The Bare Minimum

Author's Note: This article discusses the minimum wage. I understand that this is a nuanced and delicate topic, and there are many points I did not address including systemic inequality, education, productivity indexing, and more. If you have thoughts or questions, please leave a comment.

The Minimum Wage

What will happen if we raise the federal minimum wage?

The pandemic has exacerbated the already uneven outcomes between lower-wage and higher-wage workers. Income inequality and the “distribution of prosperity” are at historically high levels, with much of this disparity heavily impacting minority communities.

Opinion | America Will Struggle After Coronavirus. These Charts Show Why. -  The New York Times

Source: New York Times

This is a contentious topic, with some arguing of cost-push inflation (a $15 minimum wage will result in a coffee costing $15 too) and some arguing that it won’t change the price of goods or result in mass unemployment – and that raising the minimum wage is one of the first steps to addressing the inequities of our system.

This article discusses:

  • The Current Labor Force 
  • The Structural Deficiency of the Minimum Wage
  • The Minimum Wage and the Cost of Production
  • The Complexity of the Issue
  • Potential Outcomes

TL;DR: Why should we raise the minimum wage?

  1. Healthier, more stable workers: There is power in being able to afford medical care, health insurance, and safe living conditions. Also, if the workers have children, those children are all to benefit from all of the above – and that compounds over time.
  2. Alleviating poverty: An increase in the federal minimum wage from $7.25 to $12.00 would be the first step to lifting 6.6 million people out of poverty.
  3. Addressing inequality: “Most low-wage workers are disproportionately women and people of color” and raising the minimum wage would work to reduce earnings inequality for these workers
  4. Respect for other humans: If this pandemic has taught us anything, it should be that essential workers are truly essential. These workers have been on the frontlines of a raging pandemic, literally putting their lives on the line to keep the wheels of the broader economy turning.
  5. Investing in the Future: This is not just a short-term fix. This is a long-term approach to fixing the decades of underinvestment in the U.S. population. This is a multi-generational, systemic problem, that must be addressed head-on.

Let’s first look at the labor force and the minimum wage in context.

Overview of the Labor Force:

  • 53 million Americans, or almost half of the labor force, earn low wages (a median annual income of $18k).
  • 1 in 5 of these workers (32 million) do not have employer-sponsored healthcare.
  • Low-wage jobs have increased since the 1970’s while middle wage jobs have declined, exacerbating the increasingly bimodal wealth distribution

The Minimum Wage

  • Throughout the 1960s and 1970s, the minimum wage was well above $8 per hour in relative 2019 dollars
  • It peaked in 1968 at $11.69 in 2019 dollars
  • This is well above the current minimum wage of $7.25 (which has been at $7.25 since 2010)
  • Several states have already increased their own minimum wage including California, Massachusetts, and Washington State
  • In terms of purchasing power, the minimum wage is worth ~17% less than it was 10 years ago, and ~30% less than the 1968 peak.
  • If it moved with productivity growth (like it did up until 1968), the minimum wage would be ~$24/hour.
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Special thanks to Ashoka Rajendra, Doc Ayomide, Drew Stegmaier, Godiva Golding, Grant Gregory, Kushaan Shah, Jeanette Goon, Joel Christiansen, Lyle McKeany, Rishi Dhanaraj, Ryan Williams, Sasha ...

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Monica Kingsley 4 weeks ago Contributor's comment

Well, that's a natural result of financialized economy, characterized by serial bubbles and busts in the stock market and elsewhere. The labor participation rate trend isn't really positive.