Raising Minimum Wage: A Help Or Harm?
Originally published on Sun July 8, 2012 8:55 pm
Back in 1912, Massachusetts became the first place in America to introduce a minimum wage, but it would take another quarter century before a national minimum wage was set.
President Franklin Roosevelt made it law in 1938, that any hourly worker had to be paid at least 25 cents an hour. It was revolutionary, and very few countries had anything like it.
Every few years, the federal minimum wage would go up, helping millions of Americans inch closer to a middle-class lifestyle. Something changed in the early 1970s, however, and since then, the minimum wage has fallen by around 25 percent.
Fast-forward to today. The minimum wage is currently $7.25. But in 1968, you'd make the equivalent of $10 an hour in today's money.
"Think about the people that in 1968 got the minimum wage, [and] then think about the group today," says Sen. Tom Harkin of Iowa. "It's basically the same group, but they have 30 percent less buying power."
Harkin, a Democrat, has introduced a bill in Congress to raise the minimum wage to $9.88 an hour. For millions of Americans, an increase in the minimum wage could make a huge difference, but the battle has not been easy.
Fighting For More
In 2008, President Obama campaigned on a promise to raise the minimum wage. He hasn't. Mitt Romney has said he supports pegging minimum wage to inflation, but recently backtracked, and he now opposes an increase.
According to the Economic Policy Institute, if Harkin has his way and the minimum wage was actually raised to $9.88 an hour, it would increase wages for 30 million Americans — 10 percent of the country.
Harkin tells weekends on All Things Considered host Guy Raz that his proposed increase would give hourly wage earners more spending money to help improve the economy.
"People who are making the minimum wage, basically they're spending just about all their money because they don't have much left," Harkin says. "So if you give them a raise, it means more for our gross domestic product."
Harkin estimates that his minimum wage increase would mean about $25 billion more for GDP, 100,000 more jobs and 28 million Americans would get a raise.
To those that say raising the minimum wage would actually increase unemployment, Harkin says there's simply no proof of that. He says they've found that when minimum wages were increased, employment actually went up.
Harkin says he's not "Pollyannish" about the prospects of the bill, and doesn't think Republicans will let it go through. But it is important, he says, to bring it up so that Americans will know where Democrats stand on an issue as fundamental as keeping the minimum wage at a level that provides a decent support for people that are very poor.
"If my proposal went through, a $15,000 a year worker will make $20,000 a year," he says. "You know $5,000 a year is significant to someone in that category. [It] may not get them out of poverty, but it makes life better."
Surviving On Minimum Wage
Every morning at 1 a.m., 50-year-old Margaret Lewis rolls out of bed to start the workday. She works as a transporter for the disabled at O'Hare International Airport making minimum wage. Compared to a lot of hourly workers, however, she's lucky. In Illinois, the minimum wage is a dollar higher than the national rate.
Lewis lives in one of the roughest parts of Chicago's South Side — Englewood — with four of her children in a modest, three-bedroom apartment. All of her children who live at home are in school, and that's the reason she took the early shift — to make sure her kids are fed and get to school.
Lewis works full time and works hard, but even with tips, her annual salary about $18,000 — is still about $10,000 below the U.S. poverty level for a household her size.
It takes an entire paycheck, she tells Raz, to cover back-to-school shoes for the kids. Clothes come from thrift stores, food stamps help a lot, and her monthly rent is $850.
"I never can pay a whole rent," Lewis says. Her family covers the remaining rent by doing work for the landlord. "We do janitor work around [and] keep the grass cut. In the winter, we make sure the porch is shoveled."
In the past year, two people have been killed on her block. In the morning, when her kids have to get themselves off to school, she worries. She says the last shooting was a few months ago and unfortunately it happened at the same time her son was leaving the block going to school, when the bullets rained out.
"That was the most scariest moment of my life," she says. "You know it's not the greatest neighborhood, but if I move, it'll be in the neighborhood of this [type] as well because that's where the most affordable rent that fits my budget will be in."
A $1 increase an hour would mean more than $2,000 a year for someone like Lewis.
"It might not sound a lot to most people, but to me that much in a year would make a big difference in my household," she says.
The Business Of Minimum Wage
Opponents of Harkin's minimum wage bill point to jobs, saying that with such high unemployment, an increase in the minimum wage will make a bad situation worse.
Joe Olivo owns a small printing press in New Jersey that employs 47 people. Olivo tells Raz that a higher minimum wage basically raises the whole wage scale and would force him to make cuts.
"What happens is the employee who's been here for 3 years and has more experience than a person making an entry-level wage, they will rightfully want more for their seniority," Olivo says. "So what it does to me as a business owner, by pushing up wage scale, it increases my expenses."
Olivo says that means he either has to increase revenues — difficult in the current economy — or he must find ways to cut expenses: cutting employees, not hiring new employees or bring in new technology to decrease the number of employees he needs.
"So it really hurts my current employees and it also prevents me from bringing on new ones," he says.
Bill Dunkelberg, chief economist for the National Federation of Independent Businesses, a group that lobbies against increasing the minimum wage, says that every dollar an employee gets comes out of somebody's pocket. He says it's not logical that raising the minimum wage will add more spending money to the economy.
"It's not the job of businesses to turn themselves into social service providers and pay in excess of value to the firm," Dunkelberg says. "We do have something called the earned income tax credit, where we provide supplemental income to people who are working but need more money."
Right now, 18 states have set minimum wage rates slightly higher than the national level, while four states actually have exemptions and even lower minimums.