Is it time to raise the minimum wage?
Yes. Yes it is.
The arguments for and against raising the minimum wage are about as tiresome as your freshman-year history class that tried to explain the history of the minimum wage.
Because I’m sure some of you didn’t really pay attention, here’s a refresher course:
In 1938, Congress enacted and President Franklin Roosevelt signed the Fair Labor Standards Act, which included a ton of rules on workers’ rights and other regulations on industries. Included in the law was the nation’s first minimum wage. At $0.25 per hour, the 1938 minimum wage in today’s money is equal to about $4.07.
Still with me? Hang in there…
FDR, in proposing the idea of a minimum wage in 1937, said that, “All but the hopelessly reactionary will agree that to conserve our primary resources of man power, government must have some control over maximum hours, minimum wages, the evil of child labor and the exploitation of unorganized labor.”
Translation: the government sometimes needs to step in to make sure people are getting paid a wage that can keep the economy going.
Which is precisely what’s going on now. The current minimum wage has not kept up well with inflation. In fact, when the minimum wage was increased thirty years later in 1968, it reached $1.60 per hour. That may sound…small. But in today’s dollars, it was worth more than $10.55.
That’s $3.30 per hour more that workers then are earning than workers today. Based on a 40-hour work week, workers in 1968 earning the base wage made $6,864 more yearly than today’s minimum wage workers.
“Alright,” you say. “So raising the minimum wage is what you think we should do. Well, I’ve heard it’s BAD for the economy.”
You might have heard this argument already, that some suggest raising the minimum wage will end up hurting job creation.
That argument is a load of…well, you know what. Here’s why:
When you raise the minimum wage, you increase the purchasing power of the average person. Imagine if someone working minimum wage were suddenly given that extra $6,864 I talked about before. Some of that might be spent on paying off debts, but a good chunk of it would be used in buying things.
A person earning minimum wage might use that money to buy a value meal at a restaurant. Maybe they’d buy a new phone since their old one is likely out of date. School pictures could finally be affordable for their children, and hey, maybe they could get their oil changed, too.
Now imagine if a million minimum wage workers were given that extra $6,864 per year. One million incomes increased at that rate amounts to over $6.8 billion infused into the economy.
When that much is put into the hands of retailers, it creates a ripple effect. More money means more purchases. More purchases means more need for goods, or more need for workers to sell those goods. That increased need means an increased amount of labor, which in turn means that employers need to hire more workers.
It’s a win-win situation: with a higher minimum wage, low-wage workers can buy the things they need; and employers can hire more workers. Which in turn creates more revenue, which starts the cycle all over again.
The minimum wage is a hot topic in politics today. Half believe it needs to go up to help those with low wages live a decent life; the other half believe that doing so will hurt the economy, specifically job creation. In the end, however, it’s far better to create jobs the old fashioned way — by increasing how much money a person has in their billfold, and letting them do what Ol’ Adam Smith told them to do…generate supply and demand for products.
After all, four out of five economists agree: the benefits of raising the minimum wage far outweigh the costs.
Chris Walker
Latest posts by Chris Walker (see all)
- Raise Our Minimum Wage Already - December 7, 2013
