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No American who works hard and plays by the rules should live in poverty. Minimum-wage workers do their part to build a better life for their families by working hard every day—many at more than one job. We can support them in their climb to financial security by ensuring that the wages they earn are fair. When Americans who work full-time cannot lift themselves out of poverty, it’s time for a change.
American workers’ financial security is too important to become a political tug-of-war. Conservatives blocked an increase in the minimum wage for ten years while millions of working families sunk further into poverty. We can’t let conservatives play politics while families’ paychecks hang in the balance. The minimum wage should be indexed to inflation so that it rises automatically—not at the whim of disinterested politicians.
Raising the minimum wage stimulates the economy and provides a boost even for workers who earn more than the minimum. Economists agree that one of the best strategies for promoting growth during an economic downturn like the current one is to invest in workers at the bottom of the economic ladder. The Economic Policy Institute estimates that when the minimum wage increases to $7.25, it will not only lift paychecks for the 5.6 million workers earning minimum wage, but also for an additional 7.4 million workers who earn more than $7.25 and benefit from a “spillover” effect. [Economic Policy Institute [1]] Minimum wage increases also help promote job growth: employment rates and total job growth are higher in states with minimum wages above the federal minimum. [Fiscal Policy Institute [2]]
Barack Obama will increase the minimum wage and index it to the rate of inflation. [Obama campaign [3]] Early in its history, the minimum wage was equal to about 50 percent of the average wage for non-supervisory production employees, but inflation and political inaction have pushed it down to just 30 percent of the national average. The Economic Policy Institute notes that restoring the minimum wage to the 50 percent level will put it at approximately $8.40 an hour. [Economic Policy Institute [4]] Ten states—Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont, and Washington—have already indexed their minimum wages to the Consumer Price Index.
The minimum wage increase enacted last year was a great victory for progressives and for millions of working Americans. The federal minimum wage was stuck at $5.15 from 1997 to 2007. Once Democrats regained control of Congress in November 2006, they had to fight Bush, McCain, and their right-wing allies over the issue for five months. McCain filibustered a minimum-wage boost, and at one point Bush vetoed it. [USA Today [5]] Ultimately, after a series of tax breaks was added and the measure was attached to an Iraq war funding bill, it was enacted, increasing the minimum wage in three steps—to $5.85 on June 24, 2007, to $6.55 on June 24, 2008, and to $7.25 on June 24, 2009.
Nonetheless, the new minimum wage of $6.55 an hour still leaves millions of hard-working Americans in poverty. A worker who is employed full-time at the new minimum wage still earns only about $13,600 per year—$4,000 below the federal poverty line for a family of three and $7,600 below poverty for a family of four. Even after the next wage increase to $7.25, a family of three will remain about $3,000 below the poverty line, and a family of four will be more than $6,000 below it. [U.S. Health and Human Services [6]]
Even when the minimum wage increase is fully phased in, it will still not keep pace with inflation. Because the minimum wage has not been indexed to increase with the cost of living, it has not kept pace with inflation and its real value has plummeted. If the minimum wage had been linked to the inflation rate in 1968, it would be over $8.60 today. If had been indexed to inflation in 1978, it would be nearly $8.00 today. [Economic Policy Institute [7]] Minimum wage advocates were not able to include an automatic inflation adjustment in the 2007 legislation.
States have recognized that the federal minimum wage is inadequate and enacted stronger measures. States across America have codified their disapproval of the federal minimum wage’s falling real value by raising their wages. After the federal minimum wage increases to $6.55, it will remain below the minimum rate in 23 states and the District of Columbia. And even when it reaches $7.25 in 2009 the federal wage will still be below the minimum rate in at least 11 states and the District of Columbia. [Economic Policy Institute [8]]
EPI Issue Guide on the Minimum Wage [9]
EPI Policy Center's The Bush Legacy: Stagnant Wages, Rising Inequality [10]
MINIMUM WAGE VOTES IN CONGRESS:
Vote to end Senate filibuster on minimum wage legislation [11]
Senate vote to cripple the minimum wage legislation [12]
House vote on the minimum wage [13]
Votes on an unsuccessful conservative effort to kill the minimum wage in the House, a motion to recommit [14], and on a successful progressive effort to keep the bill alive, a motion to table the appeal [14]
1825 K Street, NW, Suite 400, Washington, DC 20006
202-955-5665 (tel) | 202-955-5606 (fax) | www.ourfuture.org
Links:
[1] http://www.epi.org/content.cfm/issueguides_minwage_minwagefacts
[2] http://www.fiscalpolicy.org/FPISmallBusinessMinWage.pdf
[3] http://www.barackobama.com/issues/economy/#labor
[4] http://www.epi.org/content.cfm/bp177
[5] http://www.usatoday.com/news/washington/2007-04-30-1912707305_x.htm
[6] http://aspe.hhs.gov/poverty/08Poverty.shtml
[7] http://www.epi.org/issueguides/minwage/table4.pdf
[8] http://www.epi.org/content.cfm/webfeatures_snapshots_20080723
[9] http://www.epi.org/content.cfm/issueguides_minwage
[10] http://www.epipolicycenter.org/blm-stagnant_wages_and_rising_inequality.pdf
[11] http://senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=110&session=1&vote=00023
[12] http://senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=110&session=1&vote=00024
[13] http://clerk.house.gov/evs/2007/roll018.xml
[14] http://clerk.house.gov/evs/2007/roll017.xml