The Minimum We Can Do

12/11/13
 
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By ARINDRAJIT DUBE,

from The New York Times,
11/30/13:

During most of the 20th century, wages in the United States were set not just by employers but by a mix of market and institutional mechanisms. Supply and demand were important factors; collective bargaining and minimum wage laws also played a key role. Under Presidents Franklin D. Roosevelt and Richard M. Nixon, we even implemented more direct forms of wage controls.

These direct interventions, however, were temporary, and unions have become rare in most parts of the United States — virtually disappearing from the private sector. This leaves minimum wage policies as one of the few institutional levers for setting a wage standard.

Of course, if most minimum wage workers were middle-class teenagers, many of us might shrug off concerns about their wages, since they are taken care of in other ways. But in reality, the low-wage work force has become older and more educated over time. In 1979, among low-wage workers earning no more than $10 an hour (adjusted for inflation), 26 percent were teenagers between 16 and 19, and 25 percent had at least some college experience. By 2011, the teenage composition had fallen to 12 percent, while over 43 percent of low-wage workers had spent at least some time in college. Even among those earning no more than the federal minimum wage of $7.25 in 2011, less than a quarter were teenagers.

Support for increasing the minimum wage stretches across the political spectrum. As Larry M. Bartels, a political scientist at Vanderbilt, shows in his book “Unequal Democracy,” support in surveys for increasing the minimum wage averaged between 60 and 70 percent between 1965 and 1975. As the minimum wage eroded relative to other wages and the cost of living, and inequality soared, Mr. Bartels found that the level of support rose to about 80 percent.

These patterns show up in recent survey data as well, as over three-quarters of Americans, including a solid majority of Republicans, say they support raising the minimum wage to either $9 or $10.10 an hour.

But the popularity of minimum wages has not translated into legislative success on the federal level.

As a result of legislative inaction, inflation-adjusted minimum wages in the United States have declined in both absolute and relative terms for most of the past four decades. The high-water mark for the minimum wage was 1968, when it stood at $10.60 an hour in today’s dollars, or 55 percent of the median full-time wage. In contrast, the current federal minimum wage is $7.25 an hour, constituting 37 percent of the median full-time wage. In other words, if we want to get the minimum wage back to 55 percent of the median full-time wage, we would need to raise it to $10.78 an hour. For the type of minimum wage increases we have implemented in the United States, the best evidence shows that the impact on jobs is small, although there is still a debate in the literature.

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