In 1938, the minimum wage was established under the Fair Labor State Act to make sure that all workers had to be paid a minimum amount so employers could not take advantage of their labor. The minimum wage at the time was a mere $0.25, which is about $4 in 2012 dollars. The president at the time, Franklin D. Roosevelt, saw this act as “the most far-reaching, far-sighted program for the benefit of workers ever adopted in this or any other country” (Sessions). While the Act has been amended twice and the minimum wage has generally increased over the years, the minimum wage has fallen far behind inflation. This means that the minimum wage has not been increased to accommodate price increases, making it much harder to live above the poverty line with a minimum wage job. Many families will suffer because they cannot afford basic necessities without an increase in the minimum wage. However, an increase in the minimum wage will not affect prices of commodities as many people believe, and the majority of big businesses will not see a drastic difference in their profit margin.
If the minimum wage truly increased at the same rate as the price of inflation, it would be close to $10.55 to make up for the lost inflation (Sessions). The minimum wage hit its peak in 1968 when the wage was capped at $8.54 in current American dollars. This means that the minimum wage workers in 1968 made more than workers today. The minimum wage was last raised in 2009 to the current $7.25, which means that “the federal minimum has lost about 8.1% of its purchasing power to inflation” (DeSilver). The Economist recently estimated that “given how rich the U.S. is and the pattern among other advanced economies in the Organization for Economic Cooperation and Development, ‘one would expect America…to pay a minimum wage around $12 an hour’” (DeSilver). Given the inflation, families that depend on a low wage job cannot make a living. If we used the New York State minimum wage, which is $8.75, and then multiply it by the hours that are usually capped, which is 39, this would equal around $341 before taxes. At $9.00 per hour and at a cap of 29 hours, the weekly income would be approximately $261. If a worker worked two jobs to reach the 40-hour minimum wage cutoff, without missing any days due to illness or tragedy, “his or her yearly salary would be $18,720. In other words, it would fall well below the Federal Poverty Line of $21,775. That's food stamp territory. To get above the poverty line with a 40-hour week, the minimum wage would need to go above $10. At 29 hours a week, it would need to make it to $15 an hour. Right now, the highest minimum wage at a state level is in the District of Columbia at $11.50. As of now, no state is slated to go higher than that before 2018” (Buren). Not only is this for a worker without children, it is also applicable to single parents. In my opinion, it is immoral to allow hard-working families to barely scrape by while multi-million dollar corporations are receiving tax breaks and recording record profits.
The majority of companies that hold minimum wage jobs are fast food restaurants such as McDonalds, Burger King, etc. On average, these companies rake in over two million dollars per year. These companies can afford to raise their employee’s wages. Many people have speculated that raising the minimum wage would in turn increase prices of goods and that these companies will have to fire people because they cannot afford the wage that they are needing to pay. This can be easily disproven because of the ways that companies would cope due to rising wages. For example, if the minimum wage rose to $15, “prices at fast food restaurants would rise by an estimated 4.3 percent, according to a new study. That would mean a McDonald’s Big Mac, which currently goes for $3.99, would cost about 17 cents more, or $4.16” (Buren). To compensate for this change, the Big Mac would probably shrink, rather than have a price fluctuation. This also does not take into account turnover or savings from the higher wages. The study mentioned in the article also noted that “the fast food industry could easily cover the increased costs of having to pay a $15 minimum wage without reducing any jobs and still have money left over. Other research has found that all employers could react to higher minimum wage costs in the same way — through savings from reduced turnover” (Buren). Employers also deal with raised wages in a variety of ways, including: “improving efficiency. An increase in the minimum wage may lead employers to encourage employees to work harder since they’re now being paid more... Increasing demand. Raising the minimum wage may increase demand for goods and services and bolster consumer spending, offsetting the increase in employer costs…Lowering turnover. A higher minimum wage ‘makes it easier for employers to recruit and retain employees’ and may even ‘compensate some or all of the increased wage costs, allowing employers to maintain employment levels’” and “Increasing prices. A comprehensive review of more than 30 academic papers on the price effects of the minimum wage found that “most studies reviewed above found that a 10% US minimum wage increase raises food prices by no more than 4% and overall prices by no more than 0.4%” (Volsky). So, these companies are more than capable of handling an increase of wage. Evidence of this can come from Georgia and Alabama, because “in the face of a planned minimum wage increase in Georgia and Alabama, for example, fast food restaurants were going to respond by raising employees’ performance standards. A major review of all the available research on how minimum wage increases impact job growth found that it’s close to zero, and state-level reviews found that those that have raised wages over recent decades haven’t hurt job growth” (Covert).
It is possible that some of the predictions that many GOP candidates have stated, such as that companies would begin firing employees to compensate for higher wages, could come true. However, the changes will not be as drastic as many would think. I believe that many people would be willing to pay approximately a dollar more so that there aren’t children of working families who are starving. Based on the evidence cited, the job economy is more than capable of handling a $15.00 per hour wage. The minimum wage, if it was raised to match inflation, would be larger than $7.25 per hour. With the price of food, necessities, child care, health care, and many more items that are considered life-sustaining necessities, anyone working full time at the minimum wage would not be able to afford these provisions. It is a shame that people see the minimum wage only as a wage for starting out, instead of a living wage, which is what it was created to be. Many full-time minimum wage employees are looked down upon because of their job. Minimum wage jobs are not simply taken up by teenagers, as over 260,000 college graduates with a degree are working in these same level jobs, even though this is only around 9.7% of the young workers in the labor market. People like to look down on these minimum wage employees, but without them, many of the underappreciated luxuries that America has would not be around today. Without these jobs, there would be no cashiers to take an order at McDonalds and there would be no clean floors in schools or restaurants. It is time for America to step up and take better care of the people who are the reason that many places still exist today.
All information can be found at The Huffington Post, The Daily Beast, ThinkProgress, and Pew Research Center. This essay was used as my final thesis in a collegiate microeconomics class.