The federal minimum wage has not been adjusted since 2009 and does not provide a living wage for full time work. Time to fix it?
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Although this video, about fast food workers demanding a higher minimum wage, is from August 2013, it is a hot and unresolved issue that requires all of our attention and votes. The November 4th elections are right around the corner, for one day only at a polling booth near you (unless you are like me and already voted by mail ahead of election day). The makeup and control of Congress and the Senate are up for grabs, and how we all vote will determine the policies we live under for years to come. One of the hot issues we are facing is whether or not there will be an increase in the federal minimum wage (19 states and many cities already raised their state and local minimum wage), last adjusted in 2009, from $7.25 an hour to the administration and President Obama proposal of $10.10 an hour by 2016.
The Congressional Budget Office (CBO) issued a report on February 18, 2014, analyzing two options to raising the federal minimum wage, as follows:
1. A “$10.10 option” would increase the federal minimum wage from its current rate of $7.25 per hour to $10.10 per hour in three steps—in 2014, 2015, and 2016. After reaching $10.10 in 2016, the minimum wage would be adjusted annually for inflation as measured by the consumer price index.
2. A “$9.00 option” would raise the federal minimum wage from $7.25 per hour to $9.00 per hour in two steps—in 2015 and 2016. After reaching $9.00 in 2016, the minimum wage would not be subsequently adjusted for inflation.
Benefits and costs option 1: Since increasing earnings for some workers would be accompanied by some reductions in real (inflation adjusted) income for people who would become jobless (estimate is 500,000 people = 0.3 percent), some business owners and consumers facing some higher prices the effect of raising the minimum wage increase to $10.10 an hour will be as follows:
• Once the increases and decreases in income for all workers are taken into account, overall real income would rise by $2 billion.
• Real income would increase, on net, by $5 billion for families whose income will be below the poverty threshold under current law, boosting their average family income by about 3 percent and moving about 900,000 people, on net, above the poverty threshold (out of the roughly 45 million people who are projected to be below that threshold under current law).
• Families whose income would have been between one and three times the poverty threshold would receive, on net, $12 billion in additional real income. About $2 billion, on net, would go to families whose income would have been between three and six times the poverty threshold.
Real income would decrease, on net, by $17 billion for families whose income would otherwise have been six times the poverty threshold or more, lowering their average family income by 0.4 percent.
Benefits and costs option 2: This option would reduce employment by about 100,000 = 0.1 percent and the effect of raising the minimum wage to $9 an hour would be as follows:
• Once the increases and decreases in income for all workers are taken into account, overall real income would rise by $1 billion.
• Real income would increase, on net, by about $1 billion for families whose income will be below the poverty threshold under current law, boosting their average family income by about 1 percent and moving about 300,000 people, on net, above the poverty threshold.
• Families whose income would have been between one and three times the poverty threshold would receive, on net, $3 billion in additional real income. About $1 billion, on net, would go to families whose income would have been between three and six times the poverty threshold.
Real income would decrease, on net, by $4 billion for families whose income would otherwise have been six times the poverty threshold or more, lowering their average family income by about 0.1 percent.
Important to note that federal spending and taxes would also be indirectly affected by the increase in real income for some people and the reduction in real income for others. Workers with increased earnings would pay more taxes and receive less federal benefits, while those losing their job, business owners and consumers facing higher pricing, would see a reduction is real income, pay less taxes and receive more federal benefits. Also important to note that the federal minimum wage peaked in 1968 at $8.56 (in 2012 dollars) and since it was last raised to $7.25/hour in 2009 , the federal minimum wage lost about 5.8% of its power to inflation.
The bottom line issue here is whether a living wage is something that people working for a living earn and deserve. Businesses and economies adjust to cost changes all the time and have to restructure, reduce overhead, increase productivity and make sure their business operations are efficient and streamlined for maximum return. Well trained, well treated and adequately compensated employees, reduce costly turnover and learning curves and increase loyalty, motivation and productivity, which is good for the one, the few, the many and society as a whole.
Video: ISON /YouTube Photo: Fredericksburg Tribute /Flicker
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