that an employer can legally pay an employee from $5.15 to $5.85 per hour.  While I'm happy for this much needed increase, it is painfully obvious that it isn't enough. 

It has been almost a decade since the last time Congress increased the minimum wage, the longest stretch of drought since the minimum wage was enacted in 1938.  Taking inflation into account, the increase to $5.85 is still far less than what it was equivalent to at the time of the last increase,  $6.67 in today's dollars, and far far less than its buying power at its peak in 1968, worth $9.56 in today's dollars.

For now, someone working full-time (2,080 hours a year) earning $5.85 an hour would earn $12,168 a year.  This is well below the 2007 federal poverty line of $17,170 for a family of three.  Think about a single mother trying to support her kids.  Is this just?

The economic disparity is even more stunning when we take into account the increase in CEO wages during this same time period.  Since the 1980s  - three decades - analysts have been saying that CEO pay is out of control and yet it keeps getting worse.

In 1980, the average large-corporation CEO made the equivalent of 97 minimum wage workers. Ten years ago, CEOs made as much as 728 minimum wage workers.  Last year, CEOs made as much as 1,419 minimum wage workers.  On average, CEOs make more in 90 minutes than minimum wage workers make in a year.  I'm not denying that some jobs carry more importance/require more skill and thus should be better compensated.  But I do question whether the head of McDonald's is really worth 1,419 times more than the person who is serving me my french fries.  Is 90 minutes of anyone's time worth a year of another person's? 

It doesn't have to be this way.  People argue that increasing the minimum wage to something that is actually liveable will hurt business, but repeatedly businesses have shown this isn't true.  Compared to Walmart, who is notorious for how badly they've treated their employess, Costco employees start at over $10/hour, and Costco is not hurting for business.   According to Costco CEO Jim Sinegal, "Paying your employees well is not only the right thing to do, but it makes for good business."

A just minimum wage isn't only an ethical imperative, it also makes sense economically. A just minimum wage puts more purchasing power in the hands of consumers, reduces employee turnover, and raises worker morale and productivity.  Higher worker wages benefit business by increasing consumer spending, reducing costly employee turnover, raising worker morale and productivity, and improving product quality and company reputation.

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Acknowledgments

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