Issue Position: Raising the Minimum Wage

Issue Position

In 1938, Congress passed the Fair Labor Standards Act, establishing the original federal minimum wage -- 25 cents per hour. Today, the minimum wage is $7.25; the last time it was raised was in 2009.The minimum wage had its lowest buying power in 1948, when it was worth about $3.81 in today's dollars, and its highest buying power in 1968, when it was worth about $10.56 in today's dollars.

In 2014, approximately 3.7 million Americans are hourly- paid workers with wages at, or below, the federal minimum. But over 30 million workers are stuck in a wage range lower than the $10.56 in 1968 adjusted dollars. Notwithstanding the talking points issued by opponents of raising the minimum wage, most minimum wage employees are not high school kids working after school or summer jobs. Often, they are college-educated, in their twenties and thirties, have no health insurance, no paid sick leave, and often don't work full-time. Many are women with dependent children.

Opponents of raising the minimum wage continue to argue that it would be a "job killer," because businesses will be less likely to hire low-skilled workers if it cost them more to do so. And yet, again and again, researchers have found that raising the minimum wage, whether on the national, state, county, or municipal level has no negative effect on employment -- not even during hard economic times such as these.

For instance, a study published in 2010 in the Review of Economics and Statistics, found "no detectable employment losses from the kind of minimum wage increases we have seen in the United States." Two other recent studies -- the first by economists Hristos Doucouliagos and T.D. Stanley in 2009, and the second by econometrics experts Paul Wolfson and Dale Belman in 2013 -- have concluded that modest minimum wage increases have little to no significant negative employment effects.

In fact, some studies have found employment actually increases slightly when a minimum wage is raised, because it has the effect of reducing turnover, and forcing firms away from a low-human capital investment model to one where workers stay attached to the workforce and employers make stronger investments in training.

Moreover, by putting an additional $40 billion of additional earnings into the pockets of minimum wage workers, who will then promptly spend that money into the economy, it is estimated that upwards of 140,000 new jobs will be created over a three year period, increasing the Gross Domestic Product (GDP) by $25 billion. So not only does raising the minimum wage not cause job losses, it actually creates jobs by increasing the demand for goods and services.

Henry Ford appreciated this dynamic 100 years ago, when he decided to pay his workers an unheard of wage of $5 per day. He knew that if his own employees couldn't afford to buy the cars they, themselves, made, he would never make a profit. His understanding of this basic principle of economics allowed him to become one of the world's richest men, while concurrently helping to build the great American middle class. (And, by the way, if you extrapolate the $5 per day wage earned by his employees into 2014 dollars, it would come out to about $14.67 per hour. Sad to think that today's minimum wage workers are making only half of what their forebears made a century ago.)

Another argument voiced by those opposed to raising the minimum wage is that consumer prices will rise sharply as businesses struggle to meet increased costs. Again, the weight of evidence from the economic literature negates these claims -- the overall business costs resulting from moderate wage increases are modest and can be absorbed by slight price increases coupled with lower employee turnover.

The truth is, the majority of low-wage workers in America are not employed by small businesses, or mom and pop operations, but rather by large international brands that can more than afford to pay their workers a little extra money. The three largest low-wage employers in the United States are Walmart, Yum! Brands (operator of fast-food chains Pizza Hut, Taco Bell, and KFC) and McDonald's. Each was profitable during all of the past three fiscal years, and each earns profits that are substantially higher than their pre-recession levels.

So, why do 91 percent of all Democrats, 74 percent of Independents and even 50 of all Republicans favor raising the minimum wage? Well, first of all, it is the right and moral thing to do. Nobody in the richest country in the world, who works hard, should have to live in poverty, unable to afford life's basic necessities for themselves and their families. Did you know that in the United States, the 2014 two-bedroom Housing Wage is $18.92? This national average is more than two-and-a-half times the federal minimum wage, and 52% higher than it was in 2000. In no state can a full-time minimum wage worker afford a one-bedroom or a two-bedroom rental unit at Fair Market Rent.

But there is also self interest at play. Taxpayers are better off when the minimum wage goes up because they have to bear fewer of the negative externalities -- such as the costs of food stamps and Medicaid -- that low-wage workers must rely upon because, even when they work full time, their inadequate incomes keep them below the poverty line. Is it fair that we should all absorb the costs of keeping these productive workers out of poverty rather than demand that their giant mega-corporate bosses bear the expense?

The current salary for a United States Congressperson is $174,000 per year. And since many congressional critics believe that the last session of Congress was one of the least productive in a generation, the most revealing thing that can be said about Congress and the minimum wage was perhaps best summed up by comedian Jay Leno:

"Believe me, when it comes to doing the minimum for their wage, Congress knows what it's talking about."

It's time for Congress to do the right thing by the American people and raise the minimum wage. I stand with those who want to lift millions of working Americans out of poverty, grow the economy, and restore a sense of fairness and equity to our social, political and financial systems.

If you agree, hire me.

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