The Next Minimum Wage Fight

The second of three annual minimum-wage increases enacted by Congress goes into effect today, raising the wage floor to $6.55 an hour. Late Wednesday the Campaign for America's Future focused on this positive development for workers in its latest issue alert [1].

As we cheer that increase, it's important to gear up for the next fight: a permanent indexing of the minimum wage to inflation.

The next Congress will face that decision even as the final stage of the 2007 legislation raises the federal minimum wage to $7.25 an hour a year from now. Sen. Barack Obama has said that he would propose such an indexing if he becomes president, and the idea has strong support among congressional Democrats. But don't underestimate the fight that has to be waged to get that accomplished.

Ten states—Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont, and Washington—have already indexed their minimum wages to the federal government's consumer price index. But the lower house of the Wisconsin state legislature earlier this year killed legislation that would have indexed that state's minimum wage. The arguments used against the measure [2] are all of the old arguments conservatives always use when the topic of increasing the minimum wage comes up: low-skilled workers will lose jobs, African-American unemployment will go up, and costs will go up significantly for consumers.

The most credible economic studies [3] prove that the dire predictions by conservative ideologues and business interests have never panned out after previous minimum wage increases. That includes one just released [4] by the Institute for Research on Labor and Employment at the University of California at Berkeley that helps to rebut some of the claims often made that minimum wage increases lead to higher teen-age unemployment.

Mary Gable, who studies wage issues for the Economic Policy Institute, said that there was no significant job loss after the 1998 increase in the minimum wage to $5.15 an hour, and that "employers were able to absorb the cost of the wage increases through increased productivity."

The truth is, the minimum wage has not only not kept pace with inflation for decades, it long ago ceased to enable a family of three to stay above the poverty line, a point that Jonathan Tasini makes in a sharply worded article on The Huffington Post [5]. "Adjusted for inflation, the minimum wage today is what it was in the 1950s -- more than half a century ago," he writes. "To really make ends meet at minimum wage pay, two people in a household have to work three full-time minimum wage jobs."

Put another way, a news story from McClatchy's Washington Bureau [6] says:

Over the years, inflation has eroded the buying power of the minimum wage. A full-time worker who earned the $2.90-an-hour minimum wage in 1979 earned enough to pull a family of three out of poverty.

That same family would fall nearly $4,000 below the poverty threshold today because the minimum wage hasn't kept pace with inflation.

In fact, to equal the buying power of the 1979 minimum wage, the new rate would have to be $8.74 an hour, according to government calculations.

There are already 23 states that have a higher minimum wage than the federal wage, and Gable says that if you analyzed the impact of having a higher minimum wage on employment in these states, "I think what we would see is it is pretty much all over the map." In other words, the categorical arguments conservatives make about the minimum wage don't hold water.

What we can categorically say is that when workers are paid a decent wage, they will in turn have more money to spend—an economic benefit that anti-minimum wage conservatives never seem to count—and will be able to focus more on their jobs and less on fretting about how they will make ends meet. That helps employers.

The bottom line is this, says Gable: "If you do a decent day's work, you should get a decent day's pay." Of course, it shouldn't take an economist to state that simple moral principle, but that truth appears to keep eluding conservative ideologues and their business allies, who, if left to their devices, would stonewall additional minimum wage increases after the wage floor reaches $7.25 next year.

They would rather shrug their shoulders (and pocket the profits) and watch a return of the erosion of lower-income purchasing power that took place during the nine years that conservatives blocked minimum wage increases before last year. Indexing the minimum wage to inflation would mean that they would never be able to do that again.